Consolidated operating expenses increased by £0.3 million for the fourth quarter of 2021,
over the same quarter in 2020, The increase is related to a rise in direct operating costs
associated with the rate increases in fuel, power and purification costs, The Company has
also recognized increases in its employee benefit costs, including but not limited to,
employee pension costs and healthcare premiums.
Consolidated operating expenses increased by $2.6 million, or 6.6%, for the full year,
from 2020 to 2021, mainly due to the higher direct production costs, as well as labor and
benefit costs, as previously discussed.
Interest expense increased tn 2021 when compared to 2020 due to interest costs
associated with: (1) the additional financed amounts for capital projects which have been
incurred for ongoing infrastructure replacement, in conformity with the Company’s key
mission objectives; (2) interest costs associated with a $2.5 million Paycheck Protection
Program Loan which was received on May 7, 2020 as part of the Coronavirus Aid, Relief
and Economic Security Act; and (3) increased debt amortization costs associated with the
write-off to maturity in 2014 and 2015 of escrow deposits required to facilitate the
advanced refunding of existing debt, which resulted from the issuance of $73.6 million of
taxable bonds by Pennichuck Water Works on September 2, 202%.
Pre-tax loss for the fourth quarter decreased to $0.2 million in 2021 versus $1.8 million in
2020, due to the increase in overall revenues as previously discussed.
The pre-tax loss for the year increased from $1.5 millton in 2020 to $3.9 million in 2021,
or 160%. This was due to the $2.0 million increase in interest expense coupled with
operating expense increases, as discussed previously, which resulted in a higher pre-tax
loss in 2021.
Dividends paid to the sole shareholder in both 2021 and 2020 were consistent with, and
were paid pursuant to, the CBFRR structure provided for in the New Hampshire Public
Utilities Commission’s Order approving the City’s ownership of the Company.
The Income Tax Provision in the current year reflects the tax accounting for the amortization
of the Municipal Acquisition Regulatory Asset, which is not deductible for tax purposes, and
as such, constitutes a permanent difference in the deductibility of those amortization
expenses for tax purposes, as opposed to their inclusion in the GAAP based financial
statements. The Income Tax Provision (Benefit) also reflects the taxation of CIAC as
income for Regulated Water Utilities, due to the elimination of an exemption allowed prior to
the passage of the 20/7 Tax Cuts and Jobs Act (“TCJA”) which made broad and complex
changes to the U.S. tax code. However, on November 27, 2019, the regulated utilities
received NHPUC approval on the requested amendments to their tariffs which now allow for
recovery of tax costs from developers and other CIAC contributors. This will now allow the
regulated utilities to fully fund the associated tax liability, which resulted from the change in
the 2017 federal tax law, for all CIAC contributions from independent third parties. On
November 6, 2021, the CIAC tax exemption, for federal income taxes, was subsequently
reinstated with passage of the federal infrastructure bill, but only for contributions made after
December 31, 2020. A bill is in the process of receiving final approval in the State of NH,
