Item 1. Business
Item 1. Business.
Overview
Middlesex Water Company (Middlesex) was incorporated
as a water utility company in 1897 and owns and operates regulated water utility and wastewater systems primarily in New Jersey and Delaware.
Middlesex also operates water and wastewater systems under contract on behalf of municipal and private clients primarily in New Jersey
and Delaware.
The terms “the Company,” “we,”
“our,” and “us” refer to Middlesex Water Company and its subsidiaries, including Tidewater Utilities, Inc. (Tidewater)
and Tidewater’s wholly-owned subsidiaries, Southern Shores Water Company, LLC (Southern Shores) and White Marsh Environmental Systems,
Inc. (White Marsh). The Company’s other subsidiaries are Pinelands Water Company (Pinelands Water) and Pinelands Wastewater Company
(Pinelands Wastewater) (collectively, Pinelands), Utility Service Affiliates, Inc. (USA) and Utility Service Affiliates (Perth Amboy)
Inc., (USA-PA).
The Company’s principal executive offices
are located at 485C Route 1 South, Suite 400, Iselin, New Jersey 08830. Our telephone number is (732) 634-1500. Our website address is
http://www.middlesexwater.com. Information contained on our website is not part of this Annual Report on Form 10-K. We make available,
free of charge through our website, reports and amendments filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, after such material is electronically filed with or furnished to the United States Securities and Exchange Commission (the
SEC).
Middlesex System
Located in New Jersey, the Middlesex System provides
water services to approximately 61,000 retail customers, primarily in eastern Middlesex County and under wholesale contracts to the City
of Rahway, Townships of Edison and Marlboro, the Borough of Highland Park and the Old Bridge Municipal Utilities Authority. The Middlesex
System treats, stores and distributes water for residential, commercial, industrial and fire protection purposes. The Middlesex System
also provides water treatment and pumping services to the Township of East Brunswick under contract. The amount of water supply allocated
to the Township of East Brunswick is granted directly to the Township by the New Jersey Water Supply Authority. The Middlesex System produced
approximately 66% of our 2023 consolidated operating revenues.
The Middlesex System’s retail customers
are located in an area of approximately 55 square miles in Woodbridge Township, the City of South Amboy, the Boroughs of Metuchen and
Carteret, portions of the Township of Edison and the Borough of South Plainfield, all in Middlesex County, and a portion of the Township
of Clark in Union County. Retail customers include a mix of residential customers, large industrial concerns and commercial and light
industrial facilities. These customers are located in generally well-developed areas of central New Jersey.
The contract customers of the Middlesex System
comprise an area of approximately 110 square miles with a population of over 200,000. Contract sales to the Townships of Edison and Marlboro,
the City of Rahway and the Old Bridge Municipal Utilities Authority are supplemental to the water systems owned and operated by these
customers. Middlesex is the sole source of water for the Borough of Highland Park and the Township of East Brunswick.
Middlesex provides water service to approximately
300 customers in Cumberland County, New Jersey. This system is referred to as the Fortescue System, and is not physically interconnected
with the Middlesex System. The Fortescue System produced less than 0.1% of our 2023 consolidated operating revenues.
Tidewater System
Tidewater, together with its wholly-owned subsidiary,
Southern Shores, provides water services to approximately 59,000 retail customers for residential, commercial and fire protection purposes
in over 470 separate communities
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in New Castle, Kent and Sussex Counties, Delaware. The Tidewater System produced approximately 25% of
our 2023 consolidated operating revenues.
USA-PA
USA-PA operates the City of Perth Amboy, New Jersey’s
(Perth Amboy) water and wastewater systems under a 10-year agreement, which expires in December 2028. In addition to performing day-to
day operations, USA-PA is also responsible for emergency responses and management of capital projects funded by Perth Amboy. USA-PA produced
approximately 4% of our 2023 consolidated operating revenues.
Pinelands Systems
Pinelands Water provides water services to approximately
2,500 residential customers in Burlington County, New Jersey. Pinelands Water is not physically interconnected with the Middlesex System.
Pinelands Water produced approximately 1% of our 2023 consolidated operating revenues.
Pinelands Wastewater provides wastewater collection
and treatment services to approximately 2,500 residential customers and one municipal wastewater system in Burlington County, New Jersey.
Pinelands Wastewater produced approximately 1% of our 2023 consolidated operating revenues.
USA
USA operates the Borough
of Avalon, New Jersey’s (Avalon) water utility, sewer utility and storm water system under a ten-year operations and maintenance
contract expiring in 2032. In addition to performing day-to-day service operations, USA is responsible for emergency responses and management
of capital projects funded by Avalon.
USA operates the Borough
of Highland Park, New Jersey’s (Highland Park) water utility and sewer utility under a ten-year operations and maintenance contract
expiring in 2030.
USA also provides water
and wastewater services to several other New Jersey municipalities under contracts that are not regulated by a public utility commission
as to rates and service.
Under a marketing agreement
with HomeServe USA Corp. (HomeServe) expiring in 2031, USA offers residential customers in New Jersey and Delaware various water and wastewater
related home maintenance programs. HomeServe is a leading national provider of such home maintenance service programs. USA receives a
service fee for the billing, cash collection and other administrative matters associated with HomeServe’s service contracts.
USA produced approximately
2% of our 2023 consolidated operating revenues.
White Marsh
White Marsh operates or maintains water and/or
wastewater systems that serve approximately 4,300 service connections under 31 separate contracts. White Marsh also owns two commercial
properties that are leased to Tidewater for its administrative office campus and its field operations center. White Marsh produced approximately
1% of our 2023 consolidated operating revenues.
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Financial Information
Consolidated operating revenues, operating income and net income are
as follows:
(Thousands of Dollars)
Years Ended December 31,
2023
2022
2021
Operating Revenues
$ 166,274
$ 162,434
$ 143,141
Operating Income
$ 39,223
$ 47,333
$ 33,211
Net Income
$ 31,524
$ 42,429
$ 36,543
Operating revenues were earned from the following sources:
Years Ended December 31,
2023
2022
2021
Residential
52.1%
52.3%
54.3%
Commercial
14.4
14.0
11.7
Industrial
7.0
6.9
6.3
Fire Protection
7.6
7.8
8.8
Contract Sales
11.5
11.6
10.2
Contract Operations
7.4
7.4
8.6
Other
0.0
0.0
0.1
Total
100.0%
100.0%
100.0%
Water Supplies and Contracts
Our New Jersey and Delaware water supply systems
are physically separate and are not interconnected. In New Jersey, the Pinelands System and Fortescue System are not interconnected with
the Middlesex System or each other. We believe we have adequate sources of water supply to meet the current service requirements of our
present customers in New Jersey and Delaware.
Middlesex System
Our Middlesex System produced approximately 13.8
billion gallons in 2023 from:
● The Carl J. Olsen Surface Water Treatment Plant (CJO Plant)-10.7 billion gallons;
● Twenty-seven Company-owned wells (ground water)-2.0 billion gallons; and
● The balance purchased from a non-affiliated water utility regulated by the New Jersey Board of Public
Utilities (NJBPU) under an agreement which expires February 27, 2026. This agreement provides for minimum purchases of 3.0 million gallons
per day (mgd) of treated water with provisions for additional purchases.
In November 2021, Middlesex temporarily ceased
pumping from its Company-owned wells at the Park Avenue Wellfield Treatment Plant (Park Avenue Plant) in South Plainfield, New Jersey
and alternate sources of supply were obtained in order to comply with new State of New Jersey water quality regulations relative to poly-
and perfluoroalkyl substances, collectively referred to as PFAS, that became effective in 2021.
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Prior to 2021, the Company began design for construction
of an enhanced treatment process at the Park Avenue Plant to meet the expected PFAS water quality standards anticipated to be enacted
by the State of New Jersey, which at that time were unknown as to their timing and extent. In June 2022, a portion of the enhanced treatment
process was completed, placed into service and effectively treated the ground water in compliance with all state and federal drinking
water standards. In June 2023, the Company completed the permanent construction of the entire Park Avenue Plant treatment upgrades and
placed the upgrades into operation in full compliance with the new State of New Jersey PFAS water quality regulations.
The Middlesex System’s distribution storage
facilities are used to supply water to customers at times of peak demand, outages and emergencies.
The principal source of surface water for the
Middlesex System is the Delaware & Raritan Canal, which is owned by the State of New Jersey and operated by the New Jersey Water Supply
Authority (NJWSA). Middlesex is under contract with the NJWSA, which expires November 30, 2048, and provides for average purchases of
27.0 mgd, with a peak up to 47.0 mgd, of untreated water from the Delaware & Raritan Canal, augmented by the Round Valley/Spruce Run
Reservoir System. The untreated surface water is pumped to, and treated at, the CJO Plant.
Water supply to customers of the Fortescue System
is derived from two wells, which produced approximately 6.7 million gallons in 2023.
Tidewater System
Our Tidewater System produced approximately 2.9
billion gallons in 2023, primarily from 175 wells. Tidewater expects to submit applications to Delaware regulatory authorities for the
approval of additional wells as growth, customer demand and water quality warrant. Tidewater augments its water production with annual
purchases of up to 60.0 million gallons of treated water from the City of Dover, Delaware. Tidewater does not have a central water treatment
facility for the over 470 separate communities it serves. As the number has grown, many of Tidewater’s individual systems have been
interconnected, forming several regional systems that are served by multiple water treatment facilities owned by Tidewater.
Pinelands Water System
Water supply to our Pinelands Water System is
derived from four wells which produced approximately 134.7 million gallons in 2023. The aggregate pumping capacity of the four wells is
2.2 mgd.
Wastewater Facilities
Pinelands Wastewater System
The Pinelands Wastewater System discharges into
the South Branch of the Rancocas Creek through a wastewater treatment plant that provides clarification, sedimentation, filtration and
disinfection. The total capacity of the plant is 0.5 mgd, and the system treated approximately 94.8 million gallons in 2023.
Human Capital Management
The Company strives to attract and retain employees
by offering competitive compensation and benefits along with career development and training opportunities in a safe, supportive and inclusive
work environment. Our mission, our business philosophy and the manner in which we deliver value for our customers, our shareholders
and our employees is inherent in what we, as an enterprise, profess to be our core values of Respect, Integrity, Growth, Honesty
and Teamwork. Our employees’ success is a key element of the Company’s success.
Workforce
As of December 31, 2023, the Company had 355 employees. None of our
employees are subject to a collective bargaining agreement. We believe our employee relations are positive.
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Employee Compensation
and Benefits
We offer comprehensive competitive employee compensation
and benefit programs consistent with job functions, skill levels, experience, knowledge and geographic location. These programs are periodically
independently evaluated by a nationally recognized consulting firm to gauge effectiveness and are benchmarked against industry peers and
the overall markets in which we operate our businesses. Compensation increases and incentive compensation are based on merit, which is
communicated to employees and documented in our bi-annual performance evaluation process. Benefits include a variety of programs to enhance
employee overall physical, mental and financial health and well-being, including healthcare insurance, employer funded retirement savings
plans, life insurance, disability insurance, accident insurance, tuition reimbursement, flu shots, wellness newsletters and webinars,
flexible hybrid office and remote work capabilities, incentive programs for achieving fitness milestones, financial counseling, elder
care assistance, substance abuse support and more.
Safety
The Company has implemented safety programs and
management practices designed to promote a culture of safety to protect its employees. This includes required trainings for employees,
as well as specific qualifications and certifications for certain operational employees. All employees have been empowered to report,
and immediately stop, work which, in their personal judgement, is unsafe or is not consistent with our safety policies and procedures.
They can take this action without fear of reprisal.
In response to the Coronavirus (COVID-19) pandemic,
the Company continues to implement changes it determines are in the best interest of our employees and customers, as well as required
to comply with government emergency orders and regulations. While the nature of our utility services business requires portions of our
workforce to operate in the field and at treatment facilities, we employ and maintain a variety of processes to help ensure the safety
of those employees and the public in light of the pandemic.
Employee Development
and Training
The Company employs various training and other
educational programs and has developed company-wide and project-specific training and educational programs, including tuition assistance
for full-time employees enrolled in pre-approved undergraduate or graduate courses or professional licensing courses. All employees receive
training to identify and report operational and financial risks, as well as risks to Company brand and reputation, which fosters a personal
culture of accountability and reinforces our commitment to a safe and sustainable workplace. All employees receive cybersecurity training
and other education regarding their use of sensitive data. Our Executive Management team and our Board of Directors continually assess
succession plans, leadership development progress and policies and strategies regarding recruitment, retention, career development, diversity,
equity and inclusion. Formalized succession planning strategies have been developed for key leadership positions.
Diversity, Equity & Inclusion (DEI)
The Company is committed
to DEI based upon our belief that embracing DEI is consistent with our Company culture and benefits all stakeholders by maintaining a
workforce with a variety of skills and perspectives as a result of their diverse backgrounds and experiences. The Company remains a signatory
to CEO Action for Diversity and Inclusion, a business led initiative which encourages companies to cultivate environments that support
dialogue on DEI, implement and expand bias education and training and engage boards of directors in the development and evaluation of
inclusion and diversity strategies.
The Company is focused
on recruitment and/or development of both external and internal candidates so that all prospective and current employees are provided
an opportunity to advance their careers. We are intentional in our efforts to attract candidates from historically marginalized groups
and seek a diverse pool of candidates for apprenticeships and internship opportunities. Statements on DEI and our Human Rights Policy
can be found on our website. We continue to monitor the results of our DEI efforts and continually explore opportunities to further engage
our employees and customers.
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Competition
Our business in our franchised service areas is
substantially free from direct competition for growth with other public utilities, municipalities and other entities. However, our ability
to provide contract wholesale water supply and operations and maintenance services that are not under the jurisdiction of a state public
utility commission is subject to competition from other public utilities, municipalities and other entities. Although Tidewater has been
granted exclusive franchises for its existing community water systems, the ability to expand service areas can be affected by the Delaware
Public Service Commission (DEPSC) awarding franchises to other regulated water utilities with whom we compete for such franchises and
for projects.
Regulation
Our rates charged to customers for utility services,
the quality of the services we provide and certain other matters are regulated by the NJBPU and DEPSC (collectively, the Public Utility
Commissions).
Our USA, USA-PA and White Marsh subsidiaries are
not regulated public utilities as related to rates and service quality. However, they are subject to federal and state environmental regulations
with respect to water quality and wastewater effluent quality to the extent such services are provided.
We are subject to environmental and water quality
regulation by the following regulatory agencies (collectively, the Government Environmental Regulatory Agencies):
● United States Environmental Protection Agency (USEPA);
● New Jersey Department of Environmental Protection (NJDEP) with respect to operations in New Jersey; and
● Delaware Department of Natural Resources and Environmental Control, the Delaware Department of Health
and Social Services-Division of Public Health (DEDPH), and the Delaware River Basin Commission with respect to operations in Delaware.
In addition, our issuances of equity securities
are subject to the prior approval of the NJBPU and require registration with the United States Securities and Exchange Commission. Our
issuances of long-term debt securities are subject to the prior approval of the respective state Public Utility Commissions.
Regulation of Rates and Services
For regulated rate setting purposes, we account
separately for our regulated utility operations to facilitate independent rate setting by the applicable Public Utility Commissions.
In determining our regulated utility rates, the
respective Public Utility Commissions consider the revenue, expenses and utility infrastructure used and useful in providing service to
the public. Rate determinations by the respective Public Utility Commissions do not guarantee achievement by our regulated utility companies
of specific rates of return for our regulated utility operations. Thus, we may not achieve the rates of return authorized by the Public
Utility Commissions. In addition, there can be no assurance that any future rate increases will be granted or, if granted, that they will
be in the amounts requested.
Middlesex Rate Matters
In February 2024, Middlesex’s petition
to the NJBPU, filed in May 2023, seeking permission to increase its base water rates was concluded, based on a negotiated settlement
that is expected to increase annual operating revenues by $15.4 million effective March 1, 2024. The approved tariff rates
were designed to recover increased operating costs as well as a return on invested capital of $563.1 million, based on an authorized
return on common equity of 9.6%. Middlesex has made capital infrastructure investments to ensure prudent upgrade and
replacement of its utility assets to support continued regulatory compliance, resilience and overall quality of service. Net
proceeds from the settlement of Middlesex’s 3M Company (3M) lawsuit were used to recover costs for the construction of the
Park Avenue Plant PFAS treatment upgrades, including depreciation and carrying costs. The rate case settlement will result in the
reclassification of $48.3 million from Regulatory Liabilities to Contributions in Aid of Construction in the March 31, 2024 balance
sheet. The Company will also record in the first quarter of 2024 the recovery of $0.7 million and $2.4 million of prior year
depreciation and carrying costs, respectively, as well as the recovery of $1.4 million of prior year costs which were associated
with the interim solution to comply with the Notice, all of which were approved in the rate case settlement.
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For further information on the 3M settlement
agreement, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , Regulatory
Notice of Non-Compliance and Regulatory Matters .
In January 2024, the NJBPU approved Middlesex’s
petition for the proposed cost recovery of its Lead Service Line Replacement (LSLR) Plan and cost recovery of project costs associated
with replacing Middlesex customer-owned lead service lines. Replacement of Middlesex and Middlesex customer-owned lead service lines is
required by the New Jersey LSLR Law. Under this legislation, the costs associated with replacing customer-owned lead service lines are
recoverable through future customer surcharges. Cost recovery for replacing Company-owned lead service lines are recoverable through traditional
base rate case filings. The current estimates for replacement of Middlesex and Middlesex customer-owned lead service lines are approximately
$46 million to $77 million over a nine-year period.
In October 2023, the NJBPU approved Middlesex’s
petition for a Distribution System Improvement Charge (DSIC) Foundation Filing, which is a prerequisite to implementing a DSIC rate that
allows water utilities to recover investments in, and generate a return on, qualifying capital improvements to their water distribution
system made between base rate proceedings. Middlesex is authorized to recover DSIC revenues up to five percent (5%) of total revenues
established in Middlesex’s 2021 base rate proceeding, or approximately $5.5 million. Semi-annually, beginning in April 2024, the
Company must file for a change in its DSIC rate seeking recovery for DSIC-eligible investments made during the period. DSIC rates remain
in effect until Middlesex’s next base rate case increase subsequent to the March 1, 2024 increase. Under the terms of the Foundational
Filing, the Company is required to file a base rate petition before November 2026.
In September 2022, the NJBPU approved Middlesex's
Emergency Relief Motion to reset its Purchased Water Adjustment Clause (PWAC) tariff rate to recover additional costs of $2.7 million
for the purchase of treated water from a non-affiliated water utility. A PWAC is a rate mechanism that allows for recovery of increased
purchased water costs between base rate case filings. The increase, effective October 1, 2022, was on an interim basis and subject to
refund with interest, pending final resolution of this matter, which the NJBPU provided in August 2023. In connection with the full recovery
of the $2.7 million of additional costs, Middlesex reset its PWAC rate to zero in October 2023.
In December 2021, Middlesex’s petition to
the NJBPU seeking permission to increase its base water rates was concluded, based on a negotiated settlement, resulting in an expected
increase in annual operating revenues of $27.7 million. The approved tariff rates were designed to recover increased operating costs,
as well as a return on invested capital of $513.5 million, based on an authorized return on common equity of 9.6%. The increase was implemented
in two phases with $20.7 million of the increase effective January 1, 2022 and the remaining $7.0 million effective January 1, 2023. As
part of the negotiated settlement, the PWAC was reset to zero.
Tidewater Rate Matters
In December 2023, the DEPSC approved Tidewater’s
application to implement a new DSIC. Effective January 1, 2024, Tidewater implemented a DSIC rate of 3.71%, which is expected to generate
revenue of approximately $1.3 million annually. A Delaware DISC is subject to a semi-annual reset with an overall maximum rate of 7.5%.
In October 2023, the DEPSC issued an Order that
made a temporary base rate reduction permanent. The initial DEPSC order required Tidewater to reduce its base rates charged to general
metered and private fire customers by 6.0%, effective for service rendered on and after September 1, 2022. The rate reduction was ordered
as a result of Tidewater earning in excess of its authorized return, and resulted in reduced annual revenues of approximately $2.1 million
in 2023.
In March 2021, Tidewater was notified by the DEPSC
that it had determined Tidewater’s earned rate of return exceeded the rate of return authorized by the DEPSC. Consequently, Tidewater
reset its DSIC rate to zero effective
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April 1, 2021 and refunded approximately $1.0 million to customers primarily in the form of an account
credit for DSIC revenue previously billed between April 1, 2020 and March 31, 2021.
Pinelands Rate Matters
In April 2023, Pinelands Water and Pinelands Wastewater
concluded their base rate case matters when the NJBPU approved a combined $1.0 million increase in annual base rates, effective April
15, 2023. The requests were necessitated by capital infrastructure investments the companies have made as well as increased operations
and maintenance costs.
Southern Shores Rate Matters
Effective January 1, 2020, the DEPSC approved
the renewal of a multi-year agreement for water service to a 2,200 unit condominium community we serve in Sussex County, Delaware.
Under the agreement, current rates were to remain in effect until December 31, 2024, unless there are unanticipated capital expenditures
or regulatory related changes in operating expenses exceeding certain thresholds during this time period. In 2022, capital expenditures
did exceed the established threshold and rates were increased by 5.39%, effective January 1, 2023. Beginning in 2025 and thereafter, inflation-based
rate increases cannot exceed the lesser of the regional Consumer Price Index or, 3%. Inflation based increases are in addition to the
threshold rate increases. This agreement expires on December 31, 2029.
Future Rate Filings
Management monitors the need for rate relief for
our regulated entities on an ongoing basis. When capital improvements and/or increases in operation, maintenance or other costs indicate
a need for rate relief, base rate increase requests are filed with the respective Public Utility Commissions.
Regulatory Service Matters
Twin Lakes Utilities, LLC (Twin Lakes) provides
water services to approximately 115 residential customers in Shohola, Pennsylvania. Pursuant to the Pennsylvania Public Utility Code,
Twin Lakes filed a petition requesting the Pennsylvania Public Utilities Commission (PAPUC) to order the acquisition of Twin Lakes by
a capable public utility. The PAPUC assigned an Administrative Law Judge (ALJ) to adjudicate the matter and submit a recommended decision
(Recommended Decision) to the PAPUC. As part of this legal proceeding the PAPUC also issued an Order in January 2021 appointing a large
Pennsylvania based investor-owned water utility as the receiver (the Receiver Utility) of the Twin Lakes system until the petition is
fully adjudicated by the PAPUC. In November 2021, the PAPUC issued an Order affirming the ALJ’s Recommended Decision, ordering the
Receiver Utility to acquire the Twin Lakes water system and for Middlesex, the parent company of Twin Lakes, to submit $1.7 million into
an escrow account within 30 days. Twin Lakes immediately filed a Petition For Review (PFR) with the Commonwealth Court of Pennsylvania
(the Commonwealth Court) seeking reversal and vacation of the escrow requirement on the grounds that it violates the Pennsylvania Public
Utility Code as well as the United States Constitution. In addition, Twin Lakes filed an emergency petition for stay of the PAPUC Order
pending the Commonwealth Court’s review of the merits arguments contained in Twin Lakes’ PFR. In December 2021, the Commonwealth
Court granted Twin Lakes’ emergency petition, pending its review. In August 2022, the Commonwealth Court issued an opinion upholding
PAPUC’s November 2021 Order in its entirety. In September 2022, Twin Lakes filed a Petition For Allowance of Appeal (Appeal Petition)
to the Supreme Court of Pennsylvania seeking reversal of the Commonwealth Court’s decision to uphold the escrow requirement on the
grounds that the Commonwealth Court erred in failing to address Twin Lakes’ claims that because the $1.7 million escrow requirement
placed on Middlesex violated Middlesex’s constitutional rights, Middlesex’s refusal to submit this escrow payment would jeopardize
the relief Twin Lakes was otherwise entitled to in the appointment of the Receiver Utility. In March 2023, the Supreme Court of Pennsylvania
issued a decision denying Twin Lakes’ Appeal Petition without addressing this claim on the merits. As a result of the Pennsylvania
Courts’ failure to address Twin Lakes’ claim, Middlesex subsequently filed a Complaint with the United States District Court
for the Middle District of Pennsylvania to address the issue of whether the PAPUC’s Order violated Middlesex’s rights under
the
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United States Constitution. On January 18, 2024, the District Court issued an Order dismissing Middlesex’s Complaint without
addressing the issue of whether the PAPUC’s Order violated Middlesex’s rights under the United States Constitution. On January
31, 2024, Middlesex filed a Notice of Appeal of the District Court’s decision with the United States Court of Appeals for the Third
Circuit.
The financial results, total assets and financial
obligations of Twin Lakes are not material to Middlesex.
Water and Wastewater Quality and Environmental Regulations
Government environmental regulatory agencies regulate
our operations in New Jersey and Delaware with respect to water supply, treatment and distribution systems and the quality of the water.
They also regulate our operations with respect to wastewater collection, treatment and disposal.
Regulations relating to water quality require
us to perform tests to ensure our water meets state and federal quality requirements. In addition, government environmental regulatory
agencies continuously review current regulations governing the limits of certain organic compounds found in the water as byproducts of
the treatment process. We participate in industry-related research to identify technologies that may reduce the level of organic, inorganic
and synthetic compounds found in water. The cost to water utilities to comply with any proposed water quality standards depends in part
on the limits set in the regulations and on the method selected to treat the water to the required standards. We regularly test our water
to determine compliance with government environmental regulatory agencies’ water quality standards.
In September 2021, the NJDEP issued a Notice of
Non-Compliance (Notice) to Middlesex based on self-reporting by Middlesex that the level of Perfluorooctanoic Acid (PFOA) in water treated
at its Park Avenue Plant in South Plainfield, New Jersey exceeded a standard promulgated in a NJDEP regulation that became effective in
2021. Middlesex was required by the regulation to notify its affected customers and complied within the required Notice period in November
2021.
The Notice further required the Company to take
any action necessary to comply with the new standard by September 7, 2022. Consequently, in November 2021, the Company implemented an
interim solution to meet the Notice requirements, which included putting the Park Avenue Wellfield Treatment Plant in off-line status
and obtaining alternate sources of supply. In June 2022, the Company accelerated the in-service date for a portion of the enhanced treatment
project based on engineering analysis that allowed a restart of the Park Avenue Wellfield Treatment Plant to ensure continued compliance
with all state and federal drinking water standards.
On September 13, 2022, the Company entered into
an Administrative Consent Order (ACO) with the NJDEP, which required the Company to take whatever actions necessary to achieve and maintain
compliance with applicable regulations. As prescribed in the ACO, the Company was to issue periodic public notifications until the ACO
was closed.
In June 2023, the Company completed the permanent
construction of the entire Park Avenue Plant treatment upgrades and placed the upgrades into operation in full compliance with the NJDEP
PFOA standards. In October 2023, the Company received confirmation from the NJDEP that it has complied with all requirements of the ACO
and consequently, the ACO has been closed.
In addition to the enhanced groundwater treatment
process for PFOA, we treat the groundwater supplies in our Middlesex System with chlorination for primary disinfection purposes and use
air stripping for removal of volatile organic compounds.
Surface water treatment in our Middlesex
System is by conventional treatment; coagulation, sedimentation and filtration. The treatment process includes pH adjustment, ozone and
chlorination for disinfection, and corrosion control for the distribution system.
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Treatment of groundwater in our Tidewater System
is by chlorination for disinfection purposes and, in some cases, pH adjustment and filtration for nitrate and iron removal and granular
activated carbon filtration for organics removal. Chloramination is used for final disinfection at Southern Shores.
Treatment of groundwater in the Pinelands Water
and Fortescue Systems (primary disinfection only) is performed at individual well sites.
Treatment of wastewater in the Pinelands Wastewater
System includes the use of rotating biological contactors.
The NJDEP and DEDPH monitor our activities and
review the results of water quality tests that are performed for adherence to applicable regulations. Other applicable regulations include
the Lead, Copper and Lead Service Line Rules, the Federal Surface Water Treatment Rule and the Federal Total Coliform Rule and regulations
for maximum contaminant levels established for various volatile organic compounds.
The Company must comply with various environmental
laws and regulations promulgated by the USEPA, NJDEP and other governmental agencies, including the Toxic Catastrophe Prevention Act,
the Spill Prevention, Control, and Countermeasure Rule and the Discharge Prevention Program of the New Jersey Spill Compensation and Control
Act.
Seasonality
Customer demand for our water during the warmer
months is generally greater than other times of the year due primarily to additional consumption of water in connection with irrigation
systems, swimming pools, cooling systems and other outside water use. Throughout the year, and particularly during typically warmer months,
demand may vary with temperature and rainfall timing and overall levels. In the event that temperatures during the typically warmer months
are cooler than normal, or if there is more rainfall than normal, the customer demand for our water may decrease and therefore, adversely
affect our revenues.
Management
In May 2023, President and Chief Executive
Officer, Dennis W. Doll announced a plan to retire upon turning age 65. On January 23, 2024, the Company named Nadine Leslie as
its new President and Chief Executive Officer effective March 1, 2024. Ms. Leslie will also be appointed to the Board
of Directors effective March 1, 2024. Mr. Doll will remain Chairman of the Company’s Board of Directors through the expiration
of his current term as a Director as of the May 21, 2024 Annual Meeting of Shareholders.
This table lists information concerning our executive management team
in 2023:
Name
Age
Principal Position(s)
Dennis W. Doll
65
President, Chief Executive Officer and Chairman of the Board of Directors
A. Bruce O’Connor
65
Senior Vice President, Treasurer and Chief Financial Officer
G. Christian Andreasen, Jr.
64
Vice President-Enterprise Engineering
Robert K. Fullagar
57
Vice President-Operations
Lorrie B. Ginegaw
48
Vice President-Human Resources
Jay L. Kooper
51
Vice President-General Counsel and Secretary
Georgia M. Simpson
50
Vice President-Information Technology and Chief Technology Officer
Bernadette M. Sohler
63
Vice President-Corporate Affairs
Bruce E. Patrick
55
President-Tidewater
Robert J. Capko
50
Corporate Controller and Principal Accounting Officer
Dennis W. Doll
– Mr. Doll joined the Company as Executive Vice President in November 2004 and was named President and Chief Executive Officer,
and a Director of Middlesex, effective January 1, 2006. In May 2010, he was elected Chairman of the Board, also serving as Chairman
of the Boards of the Company’s subsidiary companies. He is a Past President of the National Association of Water Companies and past
Chairman of the Board
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of the New Jersey Utilities Association, representing the state’s electric, gas, water and telecommunications
industries. He is a past Chairman of the Board of The Water Research Foundation where he continues to serve as a non-Trustee member of
the Audit Committee. He has also served as a Director and member of the Executive Committee of the Board of Directors of the American
Water Works Association. He presently serves as Treasurer and member of the Board of Trustees of Court Appointed Special Advocates of
Middlesex County, NJ serving the needs of children living in foster care.
A. Bruce O’Connor – Mr. O’Connor,
a Certified Public Accountant, joined the Company in 1990 and was named Vice President and Chief Financial Officer in 1996 and Treasurer
in 2014. On January 1, 2019, Mr. O’Connor was appointed Senior Vice President of Middlesex. Mr. O’Connor is also the principal
financial officer and a Director of all Middlesex subsidiaries.
G. Christian Andreasen, Jr. – Mr.
Andreasen, a licensed professional engineer, joined the Company in 1982, was named Assistant Vice President-Enterprise Engineering in
January 2019 and promoted to Vice President-Enterprise Engineering in July 2019. He is President and a Director of Pinelands Water and
Pinelands Wastewater. Mr. Andreasen serves as a Member and Vice Chair of the NJDEP’s Water Supply Advisory Council.
Robert K. Fullagar – Mr.
Fullagar, a licensed professional engineer, joined the Company in 1997, was named Assistant Vice President-Operations in January 2019
and promoted to Vice President-Operations in July 2019. He is President and a Director of USA-PA, USA and Twin Lakes. Mr. Fullagar serves
as Sector Chair of the New Jersey Infrastructure Advisory Committee and is a Member of the NJDEP’s Licensed Operator Advisory Committee.
Lorrie B. Ginegaw – Ms. Ginegaw joined
Tidewater in 2004 and in 2007 was promoted to Director of Human Resources for Middlesex. In March 2012, Ms. Ginegaw was named Vice President-Human
Resources. Prior to joining the Company, Ms. Ginegaw worked in various human resources positions in the healthcare and transportation/logistics
industries. Ms. Ginegaw serves as a volunteer director on the Board of the New Jersey Utilities Association.
Jay L. Kooper – Mr. Kooper joined
the Company in 2014 as Vice President and General Counsel and serves as Secretary for the Company and all subsidiaries. Prior to joining
the Company, Mr. Kooper held various positions in private and public entities as well as in private law practice, representing electric,
gas, water, wastewater, telephone and cable companies as well as municipalities and private clients before 17 state public utility commissions
and legislatures, federal agencies and federal and state appellate courts. Mr. Kooper serves as a volunteer director on selected
non-profit utility industry-related Boards including the National Association of Water Companies (current Director and Chairman of the
New Jersey Chapter) and the New Jersey State Bar Association’s Public Utility Law Section (current Consultor and Past Chairman)
and on other non-profit boards based in New Jersey, including as President of Temple B’Nai Abraham in Livingston, New Jersey and
as a Director of the Crohn’s and Colitis Foundation’s New Jersey Chapter.
Georgia M. Simpson – Ms. Simpson
joined the Company in 2009, was named Assistant Vice President-Information Technology in January 2019 and promoted to Vice President-
Information Technology in July 2019. In April 2022, Ms. Simpson was named Chief Technology Officer. Prior to joining the Company, Ms.
Simpson held various Information Technology positions and has gained an extensive array of technical and business computer certifications.
Ms. Simpson serves as a member of the Delaware Cyber Security Advisory Council, the Society for Information Management, New Jersey chapter
and the Project Management Institute, New Jersey chapter.
Bernadette M. Sohler – Ms. Sohler
joined the Company in 1994 after having served in several marketing and public relations management positions in the financial services
industry. She was named Director of Communications in 2004 and promoted to Vice President-Corporate Affairs in March 2007 and also serves
as Vice President of USA. Ms. Sohler is a volunteer director on area Chambers of Commerce and several other non-profit Boards supporting
public safety and the arts. She is a past director of the National Association of Water Companies and former Chair of the New Jersey Utilities
Association’s Communications Committee.
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Bruce E. Patrick – Mr. Patrick, a
licensed professional engineer, joined Tidewater in February 2002 as Vice President of Engineering. He was promoted to Vice President
and General Manager in April 2012, Executive Vice President in April 2023, and President in December 2023. Mr. Patrick has extensive
experience in regulatory compliance, permitting, planning and design. Prior to joining Tidewater, he served as Kent County, Delaware Public
Works Director and County Engineer where he had overall responsibility for the County’s regional wastewater facilities. Mr.
Patrick also held prior positions with the Delaware Department of Natural Resources and Environmental Control as well as
the Delaware Division of Public Health.
Robert J. Capko – Mr. Capko, a Certified
Public Accountant, joined the Company in 2009 as Corporate Controller. On March 28, 2023, Mr. Capko was appointed Principal Accounting
Officer of Middlesex. Mr. Capko is also a Director and Treasurer of Tidewater and White Marsh and Controller of USA, USA-PA, Pinelands
Water and Pinelands Wastewater. Prior to joining Middlesex, Mr. Capko was an Audit Senior Manager with Deloitte & Touche LLP, with
a focus on publicly traded regulated utilities including several regulated public utility clients subject to the jurisdiction of the NJBPU.