Press release·03/04/2025 22:32:41

Overview of The York Water Company

The York Water Company is the oldest investor-owned water utility in the United States, operating continuously since 1816. The company also owns and operates wastewater collection and treatment systems. As a regulated water and wastewater utility, the company’s profitability is largely dependent on water revenues.

The company has a diverse customer base, with 64% of operating revenue coming from residential customers, 29% from commercial and industrial customers, and 7% from other sources like fire service and other water/wastewater services. This diverse mix helps reduce volatility in consumption.

The company’s key goals are to grow revenues by increasing the number of customers, making prudent infrastructure investments, and filing for timely rate increases. It also focuses on minimizing costs without sacrificing water quality or customer service.

2024 Financial Performance

In 2024, the company’s net income was $20,325, a decrease of 14.4% from 2023. The primary factors contributing to the decrease were:

• Higher operating expenses, up 13.1% to $46,918
• Lower allowance for funds used during construction, down from $4,153 in 2023 to $2,052 in 2024
• Higher interest expense on debt, up 26.4% to $8,904

These were partially offset by:

• Higher operating revenues, up 5.5% to $74,959 due to a rate increase and customer growth
• Lower pension costs, down $1,606

The company’s efficiency ratio, calculated as net income divided by revenues, was 27.1% in 2024, lower than the 5-year historical average of 31.1%. Management is focused on finding ways to further improve efficiency.

Key Performance Metrics

The company uses several metrics to evaluate its financial performance:

Metric	2024	2023
Net Income	$20,325	$23,757
Earnings per Share	$1.51	$1.77
Return on Equity	8.8%	10.3%
Efficiency Ratio	27.1%	33.5%

The company’s return on equity of 8.8% in 2024 was lower than the 5-year historical average of 10.7%. Management expects to file a rate increase request in 2025 to help improve the company’s return on equity.

Rate Matters and Regulatory Environment

The company’s tariff included a Distribution System Improvement Charge (DSIC) of 2.20% effective January 1, 2025. The DSIC allows the company to add a charge to customer bills for qualified infrastructure replacement costs without submitting a full rate case.

The company expects to file a rate increase request in 2025 to help offset rising operating costs and earn a higher return. Rate increases are subject to approval by the Pennsylvania Public Utility Commission (PPUC).

Acquisitions and Growth

The company has signed agreements to acquire several small water and wastewater systems in its service area, which are expected to add around 485 customers once the acquisitions are complete in 2025. These acquisitions are not expected to have a material impact on the company’s financial results.

The company is also pursuing other bulk water contracts and acquisitions to help offset potential declines in per capita water consumption and grow the business.

Capital Expenditures and Financing

In 2024, the company invested $48,226 in construction projects and $783 in acquisitions. Key projects included dam spillway armoring, wastewater treatment plant construction, and various infrastructure replacements and improvements.

The company anticipates capital expenditures of around $46,000 in 2025 and $48,500 in 2026 for similar types of projects. It plans to fund these investments primarily through internally-generated funds, line of credit borrowings, and customer advances/contributions.

As of the end of 2024, the company’s total long-term debt as a percentage of total capitalization was 47.4%, up from 45.2% in 2023. The company expects to continue using long-term debt to finance future needs, allowing the debt percentage to trend upward.

The company maintains a $50,000 unsecured line of credit, with $15,808 outstanding as of the end of 2024. It also issued $40,000 in new senior notes in 2024 at a 5.67% interest rate.

Liquidity and Cash Management

The company manages its cash through a cash management account linked to its line of credit. Excess cash automatically pays down outstanding borrowings, and additional funds are borrowed as needed. This provides the necessary liquidity for operations, capital expenditures, and acquisitions.

The company’s accounts receivable balance increased in 2024 due to higher revenue levels. The company maintains a reserve for doubtful accounts to provide for expected credit losses.

In 2024, the company generated $30,559 in internally-funded cash, down from $31,908 in 2023, primarily due to higher interest and income taxes paid.

Income Taxes and Regulatory Assets/Liabilities

The company benefits from being able to expense certain asset improvements for tax purposes under the IRS Tangible Property Regulations. This results in a lower effective tax rate and a reduction in current income taxes payable.

The company has a substantial deferred tax asset, primarily from the excess accumulated deferred income taxes related to accelerated depreciation. It does not believe a valuation allowance is needed, as it expects to generate sufficient future taxable income.

Differences between the company’s book and tax treatment of certain items, such as customer advances and contributions, are recorded as regulatory assets and liabilities on the balance sheet. These are expected to be recovered or refunded through future rates.

Outlook and Risk Factors

The company expects modest revenue growth in 2025 from the DSIC and customer acquisitions. However, weather patterns, economic conditions, and regulatory actions could impact future results.

Key risk factors include:

• Potential declines in per capita water consumption
• Ability to obtain timely and adequate rate relief from the PPUC
• Rising operating costs, particularly for treatment, maintenance, and infrastructure
• Exposure to cyber security threats and the need to maintain robust security measures
• Potential impacts from drought conditions in its service area

Overall, the York Water Company appears to be a well-managed, regulated utility focused on prudent infrastructure investment, cost control, and strategic growth opportunities. While its 2024 financial performance declined compared to 2023, the company remains committed to maintaining a strong capital structure and seeking rate relief to support its long-term objectives.