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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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TERMS AND CONDITIONS OF SALE

EXCLUSIVE TERMS: ACCEPTANCE OF BIDS, QUOTES, OFFERS, PURCHASE ORDERS, COST ESTIMATES, AND COUNTEROFFERS
FOR PRODUCTS, SERVICES, OR MATERIAL (“PRODUCTS”) IS CONDITIONAL ON THE PERSON, FIRM, OR COMPANY ORDERING
PRODUCTS’ (“BUYER”) ASSENT TO THESE TERMS AND CONDITIONS OF SALE (“TERMS”). Seller will not be bound by any different or
additional terms or conditions proposed or submitted by Buyer, regardless of form, unless expressly and specifically agreed to by Seller in writing. No conduct
on the part of Seller, including but not limited to, (i) acceptance of a purchase order without expressly rejecting any Buyer terms or conditions reflected therein;
(ii) delivery of Product; or (iii) acceptance of payment for Product, will constitute acceptance by Seller of such different or additional terms or conditions.

GENERAL: Purchases are subject to current credit approval and to these Terms. Prices quoted are valid for 14 days or until stated expiration date on quote.
Changes in the quantity, payment terms, shipping destination or special handling that differs from quote may result in price adjustments. All Products quoted
as stock are subject to changes in availability without notice. Unless otherwise agreed by Seller in writing, payment of invoices is due within 30 days of the
invoice date. Seller retains a security interest in all Product until the invoice is paid in full. Good faith dispute of invoice must be made in accordance with
current procedures within 15 days of invoice date, regardless of payment terms binding sale of Products. Invoices must be disputed per line charge; all non-
disputed charges are due and payable per payment terms. Invoices not paid when due are subject to finance charges computed up to the rate allowed by
applicable law on the unpaid balance from due date until paid. Return of Products requires prior written authorization by Seller and not all Products are
returnable, Cancellation and/or restocking fees may be imposed by Seller or the Product manufacturer. From time to time, Seller may designate certain
Products as non-cancelable, non-returnable, non-reschedulable (“NCNR”). All NCNR Products are subject to the following restrictions: (i) purchase orders
accepted by Seller for NCNR Products cannot be canceled for any reason; (ii) NCNR Products cannot be returned for any reason other than a manufacturing
defect or nonconformity subject to the terms of any manufacturer warranty applicable to the NCNR Products; and (iii) the shipment date requested by Buyer
for the NCNR Products cannot be rescheduled by Buyer. All shipping and performance dates are approximate. All Products are deemed accepted unless Buyer
notifies Seller of any nonconformities or defects within 15 days from the date of receipt of the Products. Unless otherwise agreed by Seller in writing, title
and risk of loss transfers to Buyer when Products are consigned to the carrier and it is Buyer’s responsibility to file any claim against the carrier. Prices quoted
do not reflect applicable taxes, duties, export fees, transportation and freight charges. Seller part numbers are for reference only. Seller reserves the right to
ship functionally equivalent Products from any manufacturer without prior notice to the Buyer.

FORCE MAJEURE: Seller’s nonperformance shall be excused to the extent that such performance is rendered impossible by (i) strike, fire, flood,
governmental acts or orders or restrictions; (ii) epidemic, disease, or pandemic; (iii) failure of Seller’s suppliers; or (iv) any other reason where failure to
perform is beyond the reasonable control of and is not caused by Seller’s negligence.

GOVERNING LAW _ AND DISPUTE RESOLUTION: All sales are governed by, and the rights and obligations of the parties shall be construed and
enforced in accordance with, the laws of State of Tennessee. Any dispute, controversy or claim shall be solely and finally settled by arbitration conducted in
Memphis, Tennessee in accordance with the Commercial Arbitration rules of the American Arbitration Association then in force. The parties shall abide by
all awards rendered in arbitration proceedings, and all such awards may be enforced and executed upon by any court having jurisdiction over the party against
whom enforcement of such award is sought.

SEVERABILITY. If any part or provision of these Terms is determined to be invalid, or unenforceable, this shall not affect the validity or enforceability of
the remaining provisions of these Terms, which shall remain in effect.

WARRANTY DISCLAIMER: SELLER DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, ON PRODUCTS SOLD BY SELLER,
INCLUDING ANY WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT, OR FITNESS FOR A PARTICULAR PURPOSE. THIS
DISCLAIMER BY SELLER IN NO WAY AFFECTS THE TERMS OF ANY WARRANTY PROVIDED BY THE MANUFACTURER OF THE
PRODUCTS OR THE PROVIDER OF SERVICES SOLD BY SELLER.

LIMITATION OF LIABILITY AND REMEDY: Failure to give Seller written notice of any claim related to the Products within 30 days after Buyer's
receipt of the products, services, or material shall constitute a waiver by Buyer of all such claims, including claims for damaged or defective goods, shortage,
negligence or any other cause whatsoever. SELLER’S LIABILITY ARISING OUT OF OR RELATED TO THE SALE OF THE PRODUCTS,
WHETHER IN CONTRACT, TORT, UNDER ANY WARRANTY, NEGLIGENCE OR OTHERWISE, SHALL NOT EXCEED THE AMOUNT
OF THE PURCHASE PRICE PAID BY BUYER TO SELLER, OR IN SELLER’S SOLE DISCRETION, THE REPAIR OR REPLACEMENT OF
THE PRODUCTS AT ISSUE. UNDER NO CIRCUMSTANCES WILL SELLER BE LIABLE FOR SPECIAL, INDIRECT, OR CONSEQUENTIAL
DAMAGES, INCLUDING LOST PROFITS. THE PRICE STATED FOR THE PRODUCTS IS IN CONSIDERATION FOR LIMITING SELLER’S
LIABILITY AS PROVIDED HEREIN. No action, regardless of form, arising out of the transactions under these Terms and Conditions of Sale may be
brought by Buyer more than one (1) year after the cause of action has accrued. Seller neither assumes nor authorizes any other person to assume for it any
greater liability in connection with any sales of Products.

v.2-2021

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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The fair value of DB Plan and OPEB Plan assets by levels within the fair value hierarchy used
as of December 31, 2019 was as follows:

(in thousands) Fair Value Level 1 Level 2 Level 3
DB Plan:
Guaranteed Interest Accounts S$ 5,155 S - S - S 5,155
Total Assets in the Fair Value Hierarchy 5,155 - - 5,155
Investments measured at net asset value”) 16,032 - - -
DB Plan Investments, at Fair Value 21,187 - - 5,155
OPEB Plans:
Common stocks 311 311 - -
Mutual funds 109 109 - -
Fixed income funds 170 170 - -
Money market funds 14 - 14 -
Total Assets in the Fair Value Hierarchy 604 590 14 -
Investments measured at net asset value”! - - - -
OPEB Plans Investments, at Fair Value 604 590 14 -
Totals S$ 21,791 S 590 S 14 S 5,155

{a) In accordance with Subtopic 820-10, certain investments that were measured at fair value using the net asset value
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.

Level 1: Based on quoted prices in active markets for identical assets.
Level 2: Based on significant observable inputs.
Level 3: Based on significant unobservable inputs.

The following table summarizes investments at fair value based on NAV per share as of
December 31, 2020 and 2019, respectively:

(in thousands) Fair Value
December 31, 2020
Pooled Separate Accounts:
Equities S$ 14,391
Fixed Income 3,504

Total Pooled Separate Accounts $ 17,895

December 31, 2019
Pooled Separate Accounts:
Equities S 12,870
Fixed Income 3,162

Total Pooled Separate Accounts $ 16,032

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The following table presents a period-end reconciliation of DB Plan assets measured and
recorded at fair value on a recurring basis, using significant unobservable inputs (Level 3):

(in thousands) 2020 2019

Balance, beginning of year S 5,155 S 4,414
Plan transfers 1,941 1,079
Contributions 373 249
Benefits paid (1,844) (691)
Return on plan assets (net of investment expenses) 106 104
Balance, end of year S 5,731 S 5,155

In order to satisfy the minimum funding requirements of the Employee Retirement Income
Security Act of 1974, applicable to defined benefit pension plans, the Company anticipates it
will contribute approximately $1.4 million to the DB Plan in 2021.

The following maximum benefit payments, which reflect expected future service, as appro-
priate, are expected to be paid in the years indicated:

(in thousands) DB Plan OPEB Plans
2021 S 1,135 5 99
2022 1,300 115
2023 1,350 120
2024 1,480 136
2025 1,592 144
2026 and thereafter 9,522 943
Total S 16,379 S 1,557

Because the Company is subject to regulation in the state in which it operates, we are
required to maintain our accounts in accordance with the regulatory authority’s rules and
regulations. In those instances, we follow the guidance of ASC Topic 980 (“Regulated
Operations”). Based on prior regulatory practice, we recorded underfunded DB Plan and
OPEB Plan obligations as a regulatory asset, and we expect to recover those costs in rates
charged to customers.

Defined Contribution Plan

In addition to the defined benefit plan, the Company provides and maintains a defined
contribution plan covering substantially all employees. Under this plan, the Company
matches 100% of the first 3% of each participating employee’s salary contributed to the plan.
The matching employer’s contributions, recorded as operating expenses, were approximately
$272,000 and $278,000 for the years ended December 31, 2020 and 2019, respectively.

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Commitments and Contingencies

Operating Leases

The Company’s corporate office space, as well as certain office equipment, is leased under
operating lease agreements. Total rent expense was approximately $389,800 and $385,400
for the years ended December 31, 2020 and 2019, respectively.

The remaining non-cancelable lease commitments for the corporate office space and leased
equipment as of December 31, 2020 were as follows:

{in thousands) Amount
2021 S 379
2022 364
2023 348
2024 347
2025 330
Thereafter 3,677
Total S 5,445

Financial Measurement and Fair Value of Financial Instruments

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 the period end and have not been reevaluated
or updated for purposes of these consolidated financial statements subsequent to those
respective dates.

A fair value hierarchy is used, which prioritizes the inputs to valuation methods 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 three levels of fair value hierarchy are as follows:

Level 1: Based on quoted prices in active markets for identical assets.
Level 2: Based on significant observable inputs.

Level 3: Based on significant unobservable inputs.

An asset or liability’s level within the fair value hierarchy is based on the lowest level of input
that is significant to the fair value measurement.

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For assets and liabilities measured at fair value on a recurring basis, the fair value measure-
ment by levels within the fair value hierarchy used as of December 31, 2020 and 2019 were
as follows:

December 31, 2020

(in thousands) Total Level 1 Level 2 Level 3
Liabilities:
Interest rate swap S (460) S$ - § (460) S$ -

December 31, 2019

(in thousands) Total Level 1 Level 2 Level 3
Liabilities:
Interest rate swap S (353) S$ - S (353) S$ -

The carrying value of certain financial instruments included in the accompanying Consoli-
dated Balance Sheets, along with the related fair value, as of December 31, 2020 and 2019
was as follows:
2020 2019
Carrying Fair Carrying Fair
{in thousands) Value Value Value Value

Liabilities:
interest rate swap liability $ (460) $ (460) $ (353) $ (353)

The fair market value of the interest rate swap represents the estimated cost to terminate
this agreement as of December 31, 2020 and 2019 based upon the then-current interest rates
and the related credit risk.

The carrying values of our cash and cash equivalents, restricted cash, accounts receivable and
accounts payable approximate their fair values because of their short-term maturity dates.
The carrying value of CIAC approximates its fair value because it is expected that this is the
amount that will be recovered in future rates. The carrying values of lines of credit and long-
term debt approximate fair value, as interest rates approximate market rates.

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10.

Revenue from Contracts with Customers — Non-Regulated Entities

Revenue is recognized when control of the promised goods or services is transferred to
customers, in an amount that reflects the consideration we expect to be entitled to in
exchange for those goods or services.

Disaggregation of Revenue
For the years ended December 31, 2020 and 2019, revenue recognized for goods transferred
over time totaled $2,777,693 and $2,892,868, respectively.

For the year ended December 31, 2020, approximately 62% of revenues were from large-
contract customers, 21% of revenues were from small contract customers (con-ops), and 17%
revenues were from residential maintenance and other customers. For the year ended
December 31, 2019, approximately 59% of revenues were from large-contract customers,
20% of revenues were from small contract customers (con-ops), and 21% revenues were from
residential maintenance and other customers. In addition, substantially all of the Company's
contracts were service-related type contracts.

Income Taxes

The components of the federal and state income tax provision (benefit) as of December 31,
2020 and 2019 were as follows:

(in thousands) 2020 2019
Federal $ 656 $ 144
State (116) 203
Amortization of investment tax credits (33) (33)
Total $ 507 S 314
Current S 33 S -
Deferred 474 314
Total S 507 S 314

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The following is a reconciliation between the
effective income tax rate for 2020 and 2019:

Statutory federal rate

State tax rate, net of federal benefits
Permanent differences

Amortization of investment tax credits

Effective tax rate

statutory federal income tax rate and the

2020

21.0 %
6.1

(63.6)
2.2

(34.3) %

2019

21.0 %
6.1

(33.9)
0.7

(6.1) %

The temporary items that give rise to the net deferred tax liability as of December 31, 2020

and 2019 were as follows:

(in thousands)
Liabilities:
Property-related, net
Other

Total liabilities

Assets:

Pension accrued liability

Net operating loss carryforward
Alternative minimum tax credit

NH Business Enterprise Tax credits
Other

Less valuation allowance

Total assets

2020

S$ 22,496
704

23,200

1,659
5,415
476
957
718

9,225
956

8,269

Net non-current deferred income tax liability $ 14,931

2019

$ 21,396
519

21,915

1,403
4,953
476
1,123
656

8,611
(1,123)

7,488
$ 14,427

The Company has accumulated federal net operating losses. The federal tax benefit of the
cumulative net operating losses is approximately $4 million, begin to expire in 2033, and is
included in deferred income taxes in the Consolidated Balance Sheet as of December 31,
2020. Approximately 88% of the net operating losses are 100 percent available to be applied
to taxable income in future years and are not subject to the TCJA as they were generated
prior to the 2018 tax year. The enactment of the TCJA now limits the net operating loss shelter
to 80 percent of taxable income, for post-2017 tax year losses. The TCJA also provides for net
operating losses to be carried forward indefinitely instead of limited to 20 years, as is the case
for pre-2018 losses; however, carrybacks of these losses are no longer permitted.
Approximately 12% of the net operating losses were generated in 2019 and 2020 and

therefore are subject to the 80% limitation.

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The Company has accumulated New Hampshire net operating losses. The New Hampshire tax
benefit of the cumulative net operating loss is approximately $1.4 million which begins to
expire in 2023 and is included in deferred income taxes in the Consolidated Balance Sheet as
of December 31, 2020.

As of December 31, 2020 and 2019, it is estimated that approximately $476,000 and
$476,000, respectively, of cumulative federal alternative minimum tax credits may be carried
forward indefinitely as a credit against our regular tax liability.

As of December 31, 2020 and 2019, the Company had New Hampshire Business Enterprise
Tax (“NHBET”) credits of approximately $960,000 and $1.1 million, respectively. NHBET
credits begin to expire in 2021. It is anticipated that these NHBET credits will not be fully
utilized before they expire; therefore, a valuation allowance has been recorded related to
these credits. The valuation allowance decreased by approximately $167,000 and increased
by approximately $126,000 in the years ended December 31, 2020 and 2019, respectively.

Investment tax credits resulting from utility plant additions are deferred and amortized. The
unamortized investment tax credits are being amortized through the year 2033.

The Company had a regulatory liability related to income taxes of approximately $9,918,000
and $9,930,000 as of December 31, 2020 and 2019, respectively. This represents the
estimated future reduction in revenues associated with deferred taxes which were collected
at rates higher than the currently enacted rates and the amortization of deferred investment
tax credits.

A review of the portfolio of uncertain tax positions was performed. In this regard, an
uncertain tax position represents the expected treatment of a tax position taken in a filed tax
return, or as planned to be taken in a future tax return, that has not been reflected in
measuring income tax expense for financial reporting purposes. As a result of this review, it
was determined that the Company had no material uncertain tax positions, and tax planning
strategies will be used, if required and when possible, to avoid the expiration of any future
net operating loss and/or tax credits.

The Company’s practice is to recognize interest and/or penalties related to income tax
matters in “Other, Net” in the Consolidated Statements of Income. We incurred no interest
in 2020 and 2019. We incurred no penalties during the years ended December 31, 2020 and
2019.

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