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Item 7. Management’s Discussion and Analysis

2026-02-19 compared with 2025-02-28 · 212 added, 508 removed, 82 unchanged (90% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read in conjunction

with the consolidated financial statements and related notes.

Middlesex Water Company (Middlesex or the Company)

has operated as a water utility in New Jersey since 1897 and in Delaware through our wholly-owned subsidiary, Tidewater Utilities, Inc.

The following discussion should be read in conjunction with the consolidated financial statements and related notes.

For discussion of the year ended December 31, 2024 compared to December 31, 2023, refer to Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations in the December 31, 2024 Annual report on Form 10-K, filed on February 28, 2025.

Middlesex Water Company (Middlesex or the Company) has operated as a water utility in New Jersey since 1897 and in Delaware through our wholly-owned subsidiary, Tidewater Utilities, Inc.

(Tidewater), since 1992.

We are in the business of providing an essential water utility service for domestic, commercial, municipal, industrial

and fire protection purposes.

We operate water and wastewater systems under contract for governmental entities and private entities primarily

in New Jersey and Delaware and also provide regulated wastewater services in New Jersey.

We are regulated by state public utility commissions

as to rates charged to customers for water and wastewater services, as to the quality of water and wastewater services we provide and

as to certain other matters in the states in which our regulated subsidiaries operate.

We are in the business of providing an essential water utility service for domestic, commercial, municipal, industrial and fire protection purposes.

We operate water and wastewater systems under contract for governmental entities and private entities primarily in New Jersey and Delaware.

We also provide regulated wastewater services in New Jersey.

We are regulated by state public utility commissions as to rates charged to customers for water and wastewater services, as to the quality of water and wastewater service we provide and as to certain other matters in the states in which our regulated subsidiaries operate.

Only our Utility Service Affiliates, Inc.

Utility Service Affiliates (Perth Amboy), Inc.

(USA), Utility Service Affiliates (Perth Amboy), Inc.

(USA-PA) and White Marsh Environmental Services, Inc.

(White Marsh) subsidiaries are not

regulated public utilities as related to rates and services quality.

All municipal or commercial entities whose utility operations are

managed by these entities however, are subject to environmental regulation at the federal and state levels.

Our principal New Jersey water utility system

(the Middlesex System) provides water services to approximately 61,000 retail customers, primarily in central New Jersey.

The Middlesex

System also provides water sales under contract to municipalities in central New Jersey with a total population of over 0.2 million.

other New Jersey subsidiaries, Pinelands Water Company (Pinelands Water) and Pinelands Wastewater Company (Pinelands Wastewater) (collectively,

Pinelands), provide water and wastewater services to approximately 2,500 customers in Southampton Township, New Jersey.

Our Delaware subsidiaries, Tidewater and Southern

Shores Water Company, LLC (Southern Shores), provide water services to approximately 61,000 retail customers in New Castle, Kent and Sussex

Counties, Delaware.

Tidewater’s subsidiary, White Marsh, services approximately 4,300 customers in Kent and Sussex Counties through

various operations and maintenance contracts.

USA-PA operates the water

and wastewater systems for the City of Perth Amboy, New Jersey (Perth Amboy) under a 10-year operations and maintenance contract expiring

In addition to performing day-to day operations, USA-PA is also responsible for emergency response and management of capital

projects funded by Perth Amboy.

USA operates the Borough

of Avalon, New Jersey’s (Avalon) water utility, sewer utility and storm water system under a 10-year operations and maintenance

contract expiring in 2032.

USA also operates the Borough of Highland Park, New Jersey’s (Highland Park) water and wastewater

systems under a 10-year operations and maintenance contract expiring in 2030.

In addition to performing day-to-day service operations,

USA is responsible for emergency response and management of capital projects funded by Avalon and Highland Park.

Under a marketing agreement

with HomeServe USA Corp.

(HomeServe) expiring in 2031, USA offers residential customers in New Jersey and Delaware water and wastewater

related services and home maintenance programs.

(White Marsh) subsidiaries are not regulated public utilities as related to rates and services quality.

All municipal or commercial entities whose utility operations are managed by these entities, however, are subject to environmental regulation at the federal and state levels.

Our principal New Jersey water utility system (the Middlesex System) provides water services to approximately 61,000 retail customers, primarily in central New Jersey.

The Middlesex System also provides water sales under contract to municipalities in central New Jersey with a total population of over 0.2 million.

Our other New Jersey subsidiaries,

Pinelands Water Company (Pinelands Water) and Pinelands Wastewater Company (Pinelands Wastewater) (collectively, Pinelands) provide water and wastewater services to approximately 2,500 customers in Southampton Township, New Jersey.

Our Delaware subsidiaries, Tidewater and Southern Shores Water Company, LLC, provide water services to approximately 65,000 retail customers in New Castle, Kent and Sussex Counties, Delaware.

Tidewater’s subsidiary, White Marsh, services approximately 3,700 households in Kent and Sussex Counties through various operations and maintenance contracts.

USA-PA operates the water and wastewater systems for the City of Perth Amboy, New Jersey (Perth Amboy) under a 10-year operations and maintenance contract expiring in 2028.

In addition to performing day-to day operations, USA-PA is also responsible for emergency response and management of capital projects funded by Perth Amboy.

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.

USA also operates the Borough of Highland Park, New Jersey’s (Highland Park) water and wastewater systems under a 10-year operations and maintenance contract expiring in 2030.

In addition to performing day-to-day service operations, USA is responsible for emergency response and management of capital projects funded by Avalon and Highland Park.

Under a marketing agreement with HomeServe USA Corp.

(HomeServe) expiring in 2031, USA offers residential customers in New Jersey and Delaware water and wastewater related services and home maintenance programs.

HomeServe is a leading national provider of such home maintenance service programs.

receives a service fee for the billing, cash collection and other administrative matters associated with HomeServe’s service contracts.

Management Update

Upon the retirements of President and Chief Executive

Officer Dennis W.

Doll, and Senior Vice President, Treasurer and Chief Financial Officer A.

Bruce O’Connor, the Company

named Nadine Leslie its new President and Chief Executive Officer effective March 1, 2024 and Mohammed G.

new Senior Vice President,

Treasurer and Chief Financial Officer effective June 24, 2024.

Leslie was also appointed to

the Board of Directors effective March 1, 2024.

In December 2024, the Company named Gregory Sorensen

its new Vice President and Chief Operating Officer.

His responsibilities include water and wastewater operations, capital program planning

and delivery, safety and security, sustainability, and growth initiatives.

Tidewater Acquisition of the Water Utility

Assets of the Town of Ocean View, Delaware

In February 2025, Tidewater and the Town of Ocean

View, Delaware’s (Ocean View) joint application for Tidewater’s purchase of all of the rights, title, and interest in the

water utility assets of Ocean View for $4.6 million was approved by the Delaware Public Service Commission (DEPSC).

Ocean View serves

approximately 900 customers in Sussex County, Delaware.

Tidewater currently provides water service to most residents of Ocean View other

that the 900 customers currently served by Ocean View.

Closing on this purchase is expected by April 2025.

United States Environmental Protection Agency

(USEPA) Issues Final Perfluoroalkyl (PFAS) Regulations

In April 2024, the USEPA finalized drinking water

regulations for PFAS, establishing maximum contaminant levels (MCLs) for three PFAS compounds (Regulated PFAS) that are lower than the

current New Jersey Department of Environmental Protection MCLs adhered to by the Company.

USA receives a service fee for the billing, cash collection and other administrative matters associated with HomeServe’s service contracts.

USA also provides unregulated water and wastewater services under contract with several New Jersey municipalities.

Rates and Regulatory Matters

Middlesex - In February 2026, the New Jersey Board of Public Utilities (NJBPU) approved:

• $14.5 million of base rate increases for Middlesex and Pinelands, effective February 23, 2026;

• A Resiliency and Environmental System Improvement Charge (RESIC) Foundational Filing, which allows for the recovery of certain costs of future Middlesex and Pinelands investments related to compliance with requirements to address existing and emerging chemical elements or compounds, installation of new plant or equipment or replacement of existing plant or equipment to further maintain, enhance, or improve resiliency, health, safety or environmental protection;

• A Distribution System Improvement System Charge (DSIC) Foundational Filing, which allows for the recovery of future Middlesex and Pinelands Water investments in qualifying capital improvements to their water distribution system.

In January 2026, the NJBPU approved the merger of Pinelands into Middlesex through a corporate reorganization.

Tidewater - In July 2025, the Delaware Public Service Commission (DEPSC) approved a $5.5 million base rate increase for Tidewater, effective July 3, 2025.

In April 2025 and January 2026, Tidewater completed the acquisitions of the water utility assets of the Town of Ocean View, Delaware and Pinewood Acres, LLC, respectively, as authorized by the DEPSC.

For additional information, see Note 2, Rates and Regulatory Matters

Perfluoroalkyl Substances (PFAS) Multi-District Litigation Settlement

Several of the Company’s utility subsidiaries are parties to a multi-district litigation (MDL) lawsuit against manufacturers of certain PFAS for damages, contribution and reimbursement of costs incurred and continuing to be incurred to address the presence of such PFAS in public water supply systems owned and operated by these utility subsidiaries and throughout their service areas.

Settlements with several defendants in the MDL have received final approval by the MDL court.

The Company timely submitted to the MDL court its Phase One claim forms under settlement agreements with defendants 3M Company, DuPont de Nemours, Inc., Tyco Fire Products LP and BASF Corporation.

In 2025, the Company received settlement payments from 3M Company that will ultimately be refunded to customers.

The Company anticipates receiving additional settlement payments in 2026 from the defendants named above.

United States Environmental Protection Agency (USEPA) Issues Final PFAS Regulations

In April 2024, the USEPA finalized drinking water regulations for PFAS, establishing maximum contaminant levels (MCLs) for three PFAS compounds (Regulated PFAS) that are lower than the current New Jersey Department of Environmental Protection MCLs adhered to by the Company.

Under the new USEPA regulations effective April 2024,

2024, water systems must monitor for Regulated PFAS and have three years to complete initial monitoring (by April 2027), followed by ongoing

compliance monitoring.

Water systems must also provide the public with information on the levels of Regulated PFAS in their drinking water

beginning in 2027.

Water systems have five years (by April 2029) to implement solutions that reduce Regulated PFAS if monitoring shows

that drinking water levels exceed these MCLs.

Beginning in April 2029, water systems that have

Regulated PFAS in drinking water which exceeds one or more of these MCLs must take action to reduce levels of these PFAS compounds in

their drinking water and must provide notification to the public of the violation.

In anticipation of these new USEPA standards,

in 2023, the Company began implementing its strategy to meet these lower MCLs for Regulated PFAS and is currently performing preliminary

engineering studies to ensure that effective PFAS treatment approaches are implemented.

water systems must monitor for Regulated PFAS and have three years to complete initial monitoring (by April 2027), followed by ongoing compliance monitoring.

Water systems must also provide the public with information on the levels of Regulated PFAS in their drinking water beginning in 2027.

Water systems have five years (by April 2029) to implement treatment solutions if monitoring shows that drinking water levels exceed these MCLs.

The USEPA has announced its plans to issue a proposed rule extending the compliance date to 2031.

Beginning in April 2029 and absent an extension by the USEPA, water systems that have Regulated PFAS in drinking water which exceeds one or more of these MCLs must take action to reduce levels of these PFAS compounds in their drinking water and must provide notification to the public of the violation.

In anticipation of these new USEPA standards, in 2023, the Company began implementing its strategy to meet these lower MCLs for Regulated PFAS and is currently designing and implementing the most effective PFAS treatment approach.

Capital Construction Program

The Company’s multi-year

capital construction program encompasses numerous projects designed to upgrade and replace utility infrastructure as well as enhance the

integrity and reliability of assets to better serve the current and future generations of water and wastewater customers.

plans to invest approximately $93 million in 2025 in connection with this plan for projects that include, but are not limited to:

Replacement of 19,550 linear feet of cast iron main in Woodbridge Township in our Middlesex System;

Construction of new elevated water tanks in Delaware;

The Company’s multi-year capital construction program encompasses numerous projects designed to upgrade and replace utility infrastructure as well as enhance the integrity and reliability of assets to better serve current and future generations of water and wastewater customers.

The Company plans to invest approximately $126 million in 2026 in connection with this plan for projects that include, but are not limited to:

• Upgrade of the Carl J.

Olson Surface Water Treatment Plant (CJO Plant) to integrate PFAS removal from source water and CJO Plant finished water pump electrical distribution system improvements in our Middlesex System;

• Construction of new water treatment facilities, distribution system improvements and PFAS treatment facilities in Delaware;

• Various water main replacements and improvements.

Strategy for Growth

Our strategy for selective and sustainable growth is focused on the

following key areas:

Our strategy for selective and sustainable growth is focused on the following key areas:

• Invest in our utility infrastructure to build system resiliency and meet compliance requirements;

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• Operation of municipal and industrial water and wastewater systems on a contract basis which meet our risk profile.

Middlesex - The approval by the NJBPU in

February 2024 of the negotiated settlement of the Middlesex 2023 base rate case 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.

In August 2023, Middlesex and 3M Company (3M) executed a settlement agreement (Settlement Agreement) to resolve

a lawsuit Middlesex previously initiated claiming 3M introduced Perfluoroalkyl Substances (PFAS) into the Company’s water supply

for its Park Avenue Wellfield Treatment Plant (Park Avenue Plant).

The rate case settlement provided that the net proceeds from

the 3M Settlement Agreement were to be used to mitigate the increase in customer rates and reimburse Middlesex for previously incurred

costs for the construction of the Park Avenue Plant PFAS treatment upgrades, including depreciation and carrying costs.

This resulted

in the reclassification of $48.3 million from Regulatory Liabilities to Contributions in Aid of Construction from the December 31, 2023

balance sheet.

In 2024, the Company also recognized the recovery of $0.9 million for depreciation and $4.1 million for carrying costs

associated with the Park Avenue Plant PFAS treatment upgrades, as well as the recovery of $2.6 million of previously incurred operating

treatment costs while the Park Avenue Plant PFAS treatment upgrades were in process.

The Middlesex Lead Service Line Replacement (LSLR)

Plan, which was approved by the NJBPU in January 2024, has commenced and Middlesex is currently recovering $1.2 million of costs for replacing

customer-owned lead service lines incurred through June 2024, which are being recovered between September 2024 and February 2025.

of $0.6 million for replacing customer-owned lead service lines incurred between July 2024 through December 2024 will be recovered beginning

in March 2025 through August 2025.

The LSLR surcharge is required to be reset every six months over the life of the LSLR Plan.

Cost recovery

for replacing Company-owned lead service lines are recoverable through traditional rate making in connection with general rate case filings.

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 May 2024, the NJBPU approved a DSIC rate, effective

May 26, 2024, that is expected to result in $0.5 million of annual revenue.

In November 2024, the NJBPU approved a DSIC rate, effective

November 26, 2024, that is expected to result in an additional $0.6 million of annual revenue.

Middlesex expects to file for an additional

DSIC rate increase in April 2025.

In February 2025, the NJBPU approved Middlesex’s

petition to reset its Purchased Water Adjustment Clause (PWAC) tariff rate to recover additional annual costs of $0.5 million, primarily

for the purchase of treated water from a non-affiliated water utility regulated by the NJBPU.

A PWAC is a rate mechanism that allows for

the recovery of increased purchased water costs between base rate case filings.

The PWAC is reset to zero once those increased costs are

included in base rates.

The new PWAC rate will be effective March 1, 2025.

Tidewater - In September 2024, the DEPSC

approved Tidewater’s petition to recover up to $2.1 million of costs associated with Tidewater’s obligation to identify and

inventory lead service lines throughout Tidewater’s service area, as required by federal law and Delaware regulations.

of these costs began February 1, 2025 and is expected to continue through January 2028.

Through December 31, 2024, Tidewater has spent

$1.8 million, which is included in Regulatory Assets.

In August 2024, Tidewater filed an application

with the DEPSC to increase its general rates for water service.

In the application, Tidewater seeks an overall increase in annual operating

revenue of $10.3 million or 25.66% over current revenue.

The request for rate increases will allow Tidewater to recover prudently incurred

investments made in the last ten years to support continued regulatory compliance, enhanced water quality, service reliability, security

and resiliency of the water utility infrastructure assets.

Effective October 30, 2024, Tidewater received approval of the DEPSC to suspend

its DSIC rate and implement an interim rate increase, which is expected to result in approximately $2.5 million of annual revenues, subject

to refund pending the outcome of the rate case application.

Southern Shores - Southern Shores

provides water service to a 2,200 unit condominium community in Sussex County, Delaware under a DEPSC-approved agreement expiring December

Under the agreement, rates are increased when there are unanticipated capital expenditures or regulatory related changes

in operating expenses exceed certain thresholds.

In 2024, capital expenditures did exceed the established threshold.

In addition, rates

are increased annually by the lesser of the regional Consumer Price Index or 3%.

Effective January 1, 2025, Southern Shores rates were

increased $0.1 million or 6.51%.

Our ability to increase operating income and net

income is based significantly on four factors:

weather, adequate and timely rate relief, effective cost management and customer growth

(which are evident in comparison discussions in the Results of Operations section below).

Weather patterns which can result in

lower customer demand for water may occur in 2025.

As operating costs are anticipated to increase in 2025 in a variety of categories,

we continue to implement plans to further streamline operations and further reduce and mitigate increases in operating costs.

in customer water usage habits, as well as increases in capital expenditures and operating costs, are significant factors in determining

the timing and extent of rate increase requests.

Our investments in system infrastructure continue

to grow significantly and our operating costs are anticipated to increase in 2025 and 2026 in a variety of categories.

These factors,

among others, may require a base rate increase request by Middlesex in mid 2025.

Overall, organic residential customer growth continues

in our Tidewater system (approximately 3.5% in 2024).

The Company has projected to spend approximately

$387 million for the 2025-2027 capital investment program, including approximately $105 million for upgrading our Carl J.

Olson Surface

Water Treatment Plant (CJO Plant) to integrate PFAS removal from source water, $34 million on the RENEW Program, which is our ongoing

initiative to replace water mains in the Middlesex System, $15 million for replacement of a transmission main in Metuchen in our Middlesex

System and $12 million for elevated storage tanks in our Tidewater System.

The Company has projected to spend approximately $506 million for the 2026-2028 capital investment program, including approximately $255 million for upgrading our CJO Plant to integrate PFAS removal from source water, $34 million on the RENEW Program, which is our ongoing initiative to replace water mains in the Middlesex System, $17 million for replacement of a transmission main in Metuchen in our Middlesex System, $8 million for booster station generator replacement and electrical improvements.

$9 million for construction of the Bethany Bay new water treatment facility in the Tidewater System and $13 million for elevated storage tanks in our Tidewater System.

The Company utilizes semi-annual DSIC and RESIC filings between general rate case filings to timely recover costs for qualified capital investments related to its utility systems as well as compliance with requirements to address existing and emerging chemical elements or compounds, installation of new plant or equipment or replacement of existing plant or equipment to further maintain and enhance resiliency, health, safety or environmental protection investments.

Organic residential customer growth continues in our Tidewater system (approximately 3.0% in 2025) through expansion of our franchise area.

The Company continues to seek "tuck-in" acquisition opportunities for small water systems near our current service areas that are easily integrated into our Company, such as the recent acquisitions of the water utility assets of the Town of Ocean View and Pinewood Acres, LLC in Delaware.

Our ability to increase earnings is based primarily on four factors:

weather, adequate and timely rate relief, effective cost management and customer growth (which are evident in comparison discussions in the Results of Operations section below).

Weather patterns which can result in lower customer demand for water may occur in 2026.

Changes in customer water usage habits, as well as increases in capital expenditures and operating costs, are significant factors in determining the timing and extent of base rate increase requests.

Operating Results by Segment

The Company has two operating segments, Regulated

and Non-Regulated.

Our Regulated segment contributed approximately 93% of total revenues for the years ended December 31, 2024, 2023 and

2022, respectively, and approximately 94%, 92% and 93% of net income for the years ended December 31, 2024, 2023 and 2022, respectively.

The Company has two operating segments, Regulated and Non-Regulated.

Our Regulated segment contributed approximately 94% and 93% of total revenues for the years ended December 31, 2025 and 2024, respectively, and approximately 94% of net income for each of the years ended December 31, 2025 and 2024, respectively.

The discussion of the Company’s results of operations is on a consolidated basis and includes significant factors by subsidiary.

The segments in the tables included below are comprised of the following companies:

Regulated- Middlesex, Tidewater, Pinelands and Southern

Regulated- Middlesex, Tidewater, Pinelands and Southern Shores;

Non-Regulated- USA, USA-PA, and White Marsh.

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Years Ended December 31,

Regulated Non-

Regulated Total Regulated Non-

Regulated Total

Revenues $ 182.2 $ 12.5 $ 194.7 $ 178.8 $ 13.1 $ 191.9

Operations and maintenance expenses 82.8 8.5 91.3 83.5 8.9 92.4

Depreciation expense 26.8 0.3 27.1 24.2 0.2 24.4

Other taxes 21.7 0.2 21.9 21.6 0.3 21.9

Operating income 50.9 3.5 54.4 49.5 3.7 53.2

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Interest expense 14.3 — 14.3 14.0 — 14.0

Operating Revenues

Operating revenues for the year ended December

31, 2024 increased $25.6 million from the same period in 2023 due to the following factors:

Middlesex System revenues increased by $19.9 million due to the base rate case increase on March 1, 2024, increased weather-driven customer demand, higher commercial and industrial customer billing and the implementation of the 2024 DSIC mechanism;

Tidewater System revenues increased by $4.5 million due to customer growth and higher weather-driven customer demand;

Pinelands System revenues increased $0.5 million due to scheduled rate increases from Pinelands 2023 NJBPU Order and increased weather-driven customer demand;

Non-regulated revenues increased $0.7 million, primarily due to higher supplemental contract services.

Operation and Maintenance Expense

Operation and maintenance expenses for the year

ended December 31, 2024 increased $9.2 million from the same period in 2023 due to increased legal, financial and regulatory matter costs,

increased labor costs due to annual wage increases, an enhanced water treatment process at Middlesex’s Park Avenue Plant, and higher

energy costs due to increased water demand.

Depreciation expense for the year ended December 31, 2024 decreased

$0.8 million from the same period in 2023 due to recovery of prior year depreciation related to upgrades at the Park Avenue Plant partially

offset by a higher level of utility plant in service.

The conclusion of Middlesex’s base rate increase request allowed proceeds

from the 3M Settlement Agreement to reimburse Middlesex for previously incurred costs for the construction of the Park Avenue Plant PFAS

treatment upgrades (for further discussion of the 3M Settlement Agreement, see Rates, Middlesex above).

Other taxes for the year ended December 31, 2024

increased $3.1 million from the same period in 2023 primarily due to higher gross receipts taxes on higher revenue in Middlesex and higher

payroll related taxes on increased labor costs.

Other Income, net

Other Income, net for the year ended December

31, 2024 increased $5.6 million from the same period in 2023 primarily due to the recovery of carrying costs on the PFAS treatment upgrades

at the Park Avenue Plant and higher actuarially-determined retirement benefit plans non-service benefit offset by lower allowance for

funds used during construction on capital projects in construction.

Interest Charges

Interest charges for the year ended December 31,

2024 increased $0.9 million from the same period in 2023 due to higher average debt outstanding and higher average interest rates.

Income taxes for the year ended December 31, 2024

increased by $5.9 million from the same period in 2023, primarily due to higher pre-tax income and

lower income tax benefits associated with decreased repair expenditures on tangible property in the Middlesex System offset by the recovery

of income taxes on the taxable portion of the proceeds from the 3M Settlement Agreement .

Results of Operations for 2023 as Compared to 2022

(In Millions)

Years Ended December 31,

Operations and maintenance expenses

Depreciation expense

Gain on sale of subsidiary

Operating income

Other income (expense), net

Interest expense

Income taxes 3.6 1.2 4.8 5.7 1.2 6.9

Net income $ 40.3 $ 2.5 $ 42.8 $ 41.6 $ 2.8 $ 44.4

Operating Revenues

Operating revenues for the year ended December

31, 2023 increased $3.8 million from the same period in 2022 due to the following factors:

Middlesex System revenues increased by $4.2 million due to the implementation of the final phase of the 2021 base rate case increase on January 1, 2023 and the PWAC rate increase offset by lower weather-driven demand across all customer classes;

Tidewater System revenues decreased by $0.9 million due to a DEPSC ordered rate reduction in September 2022, lower customer connection fees and lower weather-driven customer demand partially offset by an increase in customers;

Pinelands System revenues increased $0.2 million due to the implementation of a base rate increase effective April 15, 2023;

Non-regulated revenues increased $0.5 million, primarily due to higher supplemental contract services.

Operating revenues for the year ended December 31, 2025 increased $2.8 million from the same period in 2024 due primarily to the following factors:

• Middlesex System revenues increased by $1.5 million due to the increase in base rates effective March 1, 2024 and the increase in DSIC partially offset by lower consumption driven by unfavorable weather;

• Tidewater System revenues increased by $1.6 million due to the increase in base rates effective July 3, 2025 and customer growth partially offset by lower consumption driven by unfavorable weather;

• Pinelands System revenues increased $0.2 million due to the full year impact of base rate increases;

• Non-regulated revenues decreased $0.6 million, primarily due to lower supplemental contract services;

• All other operating revenue categories increased $0.1 million.

Operation and Maintenance Expense

Operation and maintenance expenses for the year

ended December 31, 2023 increased $4.0 million from the same period in 2022 due to increased variable production costs due to weather-driven

changes in water quality and higher chemical prices, higher outside service costs due to production instrumentation calibration activities,

increases in labor costs due to wage increases and higher bad debt expense due to higher anticipated customer receivable write-offs.

offsetting these increases was lower weather-related main break activity in our Middlesex System during the winter months.

Depreciation expense for the year ended December

31, 2023 increased $2.2 million from the same period in 2022 due to a higher level of utility plant in service.

Other taxes for the year ended December 31, 2023

increased $0.5 million from the same period in 2022 primarily due to higher revenue related taxes on increased revenues in our Middlesex

Gain on Sale of Subsidiary

Middlesex recognized a $5.2 million gain on the

sale of its regulated Delaware wastewater subsidiary in January 2022.

Operation and maintenance expenses for the year ended December 31, 2025 decreased $1.1 million from the same period in 2024 due to higher capitalizable costs and lower legal, financial and regulatory matter costs, partially offset by increased production costs from weather-driven lower water quality, increased weather-driven main break repair costs, higher labor cost due to wage and employee headcount increases and the one-time recovery in 2024 of previous water treatment operating costs at Middlesex’s Park Avenue Plant in connection with Middlesex’s 2023 rate case order.

Depreciation expense for the year ended December 31, 2025 increased $2.7 million from the same period in 2024 due to higher average utility plant in service and the one-time recovery in 2024 of previous depreciation costs related to the PFAS treatment upgrades at Middlesex’s Park Avenue Plant in connection with Middlesex’s 2023 rate case order.

Other taxes for the year ended December 31, 2025 are consistent with the same period in 2024.

Other Income, net

Other Income, net for the year ended December

31, 2023 decreased $1.2 million from the same period in 2022 primarily due to lower actuarially-determined retirement benefit plans non-service

Other Income, net for the year ended December 31, 2025 decreased $4.5 million from the same period in 2024 primarily due to lower actuarially-determined retirement benefit plans non-service benefit and the one-time recovery in 2024 of carrying costs on PFAS treatment upgrades at Middlesex’s Park Avenue Plant in connection with Middlesex’s 2023 rate case order, partially offset by higher allowance for funds used during construction from increased capital expenditures.

Interest Charges

Interest charges for the year ended December 31,

2023 increased $3.8 million from the same period in 2022 due to higher average debt outstanding and higher average interest rates in 2023

as compared to 2022.

Income taxes for the year ended December 31, 2023

decreased by $2.2 million from the same period in 2022, primarily due to greater income tax benefits associated

with increased repair expenditures on tangible property in the Middlesex System and lower pretax income due to gain on the sale of a subsidiary

Interest charges for the year ended December 31, 2025 increased $0.3 million from the same period in 2024 due to higher average debt outstanding offset by lower average interest rates.

Income taxes for the year ended December 31, 2025 decreased by $2.1 million from the same period in 2024, primarily due to lower pretax income and higher income tax benefits associated with increased repair expenditures on tangible property in the Middlesex System, partially offset by the 2024 recovery of income taxes on the taxable portion of the proceeds from a litigation agreement.

Liquidity and Capital Resources

Cash Flows from Operating Activities

Cash flows from operating activities are largely

influenced by four factors:

Cash flows from operating activities are largely influenced by four factors:

weather, adequate and timely rate increases, effective cost management and customer growth.

The effect of

those factors on net income is discussed in the Results of Operations section above.

For the year ended December 31, 2024, cash flows

from operating activities increased $5.9 million to $58.7 million.

The increase in cash flows from operating activities primarily resulted

from the impact of higher weather-driven customer demand and Middlesex’s approved base rate increase effective March 1, 2024.

Increases in certain operating costs impact our

liquidity and capital resources.

We continually monitor the need for timely rate filing to minimize the lag between the time we experience

increased operating costs and capital expenditures and the time we receive appropriate rate relief.

The effect of those factors on net income is discussed in the Results of Operations section above.

For the year ended December 31, 2025, cash flows from operating activities increased $3.9 million to $62.6 million.

The increase in cash flows from operating activities primarily resulted from the impact of Middlesex’s approved base rate increase effective March 1, 2024, Tidewater's base rate increase effective July 3, 2025, Middlesex's increased DSIC, decreased unbilled revenues and lower federal income tax payments.

Increases in certain operating costs impact our liquidity and capital resources.

We continually monitor the need for timely rate case filings to minimize the lag between the time we experience increased operating costs and capital expenditures and the time we receive appropriate rate relief.

Cash Flows from Investing Activities

For the year ended December 31, 2024, cash flows

used in investing activities decreased $15.6 million to $74.6 million due to decreased utility plant expenditures in 2024.

Company had significant utility plant

expenditures for the construction of a facility to provide an enhanced treatment process at the

Company’s Park Avenue Plant to comply with new state water quality regulations relative to PFAS.

For further discussion on the Company’s

future capital expenditures and expected funding sources, see “ Capital Expenditures and Commitments ” below.

For the year ended December 31, 2025, cash flows used in investing activities increased $26.3 million to $101.0 million due to increased utility plant expenditures in 2025 and Tidewater’s acquisition of the water utility assets of Ocean View.

For further discussion on the Company’s future capital expenditures and expected funding sources, see “ Capital Expenditures and Commitments ” section below.

Cash Flows from Financing Activities

For the year ended December 31, 2024, cash flows

from financing activities decreased $18.2 million to $17.7 million.

The decrease in cash flows provided by financing activities is due

to lower proceeds from the issuance of common stock under the Middlesex Water Company Investment Plan (Investment Plan) and long-term

debt offset by proceeds received from a litigation settlement.

For further discussion on the Company’s

short-term and long-term debt, see “ Sources of Liquidity ” below.

For the year ended December 31, 2025, cash flows from financing activities increased $20.9 million to $38.6 million.

The increase in cash flows provided by financing activities is due to higher long-term debt and short-term borrowings, and higher proceeds from the issuance of common stock under Middlesex’s At-the-Market (ATM) equity offering program, partially offset by proceeds received from a litigation settlement in 2024.

For further discussion on the Company’s long-term debt, short-term borrowings and common stock, see “ Sources of Liquidity ” section below.

Capital Expenditures and Commitments

To fund our capital program, we use internally

generated funds, short-term and long-term debt borrowings, proceeds from sales of common stock under the Investment Plan and, when market

conditions are favorable, proceeds from sales to the public of our common stock.

The table below summarizes our estimated capital expenditures for the

years 2025-2027.

To fund our capital program, we use internally generated funds, short-term and long-term debt borrowings, proceeds from sales of common stock under the Middlesex Water Company Investment Plan (Investment Plan) and ATM equity offering program, and, when market conditions are favorable, proceeds from sales to the public of our common stock.

The table below summarizes our estimated capital expenditures for the years 2026-2028.

(In Millions)

2026 2027 2028 Total

Distribution/Network System $ 53 $ 57 $ 65 $ 175

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Information Technology (IT) Systems 2 2 1 5

Other 6 6 4 16

Total Estimated Capital Expenditures $ 126 $ 200 $ 180 $ 506

Our estimated capital expenditures for the items

listed above are primarily comprised of the following:

Our estimated capital expenditures for the items listed above are primarily comprised of the following:

• Distribution/Network System - Includes projects associated with replacement, installation and relocation of water mains and service lines and wastewater collection systems, construction of water storage tanks, installation and replacement of hydrants, meters and meter pits and the RENEW Program.

RENEW is our ongoing initiative to replace water mains in the Middlesex System.

In connection with RENEW, we expect to spend approximately $11 million in each of 2025 and 2026, and $12 million in 2027.

Also, we plan to replace a transmission main in Metuchen in our Middlesex System for approximately $8 million and $7 million in 2026 and 2027, respectively.

In addition, we expect to invest $2 million and $10 million in 2025 and 2026, respectively, for elevated storage tanks in our Tidewater System.

In connection with RENEW, we expect to spend approximately $12 million each year from 2026 to 2028.

Also, we plan to replace a transmission main in Metuchen, New Jersey in our Middlesex System for approximately $8 million in 2027 and 2028.

In addition, we expect to invest $2 million in Tidewater distribution system improvements in 2026.

Also, we expect to invest $3 million and $9 million in 2027 and 2028, respectively, for elevated storage tanks in our Tidewater System.

• Production System - Includes projects associated with our treatment plants, including approximately $36 million, $119 million and $100 million of expenditures in 2026, 2027 and 2028, respectively to install PFAS treatment at our CJO Plant.

Information Technology (IT) Systems - Includes further upgrade of our enterprise resource planning system and hardware and software purchases for other IT systems, including approximately $2 million in both 2026 and 2027 for upgrades of our customer information system.

Other - Includes purchase of transportation equipment, tools, furniture, laboratory equipment, security systems and other general infrastructure needs including improvements to field and inventory management facilities in Iselin, New Jersey.

The actual amount and timing of capital expenditures

is dependent on the need for replacement of existing infrastructure, customer growth, residential new home construction and sales, project

scheduling and continued refinement of project scope and costs.

To fund our capital program in 2025, we estimate we will utilize some

or all of the following:

• Information Technology (IT) Systems - Includes additional upgrades of our enterprise resource planning system and hardware and software purchases for other IT systems.

• Other - Includes purchase of transportation equipment, tools, furniture, laboratory equipment, security systems and other general infrastructure needs including improvements to field and inventory management facilities.

The actual amount and timing of capital expenditures is dependent on the need for replacement of existing infrastructure, customer growth, residential new home construction and sales, project scheduling and continued refinement of project scope and costs.

To fund our capital program in 2026, we estimate we will utilize some or all of the following:

• Internally generated funds;

• Short-term borrowings, as needed, through $148 million of available lines of credit with several financial institutions.

As of December 31, 2024, $23.0 million was outstanding under these lines of credit (see discussion under “ Sources of Liquidity-Short-term Debt ” below);

(see discussion under “ Sources of Liquidity-Short-term Borrowings ” below);

• Proceeds from the Delaware State Revolving Fund (SRF) Program.

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• Proceeds from other long-term borrowings (see discussion under “ Sources of Liquidity-Long-term Debt ” below);

Proceeds from common stock sales through the Investment Plan and proceeds from sales to the public of our common stock when market conditions are favorable (see discussion under “ Sources of Liquidity-Common Stock ” below).

• Proceeds from common stock sales through the ATM equity offering program and Investment Plan and proceeds from sales to the public of our common stock when market conditions are favorable (see discussion under “ Sources of Liquidity-Common Stock ” below).

Sources of Liquidity

Debt - The Company has available lines of credit of $140 million.

The outstanding borrowings under the credit lines at December 31,

2024 were $23.0 million, at a weighted average interest rate of 5.63%.

The weighted average daily amounts of borrowings

outstanding under the credit lines and the weighted average interest rates on those amounts were $38.7 million and $35.7 million at 6.33%

and 6.13% for the years ended December 31, 2024 and 2023, respectively.

Long-term Debt - Subject to regulatory

approval, the Company periodically issues long-term debt to fund investments in utility plant.

To the extent possible and fiscally prudent,

the Company finances qualifying capital projects under SRF loan programs in New Jersey and Delaware.

These government programs provide

financing at interest rates typically below rates available in the broader financial markets.

Middlesex has received approval from the NJBPU

to borrow up to $300.0 million from the New Jersey SRF Program, the New Jersey Economic Development Authority, private placement and other

financial institutions as needed through December 31, 2025.

The Company expects to issue debt securities in a series of one or more transaction

offerings to help fund Middlesex’s multi -year capital construction program.

In September 2024, Tidewater closed on a $2.2

million Delaware SRF loan with a 0.0% interest rate with an expected maturity date in 2044.

This loan is for costs associated with Tidewater’s

obligation, as required by federal law and Delaware regulations, to identify and inventory lead service lines throughout Tidewater’s

service area.

Short-term Borrowings - In February 2026, the Company increased available lines of credit from $148 million to $180 million.

The outstanding borrowings under the credit lines at December 31, 2025 were $28.3 million, at a weighted average interest rate of 5.03%.

The weighted average daily amounts of borrowings outstanding under the credit lines and the weighted average interest rates on those amounts were $42.1 million and $38.7 million at 5.42% and 6.33% for the years ended December 31, 2025 and 2024, respectively.

Long-term Debt - Subject to regulatory approval, the Company periodically issues long-term debt to fund investments in utility plant.

To the extent possible and fiscally prudent, the Company finances qualifying capital projects under SRF loan programs in New Jersey and Delaware.

These government programs provide financing at interest rates typically below rates available in the broader financial markets.

The Company intends to issue debt securities in a series of transaction offerings over a multi-year period to fund the multi-year capital construction program.

In September 2025, the NJBPU authorized Middlesex to borrow up to $260.0 million during the period January 2026 through December 2028, in one or more negotiated transactions in the form of notes and/or first mortgage bonds through loans from the New Jersey SRF Program, the New Jersey Economic Development Authority, private placement and other financial institutions as needed.

Middlesex was previously authorized to borrow up to $300.0 million for the period beginning in April 2023 through December 2025.

In October 2025, Middlesex closed on a $30.0 million, 5.99% private placement of First Mortgage Bonds (FMBs) due 2055, designated as Series 2025A.

The net proceeds from the sale were used to repay short-term borrowings under the Company’s bank lines of credit and for other general corporate purposes.

In September 2024, Tidewater closed on a $2.2 million Delaware SRF loan with a 0.0% interest rate with an expected maturity date in 2044.

This loan is for costs associated with Tidewater’s obligation, as required by federal law and Delaware regulations, to identify and inventory lead service lines throughout Tidewater’s service area.

Tidewater has drawn down $1.8 million as of December 31, 2025.

In May 2024, Tidewater closed on four DEPSC-approved

Delaware SRF loans totaling $5.6 million, all at interest rates of 2.0% with expected maturity dates in 2044.

These loans are for the

construction, relocation, improvement, and/or interconnection of transmission mains and construction of a water treatment facility.

has drawn down less than $0.1 million on these loans as of December 31, 2024.

Each project has its own construction timetable with the

last spending set to occur in 2026.

Tidewater also has two active construction projects

funded by Delaware SRF loans totaling $8.3 million with remaining availability of funds for borrowing.

These loans are for the construction

of a one-million gallon elevated storage tank and construction, relocation, improvement, and interconnection of transmission mains.

has drawn a total of $4.9 million through December 31, 2024 and expects that the requisitions will continue through the second quarter

In July 2023, Pinelands Water and Pinelands Wastewater

closed on $3.9 million and $3.6 million CoBank, ACB (CoBank) amortizing mortgage type loans, respectively, with an interest rate of 6.17%

and a final maturity date of 2043 for each loan.

Proceeds were used to pay off outstanding intercompany loans with Middlesex and for ongoing

capital projects.

In May 2023, Tidewater closed on a $20.0 million

loan from CoBank with an interest rate of 5.71% and a 2033 maturity date and fully drew all funds by June 30, 2023.

Proceeds from the

loan were used to pay off Tidewater’s outstanding balances under its bank lines of credit and for other general corporate purposes.

In April 2023, Tidewater closed on two DEPSC-approved

Delaware SRF loans totaling $6.9 million, all at interest rates of 2.0% with maturity dates in 2043 and 2044.

These loans are for the

construction, relocation, improvement, and/or interconnection of transmission mains.

Tidewater has fully drawn on these loans.

In March 2023, Middlesex closed on a $40.0 million,

5.24% private placement of First Mortgage Bonds (FMBs) with a 2043 maturity date designated as Series 2023A.

Proceeds were used to reduce

the Company’s outstanding balances under its bank lines of credit.

In May 2022, Middlesex repaid its two outstanding

New Jersey Infrastructure Bank (NJIB) construction loans by issuing FMBs to the NJIB under two loan agreements.

The total amount of FMBs

issued is $52.2 million and designated as Series 2022A ($16.2 million) and Series 2022B ($36.0 million).

The interest rate on the Series

2022A bond is zero and the interest rate on the Series 2022B bond ranges between 2.7% and 3.0%.

The final maturity date for both FMBs

is August 1, 2056, with scheduled debt service payments over the life of these loans.

Substantially all of the utility plant of the

Company is subject to the lien of its mortgage, which includes debt service and capital ratio covenants.

The Company is in compliance

with all of its mortgage covenants.

Common Stock - The Company issues shares

of its common stock in connection with the Investment Plan, a direct share purchase and dividend reinvestment plan for the Company’s

common stock.

In May 2024, Tidewater closed on four DEPSC-approved Delaware SRF loans totaling $5.6 million, all at interest rates of 2.0% with maturity dates in 2045.

These loans are for the construction, relocation, improvement, and/or interconnection of transmission mains and construction of a water treatment facility.

In December 2025, Tidewater closed on an additional $1.0 million, 2.0% SRF loan with a maturity date of 2045 related to these projects.

Tidewater has drawn down $0.9 million on these loans as of December 31, 2025.

Each project has its own construction timetable with the last spending set to occur in 2027.

Separately, Tidewater has two active construction projects funded by Delaware SRF loans totaling $8.3 million with remaining availability of funds for borrowing.

These loans are for the construction of a one-million gallon elevated storage tank and construction, relocation, improvement, and interconnection of transmission mains.

Tidewater has drawn a total of $7.1 million through December 31, 2025 and expects that the requisitions will continue through the first quarter of 2026.

In December 2025, Southern Shores closed on a $0.4 million Delaware SRF loan with a 0.0% interest rate with a maturity date in 2045.

This loan is for costs associated with Southern Shore’s obligation, as required by federal law and Delaware regulations, to identify and inventory lead service lines in its service area.

In February 2026, Pinelands Water and Pinelands Wastewater repaid in full $3.7 million and $3.4 million, respectively, of their amortizing secured notes.

The interest rates and due dates on both of these notes were 6.17% and 2043, respectively.

Substantially all of the utility plant of the Company is subject to the lien of its mortgage, which includes debt service and capital ratio covenants.

As of December 31, 2025, the Company is in compliance with all of its mortgage covenants.

Common Stock - The Company issues shares of its common stock in connection with the Investment Plan, a direct share purchase and dividend reinvestment plan for the Company’s common stock.

The Company raised approximately $0.9 million through the issuance of shares under the Investment Plan during 2025.

2023, Middlesex received approval from the NJBPU to increase the number of authorized shares under the Investment Plan by 0.7 million

Currently, 0.7 million shares remain registered with the United States Securities and Exchange Commission and available for issuance

to participants under the Investment Plan.

In order to fully fund the ongoing capital investment

program and maintain a balanced capital structure required for a regulated water utility, Middlesex may offer for sale additional shares

of its common stock.

The amount, the timing and the sales method of the common stock is dependent on the timing of the construction expenditures,

the level of additional debt financing and financial market conditions.

Common stock offerings will occur as needed to maintain a balanced

capital structure as we continue on a parallel path with future debt offerings.

In April 2023, Middlesex received approval from

the NJBPU to issue and sell up to 1.0 million shares of its common stock, without par value, through December 31, 2025.

Sales of additional

shares of common stock are part of the Company’s comprehensive financing plan to fund its multi-year utility plant infrastructure

investment program.

As described above in “Long-term Debt”, the NJBPU also approved the debt funding component of the financing

In September 2025, the NJBPU authorized Middlesex to issue and sell up to 2.5 million shares of its common stock, without par value, during the period January 2026 through December 2028, through one or more traditional underwriting offerings and/or ATM offerings.

Middlesex's was previously authorized to issue and sell up to 1.0 million shares of its common stock, without par value for the period beginning in April 2023 through December 2025.

In May 2025, Middlesex entered into an ATM Equity Offering Sales Agreement (Equity Sales Agreement) with BofA Securities, Inc., Robert W.

Incorporated, and Janney Montgomery Scott LLC, pursuant to which Middlesex may offer and sell shares of its common stock, no par value per share, from time to time in “at-the-market” offerings, having an aggregate gross sales price of up to $110.0 million.

The Company intends to use the net proceeds from these sales, after deducting commissions and offering expenses, to fund our capital expenditures, to purchase and maintain plant equipment, as well as for other general corporate purposes.

In 2025, Middlesex issued and sold a total of 560,000 shares of common stock, at a weighted average price of $53.54 per share, and received $29.5 million in net proceeds, under the Equity Sales Agreement.

As of December 31, 2025, the Company has $80.0 million of aggregate gross sales remaining under the Equity Sales Agreement.

In order to fully fund the ongoing capital investment program and maintain a balanced capital structure required for a regulated water utility, Middlesex may offer for sale additional shares of its common stock.

The amount, the timing and the sales method of the common stock is dependent on the timing of the construction expenditures, the level of additional debt financing and financial market conditions.

Common stock offerings will occur as needed to maintain a balanced capital structure as we continue on a parallel path with future debt offerings.

Sales of additional shares of common stock are part of the Company’s comprehensive financing plan to fund its multi-year utility plant infrastructure investment program.

Contractual Obligations

In the course of normal business activities, the

Company enters into a variety of contractual obligations and commercial commitments.

Some result in direct obligations on the Company’s

balance sheet while others are commitments, some firm and some based on uncertainties, which are disclosed in the Company’s consolidated

financial statements.

The table below presents our known contractual obligations for the

periods specified as of December 31, 2024.

In the course of normal business activities, the Company enters into a variety of contractual obligations and commercial commitments.

Some result in direct obligations on the Company’s balance sheet while others are commitments, some firm and some based on uncertainties, which are disclosed in the Company’s consolidated financial statements.

The table below presents our known contractual obligations for the periods specified as of December 31, 2025.

Payment Due by Period

(Millions of Dollars)

Total Less than 1

Year 2-3 Years 4-5 Years More than

Long-term Debt $ 386 $ 8 $ 15 $ 12 $ 351

Note Payable 28 28 — — —

Interest on Long-Term Debt 285 13 25 25 222

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Commercial Office Leases 4 1 2 1 —

The table above does not reflect any anticipated

cash payments for retirement benefit plan obligations.

The effect on the timing and amount of these payments resulting from potential

changes in actuarial assumptions and returns on plan assets cannot be estimated.

In 2024, the Company contributed $3.7 million to its

retirement benefit plans and expects to contribute approximately $1.8 million in 2025.

We do not currently have, nor have we ever had,

any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or

special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements, or for other

contractually narrow or limited purposes.

TOTAL $ 805 $ 57 $ 57 $ 53 $ 638

The table above does not reflect any anticipated cash payments for retirement benefit plan obligations.

The effect on the timing and amount of these payments resulting from potential changes in actuarial assumptions and returns on plan assets cannot be estimated.

In 2025 the Company contributed $2.0 million to its postretirement benefit plans and expects to contribute approximately $2.0 million in 2026 as well.

We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements, or for other contractually narrow or limited purposes.

In addition, we do not engage in trading activities involving non-exchange traded contracts.

Critical Accounting Policies and Estimates

The application of accounting policies and standards

often requires the use of estimates, assumptions and judgments.

The Company regularly evaluates these estimates, assumptions and judgments,

including those related to the calculation of pension and other retirement benefits, unbilled revenues, and the recoverability of certain

assets, including regulatory assets.

The Company bases its estimates, assumptions and judgments on historical experience and current operating

Changes in any of the variables that are used for the Company’s estimates, assumptions and judgments may lead to significantly

different financial statement results.

The application of accounting policies and standards often requires the use of estimates, assumptions and judgments.

The Company regularly evaluates these estimates, assumptions and judgments, including those related to the calculation of pension and other retirement benefits, unbilled revenues, and the recoverability of certain assets, including regulatory assets.

The Company bases its estimates, assumptions and judgments on historical experience and current operating environment.

Changes in any of the variables that are used for the Company’s estimates, assumptions and judgments may lead to significantly different financial statement results.

Our critical accounting policies and estimates are set forth below.

Regulatory Accounting

We maintain our books and records in accordance

with accounting principles generally accepted in the United States of America.

Middlesex and certain of its subsidiaries are subject to

regulation in the states in which they operate.

Those companies are required to maintain their accounts in accordance with regulatory

authorities’ rules and guidelines, which may differ from other authoritative accounting pronouncements.

In those instances, the

Company follows the guidance in the Financial Accounting Standards Board Accounting Standards Codification Topic 980 Regulated Operations

(Regulatory Accounting).

In accordance with Regulatory Accounting, costs

and obligations are deferred if it is probable that these items will be recognized for rate-making purposes in future rates.

we have recorded costs and obligations, which will be amortized over various future periods.

Any change in the assessment of the probability

of rate-making treatment would require us to change the accounting treatment of the deferred item.

We have no reason to believe any of

the deferred items that are recorded will be treated differently by the regulators in the future.

Revenues from our regulated customers, which include

amounts billed quarterly to residential customers and monthly to industrial, commercial, fire-protection and wholesale customers, also

include unbilled amounts based upon estimated usage from the date of the last meter reading to the end of the accounting period.

actual usage for customers may differ from the estimate, we believe the overall total estimate of consumption and revenue for the fiscal

period will not differ materially from actual consumption.

We maintain our books and records in accordance with accounting principles generally accepted in the United States of America.

Middlesex and certain of its subsidiaries are subject to regulation in the states in which they operate.

Those companies are required to maintain their accounts in accordance with regulatory authorities’ rules and guidelines, which may differ from other authoritative accounting pronouncements.

In those instances, the Company follows the guidance in the Financial Accounting Standards Board Accounting Standards Codification Topic 980 Regulated Operations (Regulatory Accounting).

In accordance with Regulatory Accounting, costs and obligations are deferred if it is probable that these items will be recognized for rate-making purposes in future rates.

Accordingly, we have deferred certain costs and obligations, which will be amortized in the same periods that revenues for these costs are recognized.

Any change in the assessment of the probability of rate-making treatment would require us to change the accounting treatment of the deferred item.

We have no reason to believe any of the deferred items that are recorded will be treated differently by the regulators in the future.

Revenues from our regulated customers, which include amounts billed quarterly or monthly to residential customers and monthly to industrial, commercial, fire-protection and wholesale customers, also include unbilled amounts based upon estimated usage from the date of the last meter reading to the end of the accounting period.

While actual usage for

customers may differ from the estimate, we believe the overall total estimate of consumption and revenue for the fiscal period will not differ materially from actual consumption.

Retirement Benefit Plans

We maintain a noncontributory defined benefit

pension plan (Pension Plan) which covers all currently active employees hired prior to April 1, 2007.

In addition, the Company maintains

an unfunded supplemental plan for certain executive officers.

The Company has a retirement benefit plan other

than pensions (Other Benefits Plan) for substantially all of its retired employees.

Employees hired after March 31, 2007 are not eligible

to participate in the Other Benefits Plan.

We maintain a noncontributory defined benefit pension plan (Pension Plan) which covers all currently active employees hired prior to April 1, 2007.

In addition, the Company maintains an unfunded supplemental plan for certain executive officers.

The Company has a retirement benefit plan other than pensions (Other Benefits Plan) for substantially all of its retired employees.

Employees hired after March 31, 2007 are not eligible to participate in the Other Benefits Plan.

Coverage includes healthcare and life insurance.

The costs for providing retirement benefits are

dependent upon numerous factors, including actual plan experience and assumptions of future experience.

Future retirement benefit plan

obligations and expense will depend on future investment performance, changes in future discount rates and various other demographic factors

related to the population participating in the Company’s retirement benefit plans, all of which can change significantly in future

The primary assumptions used for determining future retirement benefit

plans’ obligations and costs, which are reviewed and revised as needed each year, are as follows:

The costs for providing retirement benefits are dependent upon numerous factors, including actual plan experience and assumptions of future experience.

Future retirement benefit plan obligations and expense will depend on future investment performance, changes in future discount rates and various other demographic factors related to the population participating in the Company’s retirement benefit plans, all of which can change significantly in future years.

The primary assumptions used for determining future retirement benefit plans’ obligations and costs, which are reviewed and revised as needed each year, are as follows:

• Discount Rate - calculated based on market rates for long-term, high-quality corporate bonds specific to the expected duration of our Pension Plan and Other Benefits Plan’s liabilities;

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• Healthcare Cost Trend Rate - based on management projected future healthcare costs.

The discount rate, compensation increase rate and long-term rate of

return used to determine future obligations of our retirement benefit plans as of December 31, 2024 are as follows:

Other Benefits Plan

The discount rate, compensation increase rate and long-term rate of return used to determine future obligations of our retirement benefit plans as of December 31, 2025 are as follows:

Pension Plan Other Benefits Plan

Discount Rate 5.39% 5.49%

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Long-term Rate of Return 6.25% 6.75%

For the 2024 valuation, costs and obligations

for our Other Benefits Plan assumed an 8.0% annual rate of increase in the per capita cost of covered healthcare benefits in 2025 with

the annual rate of increase declining 0.15% per year for 2026-2045, resulting in an annual rate of increase in the per capita cost of

covered healthcare benefits of 5.0% by year 2045.

The following is a sensitivity analysis for certain actuarial assumptions

used in determining projected benefit obligations (PBO) and expenses for our retirement benefit plans:

Actuarial Assumptions

For the 2025 valuation, costs and obligations for our Other Benefits Plan assumed an 8.0% annual rate of increase in the per capita cost of covered healthcare benefits in 2026 with the annual rate of increase declining 0.15% per year for 2027-2046, resulting in an annual rate of increase in the per capita cost of covered healthcare benefits of 5.0% by year 2046.

The following is a sensitivity analysis for certain actuarial assumptions used in determining projected benefit obligations (PBO) and expenses for our retirement benefit plans:

Actuarial Assumptions Estimated

(000s) Estimated

Discount Rate 1% Increase $ (9,066) $ 58

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Other Benefits Plan

Actuarial Assumptions

Actuarial Assumptions Estimated

(000s) Estimated

Discount Rate 1% Increase $ (3,905) $ (547)

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Recent Accounting Standards

See Note 1(q) of the Notes to Consolidated Financial

Statements for a discussion of recent accounting pronouncements.

See Note 1(q) of the Notes to Consolidated Financial Statements for a discussion of recent accounting pronouncements.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.

We are exposed to market risk associated with

changes in interest rates and commodity prices.

The Company is subject to the risk of fluctuating interest rates in the normal course

Our policy is to manage interest rates through the use of fixed rate long-term debt and, to a lesser extent, variable rate

short-term debt.

The Company’s interest rate risk related to existing fixed rate, long-term debt is not material due to the term

of the majority of our First Mortgage Bonds, which have final maturity dates ranging from 2026 to 2059.

Over the next twelve months, approximately

$7.7 million of the current portion of existing long-term debt instruments will mature.

The Company manages its interest rate risk related

to existing variable-rate short-term debt by limiting our variable rate exposure.

Applying a hypothetical change in the rate of interest

charged by 10% on those fixed- and variable-rate borrowings would not have a material effect on our earnings.

Fixed rate long-term debt

and variable rate short-term debt agreements were not entered into for trading purposes.

Our risks associated with commodity price increases

for chemicals, electricity and other commodities are reduced through contractual arrangements and the ability to recover price increases

through rates.

Non-performance by these commodity suppliers could have a material adverse impact on our results of operations, financial

position and cash flows.

We are exposed to credit risk for both our Regulated

and Non-Regulated business segments.

Our Regulated operations serve residential, commercial, industrial and municipal customers while

our Non-Regulated operations engage in business activities with developers, government entities and other customers.

Our primary credit

risk is exposure to customer default on contractual obligations and the associated loss that may be incurred due to the non-payment of

customer accounts receivable balances.

Our credit risk is managed through established credit and collection policies which are in compliance

with applicable regulatory requirements and involve monitoring of customer exposure and the use of credit risk mitigation measures such

as letters of credit or prepayment arrangements.

We are exposed to market risk associated with changes in interest rates and commodity prices.

The Company is subject to the risk of fluctuating interest rates in the normal course of business.

Our policy is to manage interest rates through the use of fixed rate long-term debt and, to a lesser extent, variable rate short-term debt.

The Company’s interest rate risk related to existing fixed rate, long-term debt is not material due to the term of the majority of our First Mortgage Bonds, which have final maturity dates ranging from 2026 to 2059.

Over the next twelve months, approximately $7.9 million of the current portion of existing long-term debt instruments will mature.

The Company manages its interest rate risk related to existing variable-rate short-term debt by limiting our variable rate exposure.

Applying a hypothetical change in the rate of interest charged by 10% on those fixed- and variable-rate borrowings would not have a material effect on our earnings.

Fixed rate long-term debt and variable rate short-term debt agreements were not entered into for trading purposes.

Our risks associated with commodity price increases for chemicals, electricity and other commodities we use are reduced through contractual arrangements and the ability to recover price increases through rates.

Non-performance by these commodity suppliers could have a material adverse impact on our results of operations, financial position and cash flows.

We are exposed to credit risk for both our Regulated and Non-Regulated business segments.

Our Regulated operations serve residential, commercial, industrial and municipal customers while our Non-Regulated operations engage in business activities with developers, government entities and other customers.

Our primary credit risk is exposure to customer default on contractual obligations and the associated loss that may be incurred due to the non-payment of customer accounts receivable balances.

Our credit risk is managed through established credit and collection policies which are in compliance with applicable regulatory requirements and involve monitoring of customer exposure and the use of credit risk mitigation measures such as letters of credit or prepayment arrangements.

Our credit portfolio is diversified with no significant customer or industry concentrations.

In addition, our Regulated businesses are generally able to recover all prudently incurred costs including uncollectible customer accounts

receivable expenses and collection costs through rates.

The Company's retirement benefit plan assets are

exposed to the market price variations of debt and equity securities.

Changes to the Company's retirement benefit plan assets’ value

can impact the Company's retirement benefit plan expense, funded status and future minimum funding requirements.

Our exposure to market

price risk in our retirement benefit plan assets is managed through our ability to recover retirement benefit plan costs through customer

There were no material changes to our primary market risk exposures or how such exposures are managed in 2024 nor are there expected

to be in the future.

In addition, our Regulated businesses are generally able to recover all prudently incurred costs including uncollectible customer accounts receivable expenses and collection costs through rates.

The Company's retirement benefit plan assets are exposed to the market price variations of debt and equity securities.

Changes to the Company's retirement benefit plan assets’ value can impact the Company's retirement benefit plan expense, funded status and future minimum funding requirements.

Our exposure to market price risk in our retirement benefit plan assets is managed through our ability to recover retirement benefit plan costs through customer rates.

There were no material changes to our primary market risk exposures or how such exposures are managed in 2025 nor are there expected to be in the future.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis