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Adoption of New Accounting Standards

Effective January 1, 2020, the Company adopted Accounting Standards Update (ASU) 2018-
13, Fair Value Measurement (Topic 820), Disclosure Framework — Changes to the Disclosure
Requirements for Fair Value Measurement, which removes certain disclosure requirements
from FASB ASC 820 and modifies certain other disclosures. The Company has applied this
guidance retrospectively for certain disclosures and prospectively for other disclosures as
required by the standard. There was no prior year effect to the financial statements as a result
of this change.

New Accounting Standards to be Adopted in the Future

Leases

In February 2016, the FASB issued ASU 2016-02, Leases. The ASU requires all leases with lease
terms more than 12 months to be capitalized as a right of use asset and lease liability on the
balance sheet at the date of lease commencement. Leases will be classified as either finance
leases or operating leases. This distinction will be relevant for the pattern of expense
recognition in the income statement. This ASU will be effective for the Company for the year
ending December 31, 2022. The Company is currently in the process of evaluating the impact
of adoption of this ASU on the financial statements.

Credit Losses

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial
Instruments. The ASU requires a financial asset (including trade receivables) measured at
amortized cost basis to be presented at the net amount expected to be collected. Thus, the
income statement will reflect the measurement of credit losses for newly recognized financial
assets as well as the expected increases or decreases of expected credit losses that have
taken place during the period. This ASU will be effective for the Company for the year ending
December 31, 2023. The Company is currently in the process of evaluating the impact of
adoption of this ASU on the financial statements.

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2. Property, Plant and Equipment

The components of property, plant and equipment as of December 31, 2020 and 2019 were

as follows:
Useful Lives
(in thousands) 2020 2019 (in years)
Utility Property:
Land and land rights S 5,972 S 5,993 -
Source of supply 73,721 72,360 3-70
Pumping and purification 31,846 29,929 7 - 64
Transmission and distribution, including
services, meters and hydrants 194,244 188,069 15-91
General and other equipment 17,023 16,352 7-75
Intangible plant 790 790 20
Construction work in progress 792 1,225
Total utility property 324,388 314,718
Total non-utility property 5 S 5-10
Total property, plant and equipment 324,393 314,723
Less accumulated depreciation (81,924) (77,541)
Property, Plant and Equipment, net $ 242,469 S$ 237,182

The provision for depreciation is computed on the straight-line method over the estimated
useful lives of the assets, which range from 3 to 91 years. The weighted average composite
depreciation rate was 2.58% and 2.53% in 2020 and 2019, respectively.

3. Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash
reported within the consolidated balance sheets that sum to the total of the same such
amounts shown in the statements of cash flows.

(in thousands) 2020 2019
Cash and cash equivalents S 310 S$ 4,885
Restricted cash - RSF 8,611 1,963
Restricted cash - CIAC 274 -
Restricted cash - Bond Project Funds 237 3,426

Total cash, cash equivalents and restricted cash
shown in the consolidated statements of cash flows$ 9,432 $ 10,274

Amounts included in restricted cash represent those required to be set aside as outlined in
Note 1.

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4.

Accounts Receivable

Accounts receivable consisted of the following at December 31, 2020 and 2019:

(in thousands) 2020 2019
Accounts receivable - billed S 4365 S 3,091
Less allowance for doubtful accounts (68) (50)
Accounts receivable - billed, net S 4,297 S 3,041
Accounts receivable - unbitled S 4,473 S 2,575

Less allowance for doubtful accounts - -
Accounts receivable - unbilled, net S 4,473 S 2,575
Deferred Charges and Other Assets

Deferred charges and other assets as of December 31, 2020 and 2019 consisted of the
following:

Recovery
Period
(in thousands) 2020 2019 (in years)
Regulatory assets:
Source development charges S 1,004 S 801 5-25
Miscellaneous studies 998 790 2-25
Unrecovered pension and post-retirement
benefits expense 14,197 11,347 (1)
Total regulatory assets 16,199 12,938
Supplemental executive retirement plan asset 815 789
Total deferred charges and other assets S 17,014 S 13,727

We expect to recover these amounts consistent with the anticipated expense recognition of these assets.

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BID RESULTS 2021-2022 FISCAL YEAR

13 of 16 pages

Post-Retirement Benefit Plans

Pension Plan and Other Post-Retirement Benefits

The Company has a non-contributory, defined benefit pension plan (the “DB Plan”) that
covers substantially all employees. The benefits are based on years of service and participant
compensation levels. The Company’s funding policy is to contribute annual amounts that
meet the requirements for funding under the U.S. Department of Labor’s Pension Protection
Act. Contributions are intended to provide not only for benefits attributed to service to date,
but also for those expected to be earned in the future.

Post-retirement medical benefits are provided for eligible retired employees through one of
two plans (collectively referred to as our “OPEB Plans”). For employees who retire on or after
the normal retirement age of 65, benefits are provided through a post-retirement plan (the
“Post-65 Plan”). For eligible non-union employees who retire prior to their normal retirement
age and who have met certain age and service requirements, benefits are provided through
a post-employment medical plan (the “Post-employment Plan”). Future benefits under the
Post-65 Plan increase annually based on the actual percentage of wage and salary increases
earned from the plan inception date to the normal retirement date. The benefits under the
Post-employment Plan allow for the continuity of medical benefits coverage at group rates
from the employee’s retirement date until the employee becomes eligible for Medicare,
which are fully funded by the retiree. The liability related to the Post-65 Plan will be funded
from the general assets of our Company.

Upon retirement, if a qualifying employee elects to receive medical benefits under our
Post-65 Plan, we pay up to a maximum monthly benefit of $373 based on years of service.

The following table sets forth information regarding our DB Plan and our OPEB Plans as of
December 31, 2020 and for the year then ended:

(in thousands) DB Plan OPEB Plans
Projected benefit obligations S 39,050 S 5,549
Employer contribution 1,491 11
Benefits paid, excluding expenses (1,964) (72)
Fair value of plan assets 23,626 639
Accumulated benefit obligation 35,020 -
Funded status (15,424) (4,910)
Net periodic benefit cost 1,688 345

Amount of the funded status recognized in the
Consolidated Balance Sheet consisted of:
Current liability - -

Non-current liability (15,424) (4,910)
Total § (15,424) $ (4,910)

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The following table sets forth information regarding our DB Plan and our OPEB Plans as of
December 31, 2019 and for the year then ended:

(in thousands) DB Plan OPEB Plans
Projected benefit obligations S 34,158 S 4,586
Employer contribution 1,181 11
Benefits paid, excluding expenses (695) (63)
Fair value of plan assets 21,187 604
Accumulated benefit obligation 30,643 -
Funded status (12,971) (3,982)
Net periodic benefit cost 1,494 279
Amount of the funded status recognized in the

Consolidated Balance Sheet consisted of:

Current liability - -

Non-current liability (12,971) (3,982)

Total $ (12,971) $ (3,982)

The components of net periodic benefit cost other than the service cost component are
included in the line item operations and maintenance in the consolidated statements of
income (loss), as the amounts are immaterial.

Changes in plan assets and benefit obligations recognized in regulatory assets, for the year
ended December 31, 2020, were as follows:

(in thousands) DB Plan OPEB Plans

Regulatory asset balance, beginning of period $ 10,269 S 1,078
Net actuarial gain incurred during the period 2,733 621
Prior service cost incurred during the period - 16
Recognized net actuarial (gain)/loss (477) (43)
Regulatory asset balance, end of period S 12,525 S 1,672

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Changes in plan assets and benefit obligations recognized in regulatory assets, for the year
ended December 31, 2019, were as follows:

(in thousands) DB Plan OPEB Plans

Regulatory asset balance, beginning of period $ 7,632 S 565
Net actuarial gain incurred during the period 2,991 516
Prior service cost incurred during the period - 16
Recognized net actuarial (gain)/loss (354) (19)
Regulatory asset balance, end of period S 10,269 S 1,078

Amounts recognized in regulatory assets for the DB and OPEB Plans that have not yet been
recognized as components of net periodic benefit cost of the following as of December 31,
2020:

(in thousands) DB Plan OPEB Plans

Net actuarial loss S 12,525 S 1,787
Prior service cost - (11S)
Regulatory asset 5 12,525 S 1,672

Amounts recognized in regulatory assets for the DB and OPEB Plans that have not yet been
recognized as components of net periodic benefit cost of the following as of December 31,
2019:

(in thousands) DB Plan OPEB Plans

Net actuarial loss S 10,269 S 1,209
Prior service cost - (131)
Regulatory asset S 10,269 S 1,078

The key assumptions used to value benefit obligations and calculate net periodic benefit cost
for our DB and OPEB Plans include the following:

2020 2019
Discount rate for net periodic benefit cost, beginning of year 3.13% 4.15%
Discount rate for benefit obligations, end of year fa) 2.39% 3.13%
Expected return on plan assets for the period (net of investment expenses) 7.00% 7.00%
Rate of compensation increase, beginning of year 3.00% 3.00%
Healthcare cost trend rate (applicable only to OPEB Plans) 6.00% 6.50%

®) an increase or decrease in the discount rate of 0.5% would result ina change in the funded status as of December
31, 2020, for the DB Plan and the OPEB Plans of approximately $3.4 million and $544 thousand, respectively.

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The estimated net actuarial loss for our DB Plan that will be amortized in 2021 from the
regulatory assets into net periodic benefit costs is $625,000. The estimated net actuarial gain
and prior service cost for our OPEB Plans that will be amortized in 2021 from the regulatory
assets into net periodic benefit costs is $60,200.

In establishing its investment policy, the Company has considered the fact that the DB Plan is
a major retirement vehicle for its employees and the basic goal underlying the establishment
of the policy is to provide that the assets of the DB Plan are invested in accordance with the
asset allocation range targets to achieve our expected return on DB Plan assets. The
Company’s investment strategy applies to its OPEB Plans as well as the DB Plan. The expected
long-term rate of return on DB Plan and OPEB Plan assets is based on the Plans’ expected
asset allocation, expected returns on various classes of Plan assets, as well as historical
returns.

The assets of our Post-65 Plan are held in two separate Voluntary Employee Beneficiary
Association (“VEBA”) trusts. The VEBA plan assets are maintained in directed trust accounts
at a commercial bank.

The investment strategy for the Company’s DB Plan and OPEB Plans utilizes several different
asset classes with varying risk/return characteristics. The following table indicates the asset
allocation percentages of the fair value of the DB Plan and OPEB Plans’ assets for each major
type of plan asset as of December 31, 2020, as well as the targeted allocation range:

DB Plan OPEB Plans
Asset Asset
Allocation Allocation
Range Range
Equities 61% 30% - 100% 69% 30% - 100%
Fixed income 39% 20% - 70% 24% 0% - 50%
Cash and cash equivalents 0% 0% - 15% 7% 0% - 15%
Total 100% 100%

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The following table indicates the asset allocation percentages of the fair value of the DB Plan
and OPEB Plans’ assets for each major type of plan asset as of December 31, 2019, as well as
the targeted allocation range:

DB Plan OPEB Plans
Asset Asset
Allocation Allocation
Range Range
Equities 61% 30% - 100% 69% 30% - 100%
Fixed income 39% 20% - 70% 29% 0% - 50%
Cash and cash equivalents 0% 0% - 15% 2% 0% - 15%
Total 100% 100%

Management uses its best judgment in estimating the fair value of its financial instruments.
However, there are inherent weaknesses in any estimation technique. Therefore, for substan-
tially all financial instruments, the fair value estimates herein are not necessarily indicative of
the amounts that we could realize in a sales transaction for these instruments. The estimated
fair value amounts have been measured as of year-end and have not been reevaluated or
updated for purposes of these consolidated financial statements subsequent to those
respective dates.

Investments in common stock and mutual funds are stated at fair value by reference to
quoted market prices. Money market funds are valued utilizing the net asset value per unit
based on the fair value of the underlying assets as determined by the directed trustee.

The DB Plan also holds assets under an immediate participation guarantee group annuity
contract with a life insurance company. The assets under the contract are invested in pooled
separate accounts and in a general investment account. The pooled separate accounts are
valued based on net asset value (NAV) per unit of participation in the fund. The NAV is used
as a practical expedient to estimate fair values. This practical expedient is not used when it is
determined to be probable that the fund will sell the investment for an amount different than
that reported at NAV. These accounts have no unfunded commitments or significant
redemption restrictions at year-end. The value of these units is determined by the trustee
based on the current market values of the underlying assets of the pooled separate accounts.
Therefore, the value of the pooled separate accounts is deemed to be at estimated fair value.

The general investment account is not actively traded, and significant other observable inputs

are not available. The fair value of the general investment account is calculated by discounting
the related cash flows based on current yields of similar instruments with comparable durations.

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The methods described above may produce a fair value calculation that may not be indicative of
net realizable value or reflective of future fair values. Furthermore, while the Plan’s management
believes the valuation methodologies are appropriate and consistent with other market
participants, the use of different methodologies or assumptions to determine the fair value of
certain investments could result in a different fair value measurement at the reporting date.

A fair value hierarchy which prioritizes the inputs to valuation methods is used to measure
fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements).

The fair value of DB Plan and OPEB Plan assets by levels within the fair value hierarchy used
as of December 31, 2020 was as follows:

(in thousands) Fair Value Level 1 Level 2 Level 3
DB Plan:
Guaranteed Interest Accounts S 5,731 S - S - S 5,731
Total Assets in the Fair Value Hierarchy 5,731 - - 5,731
Investments measured at net asset value®) 17,895 - - -
DB Plan Investments, at Fair Value 23,626 - - 5,731
OPEB Plans:
Common stocks 349 349 - -
Mutual funds 124 124 - -
Fixed income funds 143 143 - -
Money market funds 23 - 23 -
Total Assets in the Fair Value Hierarchy 639 616 23 -
investments measured at net asset value®) - - - -
OPEB Plans Investments, at Fair Value 639 616 23 -
Totals S 24,265 S 616 S 23 S 5,731

(a) In accordance with Subtopic 820-10, certain investments that were measured at fair value using the net asset vatue
per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value
amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts
presented in the statements of assets available for benefits of the Plans.

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