10.	Commitments

Based on its capital budget, the Company anticipates construction and acquisition expenditures for 2018 and 2019 of approximately $22,564 and $19,755, respectively, exclusive of any acquisitions not yet approved. The Company plans to finance ongoing capital expenditures with internally-generated funds, borrowings against the Company's lines of credit, proceeds from the issuance of common stock under its dividend reinvestment and direct stock purchase and sale plan and ESPP, potential common stock or debt issues and customer advances and contributions.

The Company has committed a total of approximately $6,126 for an additional untreated water pumping station, of which $582 remains to be incurred as of December 31, 2017. The Company may make additional commitments for this project in 2018.

During its triennial testing completed in 2016, the Company determined it exceeded the action level for lead as established by the Lead and Copper Rule, or LCR, issued by the U.S. Environmental Protection Agency. The rule allows the Company to have five samples of the 50 high-risk homes tested exceed the action level of 15 parts per billion, or PPB. The testing found that six properties with lead service lines, all built before 1935, exceeded the action level, and the reported exceedance amount was 1 PPB. The Company determined that only 3% of the company-owned service lines in the system were lead. The Company is required, per the LCR, to engage in more frequent testing for lead, public education, and annually replace 7% of the remaining company-owned lead service lines in its distribution system. The Company completed two rounds of compliance testing at the customer's tap in 2017 and the water samples did not exceed the action level either time. As a result, the Company will reduce its monitoring from semi-annual to annual beginning in 2018.

The Company is performing in excess of the required actions under the LCR. Specifically, the Company is providing the affected customers with a free water test and a 200 gallon per month credit to flush their line in order to reduce any lead content until their lead service line has been replaced. The cost of the water tests and flushing credits was $16 and $9 for the years ended December 31, 2017 and 2016, respectively. Additional amounts for water tests and flushing credits are not expected to have a material impact on the financial position of the Company over the remaining three years.

In addition, the Company entered into a consent order agreement with the Pennsylvania Department of Environmental Protection in December 2016. Under the agreement, the Company committed to exceed the LCR replacement schedule by replacing all of the remaining known company-owned lead service lines within four years from the agreement. The cost for these service line replacements was approximately $1,390 and $75 for the years ended December 31, 2017 and 2016, respectively, and is included in utility plant. Additional costs of approximately $535 are expected until the replacements are complete, and will be integrated into the Company's annual capital budgets.

Finally, the Company was granted approval by the PPUC to modify its tariff to include the cost of the replacement of lead customer-owned service lines that are discovered when the Company replaces its lead service lines over the remaining three years, and to include the cost of the annual replacement of up to 400 lead customer-owned service lines whenever they are discovered, regardless of the material used for the company-owned service line over nine years. The tariff modification allows the Company to replace customer-owned service lines at its own initial cost. The Company will record the costs as a regulatory asset to be recovered in future base rates to customers, over a reasonable period of at least four but not more than six years. The cost for the customer-owned lead service line replacements under the four-year tariff modification was approximately $191 through December 31, 2017 and is included as a regulatory asset. Additional replacements are expected to be approximately $75 under the four-year tariff modification, assuming the average percentage of customer-owned lead service lines that were replaced when company-owned lead service lines were replaced through December 31, 2017 remains consistent over the entire replacement period.. The Company is unable to predict how many lead customer-owned service lines are in use, and, therefore, its current estimate of $1,040 for replacements under the nine-year tariff modification is subject to adjustment as more facts become available.

As of December 31, 2017, approximately 34% of the Company's full time employees are under union contract. The current contract was ratified in December 2017 and expires on April 30, 2020.

The Company is involved in certain legal and administrative proceedings before various courts and governmental agencies concerning water service and other matters. The Company expects that the ultimate disposition of these proceedings will not have a material effect on the Company's financial position, results of operations and cash flows.