10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from  _____  to  _____

Commission file number 000-18516

ARTESIAN RESOURCES CORPORATION

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(Exact name of registrant as specified in its charter)

Delaware	51-0002090
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(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

664 Churchmans Road, Newark, Delaware 19702

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Address of principal executive offices

(302) 453 – 6900

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Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol (s)	Name of each exchange on which registered
Common Stock	ARTNA	The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☑ Yes □ No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☑ Yes □ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12(b)-2 of the Exchange Act.

Large Accelerated Filer □ Accelerated Filer ☐ Non-accelerated Filer ☑ Smaller Reporting Company ☒ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act ).

☐ Yes ☑ No

As of August 2, 2022, 8,557,647 shares of Class A Non-Voting Common Stock and 881,452 shares of Class B Common Stock were outstanding.

TABLE OF CONTENTS

ARTESIAN RESOURCES CORPORATION

FORM 10-Q

Part I	-	Financial Information:
Item 1	-	Financial Statements	Page(s)
		Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 (unaudited)	3
		Condensed Consolidated Statements of Operations for the three and six  months ended June 30, 2022 and 2021 (unaudited)	4
		Condensed Consolidated Statements of Cash Flows for the six  months ended June 30, 2022 and 2021 (unaudited)	5
		Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021 (unaudited)	6
		Notes to the Condensed Consolidated Financial Statements	7 - 21
Item 2	-	Management's Discussion and Analysis of Financial Condition and Results of Operations	22 - 30
Item 3	-	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4	-	Controls and Procedures	31
Part II	-	Other Information	31
Item 1	-	Legal Proceedings	31
Item 1A	-	Risk Factors	32
Item 2	-	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3		Defaults Upon Senior Securities	32
Item 4		Mine Safety Disclosures	32
Item 5		Other Information	32
Item 6	-	Exhibits	33
Signatures

2

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(In thousands)

ASSETS	June 30, 2022		December 31, 2021
Utility plant, at original cost (less accumulated depreciation - 2022 - $172,261; 2021 - $159,385)	$	639,513	$	590,431
Current assets
Cash and cash equivalents		220		92
Accounts receivable (less allowance for doubtful accounts - 2022 - $466; 2021 - $429)		8,114		8,367
Income tax receivable		766		2,234
Unbilled operating revenues		2,149		1,080
Materials and supplies		2,869		1,933
Prepaid property taxes		21		2,306
Prepaid expenses and other		2,792		2,652
Total current assets		16,931		18,664
Other assets
Non-utility property (less accumulated depreciation - 2022 - $956; 2021 - $919)		3,759		3,751
Other deferred assets		7,116		5,097
Operating lease right of use assets		445		451
Total other assets		11,320		9,299
Regulatory assets, net		6,314		6,321
Total Assets	$	674,078	$	624,715
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity
Common stock	$	9,459	$	9,414
Preferred stock		—		—
Additional paid-in capital		105,984		104,989
Retained earnings		65,459		63,607
Total stockholders' equity		180,902		178,010
Long-term debt, net of current portion		173,597		143,259
		354,499		321,269
Current liabilities
Lines of credit		9,580		26,703
Current portion of long-term debt		1,996		1,591
Dividends payable		2,581		—
Accounts payable		8,576		10,206
Accrued expenses		3,748		4,038
Overdraft payable		334		30
Accrued interest		896		917
Income taxes payable		792		-
Customer and other deposits		2,394		2,273
Other		2,593		1,448
Total current liabilities		33,490		47,206
Commitments and contingencies
Deferred credits and other liabilities
Net advances for construction		4,174		4,295
Operating lease liabilities		440		440
Regulatory liabilities		21,632		21,260
Deferred investment tax credits		447		456
Deferred income taxes		52,701		53,133
Total deferred credits and other liabilities		79,394		79,584
Net contributions in aid of construction		206,695		176,656
Total Liabilities and Stockholders’ Equity	$	674,078	$	624,715

See notes to the condensed consolidated financial statements.

3

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(In thousands, except per share amounts)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2022			2021			2022		2021
Operating revenues
Water sales	$	19,722		$	20,078		$	37,865	$	37,908
Other utility operating revenue		2,914			1,014			5,440		2,390
Non-utility operating revenue		2,375			1,377			3,893		2,815
Total Operating Revenues		25,011			22,469			47,198		43,113
Operating expenses
Utility operating expenses		10,070			9,661			20,566		19,166
Non-utility operating expenses		1,905			862			2,847		1,777
Depreciation and amortization		3,055			2,976			6,140		5,988
State and federal income taxes		1,725			1,542			3,144		2,893
Property and other taxes		1,413			1,341			2,914		2,761
Total Operating Expenses		18,168			16,382			35,611		32,585
Operating income		6,843			6,087			11,587		10,528
Other income, net
Allowance for funds used during construction (AFUDC)		324			371			505		615
Miscellaneous (expense) income		(33	)		(59	)		1,412		1,343
Income before interest charges		7,134			6,399			13,504		12,486
Interest charges		2,088			1,894			3,975		3,775
Net income applicable to common stock	$	5,046		$	4,505		$	9,529	$	8,711
Income per common share:
Basic	$	0.53		$	0.48		$	1.01	$	0.93
Diluted	$	0.53		$	0.48		$	1.01	$	0.93
Weighted average common shares outstanding:
Basic		9,452			9,395			9,438		9,381
Diluted		9,470			9,425			9,464		9,416
Cash dividends per share of common stock	$	0.2729		$	0.2610		$	0.5404	$	0.5181

See notes to the condensed consolidated financial statements.

4

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(In thousands)

	For the Six Months Ended June 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	9,529		$	8,711
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		6,140			5,988
Deferred income taxes, net		(640	)		(3,073	)
Stock compensation		104			92
AFUDC, equity portion		(349	)		(415	)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net of allowance for doubtful accounts		204			434
Income tax receivable		1,468			559
Unbilled operating revenues		(704	)		(599	)
Materials and supplies		(936	)		68
Prepaid property taxes		2,862			1,891
Prepaid expenses and other		(130	)		(754	)
Other deferred assets		511			(467	)
Regulatory assets		185			(71	)
Regulatory liabilities		(254	)		(297	)
Income tax payable		792			2,362
Accounts payable		(4,680	)		(1,071	)
Accrued expenses		(934	)		(124	)
Accrued interest		(21	)		(25	)
Deposits and other		441			567
NET CASH PROVIDED BY OPERATING ACTIVITIES		13,588			13,776
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (net of AFUDC, equity portion)		(23,266	)		(19,418	)
Investment in acquisitions, net of cash acquired		(6,341	)		—
Proceeds from sale of assets		41			15
NET CASH USED IN INVESTING ACTIVITIES		(29,566	)		(19,403	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayments) under lines of credit agreements		(17,123	)		(1,120	)
Deferred debt issuance cost		(102	)		—
Increase in overdraft payable		304			403
Net advances and contributions in aid of construction		8,013			9,786
Net proceeds from issuance of common stock		936			941
Issuance of long-term debt		30,000			1,720
Dividends paid		(5,096	)		(4,856	)
Principal repayments of long-term debt		(826	)		(906	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		16,106			5,968
NET INCREASE IN CASH AND CASH EQUIVALENTS		128			341
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		92			28
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	220		$	369
Non-cash Investing and Financing Activity:
Utility plant received as construction advances and contributions	$	3,243		$	2,334
Dividends declared but not paid		2,581			2,454
Amounts included in accounts payable and accrued payables related to capital expenditures		1,761			2,723
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	3,996		$	3,800
Income taxes paid	$	743		$	3,248
Preliminary purchase price of allocation of investment in acquisitions:
Utility plant	$	28,335		$	—
Cash		280			—
Other assets		3,580			—
Total assets		32,195			—
Less:
Liabilities		3,536			—
Future contractual obligation payable to seller		1,569			—
Contributions in aid of construction		20,469			—
Cash paid for acquisition		6,621			—
Cash received from acquisition		280			—
Net cash paid for acquisition	$	6,341		$	—

See notes to the condensed consolidated financial statements.

5

ARTESIAN RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Unaudited

(In thousands)

	Common Shares Outstanding Class A Non-Voting (1) (3) (4)		Common Shares Outstanding Class B Voting (2)		$1 Par Value Class A Non-Voting		$1 Par Value Class B Voting		Additional Paid-in Capital		Retained Earnings			Total
Balance as of December 31, 2020		8,475		882	$	8,475	$	882	$	103,463	$	56,606		$	169,426
Net income		—		—		—		—		—		4,206			4,206
Cash dividends declared
Common stock		—		—		—		—		—		(2,406	)		(2,406	)
Issuance of common stock
Dividend reinvestment plan		3		—		3		—		95		—			98
Employee stock options and awards(4)		22		—		22		—		438		—			460
Employee Retirement Plan(3)		2		—		2		—		84		—			86
Balance as of March 31, 2021		8,502		882		8,502		882		104,080		58,406			171,870
Net income		—		—		—		—		—		4,505			4,505
Cash dividends declared
Common stock		—		—		—		—		—		(4,904	)		(4,904	)
Issuance of common stock
Dividend reinvestment plan		2		—		2		—		103		—			105
Employee stock options and awards(4)		11		—		11		—		165		—			176
Employee Retirement Plan(3)		3		—		3		—		105		—			108
Balance as of June 30, 2021		8,518		882		8,518		882		104,453		58,007			171,860

	Common Shares Outstanding Class A Non-Voting (1) (3) (4)		Common Shares Outstanding Class B Voting (2)		$1 Par Value Class A Non-Voting		$1 Par Value Class B Voting		Additional Paid-in Capital		Retained Earnings		Total
Balance as of December 31, 2021		8,532		882	$	8,532	$	882	$	104,989	$	63,607	$	178,010
Net income		—		—		—		—		—		4,483		4,483
Cash dividends declared
Common stock		—		—		—		—		—		(2,518)		(2,518)
Issuance of common stock
Dividend reinvestment plan		2		—		2		—		87		—		89
Employee stock options and awards(4)		22		—		22		—		475		—		497
Employee Retirement Plan(3)		0		—		0		—		0		—		0
Balance as of March 31, 2022		8,556		882		8,556		882		105,551		65,572		180,561
Net income		—		—		—		—		—		5,046		5,046
Cash dividends declared
Common stock		—		—		—		—		—		(5,159)		(5,159)
Issuance of common stock
Dividend reinvestment plan		2		—		2		—		97		—		99
Employee stock options and awards(4)		19		—		19		—		336		—		355
Employee Retirement Plan(3)		—		—		—		—		—		—		—
Balance as of June 30, 2022		8,577		882		8,577		882		105,984		65,459		180,902

(1) At June 30, 2022 and June 30, 2021, Class A Common Stock had 15,000,000 shares authorized.  For the same periods, shares issued, inclusive of treasury shares, were 8,606,597 and 8,548,106, respectively.

(2) At June 30, 2022 and June 30, 2021, Class B Common Stock had 1,040,000 shares authorized and 881,452 shares issued.

(3) Artesian Resources Corporation registered 200,000 shares of Class A Common Stock, subsequently adjusted for stock splits, available for purchase through the Company’s 401(k) retirement plan.

(4) Under the Equity Compensation Plan, effective December 9, 2015, or the 2015 Plan, Artesian Resources Corporation authorized up to 331,500 shares of Class A Common Stock for issuance of grants in the form of stock options, stock units, dividend equivalents and other stock-based awards, subject to adjustment in certain circumstances as discussed in the 2015 Plan. Includes stock compensation expense for June 30, 2022, and June 30, 2021, see Note 5-Stock Compensation Plans.

See notes to the condensed consolidated financial statements

6

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – GENERAL

Artesian Resources Corporation, or Artesian Resources, includes income from the earnings of all of our wholly owned subsidiaries. The terms "we", "our", "Artesian" and the "Company" as used herein refer to Artesian Resources and its subsidiaries.

DELAWARE REGULATED SUBSIDIARIES

Artesian Water Company, Inc., or Artesian Water, our principal subsidiary, distributes and sells water to residential, commercial, industrial, governmental, municipal and utility customers throughout the State of Delaware.  In addition, Artesian Water provides services to other water utilities, including operations and billing functions, and has contract operation agreements with private, municipal and state water providers.  Artesian Water also provides water for public and private fire protection to customers in our service territories.

On May 26, 2022, Artesian Water completed its purchase of substantially all of the water operating assets from the Town of Clayton, or Clayton, a Delaware municipality located in Kent County, Delaware, including Clayton’s exclusive franchise territory and the right to provide water service to Clayton’s existing customers, or the Clayton Water System.  The total purchase price was $5.0 million, less the current payoff amount of secured debt or debt associated with the Clayton Water System.

Artesian Wastewater Management, Inc., or Artesian Wastewater, began providing wastewater services in Sussex County, Delaware in July 2005.  Artesian Wastewater is a regulated entity that owns wastewater collection and treatment infrastructure and provides wastewater services to customers in Delaware as a regulated public wastewater service company.

In January 2022, Artesian Wastewater acquired Tidewater Environmental Services, Inc.  Artesian Wastewater operates as the parent holding company of Tidewater Environmental Services, Inc. dba Artesian Wastewater, or TESI.  TESI was incorporated in 2004 and is a regulated entity that owns wastewater collection and treatment infrastructure and provides wastewater services to customers in Sussex County, Delaware as a regulated public wastewater service company.  Artesian Wastewater purchased all of the stock of TESI from Middlesex Water Company, or Middlesex, for $6.4 million in cash and other consideration, including forgiveness of a $2.1 million note due from Middlesex.  This acquisition more than doubled the number of wastewater customers served by Artesian’s Delaware wastewater subsidiaries in Sussex County, Delaware and included all residents within the Town of Milton.

MARYLAND REGULATED SUBSIDIARIES

Artesian Water Maryland, Inc., or Artesian Water Maryland, began operations in August 2007. Artesian Water Maryland distributes and sells water to residential, commercial, industrial and municipal customers in Cecil County, Maryland.

Artesian Wastewater Maryland, Inc., or Artesian Wastewater Maryland, was incorporated on June 3, 2008 and is able to provide regulated wastewater services to customers in the State of Maryland.  It is currently not providing these services.

PENNSYLVANIA REGULATED SUBSIDIARY

Artesian Water Pennsylvania, Inc., or Artesian Water Pennsylvania, began operations in 2002.  It provides water service to a residential community in Chester County, Pennsylvania.

OTHER SUBSIDIARIES

Our three other subsidiaries, none of which are regulated, are Artesian Utility Development, Inc., or Artesian Utility, Artesian Development Corporation, or Artesian Development, and Artesian Storm Water Services, Inc., or Artesian Storm Water.

7

Artesian Utility was formed in 1996 and designs and builds water and wastewater infrastructure and provides contract water and wastewater operation services on the Delmarva Peninsula to private, municipal and governmental institutions.  Artesian Utility also evaluates land parcels, provides recommendations to developers on the size of water or wastewater facilities and the type of technology that should be used for treatment at such facilities, and operates water and wastewater facilities in Delaware for municipal and governmental agencies.  Artesian Utility also contracts with developers and government agencies for design and construction of wastewater infrastructure throughout the Delmarva Peninsula.  In addition, as further discussed below, Artesian Utility operates the Water Service Line Protection Plan, or WSLP Plan, the Sewer Service Line Protection Plan, or SSLP Plan, and the Internal Service Line Protection Plan, or ISLP Plan.

Artesian Utility currently operates wastewater treatment facilities for the town of Middletown, in southern New Castle County, Delaware, or Middletown, under a 20-year contract that expires in July 2039.  Artesian Utility currently operates three wastewater treatment systems with a combined capacity of up to approximately 3.8 million gallons per day. The wastewater treatment facilities in Middletown provide reclaimed wastewater for use in spray irrigation on public and agricultural lands in the area.

Artesian Utility also offers three protection plans to customers, the WSLP Plan, the SSLP Plan and the ISLP Plan. The WSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking water service lines up to an annual limit. The SSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking or clogged sewer lines up to an annual limit.  The ISLP Plan enhances available coverage to include water and wastewater lines within customers' residences up to an annual limit.

Artesian Development is a real estate holding company that owns properties, including land approved for office buildings, a water treatment plant and wastewater facility, as well as property for current operations, including an office facility in Sussex County, Delaware.  The facility consists of approximately 10,000 square feet of office space along with nearly 10,000 square feet of warehouse space.

Artesian Storm Water, incorporated in 2017, was formed to provide design, installation, maintenance and repair services related to existing or proposed storm water management systems in Delaware and the surrounding areas.  The ability to offer storm water services will complement the primary water and wastewater services that we provide.  Artesian Storm Water is not actively seeking new opportunities.

NOTE 2 – BASIS OF PRESENTATION

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, for Form 10-Q.  Certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.  Accordingly, these condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes in the Company's annual report on Form 10-K for fiscal year 2021 as filed with the SEC on March 11, 2022.

The condensed consolidated financial statements include the accounts of Artesian Resources Corporation and its wholly owned subsidiaries, including its principal operating company, Artesian Water.  In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments (unless otherwise noted) necessary to present fairly the Company's balance sheet position as of June 30, 2022, the results of its operations for the three and six-month periods ended June 30, 2022 and June 30, 2021, its cash flows for the six-month periods ended June 30, 2022 and June 30, 2021 and the changes in stockholders’ equity for the three and six-month periods ended June 30, 2022 and June 30, 2021.  The December 31, 2021 Condensed Consolidated Balance Sheet was derived from the Company’s December 31, 2021 audited consolidated financial statements, but does not include all disclosures and notes normally provided in annual financial statements.

The results of operations for the interim periods presented are not necessarily indicative of the results for the full year or for future periods.

8

Use of Estimates

The condensed consolidated financial statements were prepared in conformity with generally accepted accounting principles in the U.S., which require management to make certain estimates and assumptions regarding the reported amounts of assets and liabilities including unbilled revenues, credit losses and reserves for bad debt, regulatory asset recovery, lease agreements and contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from management's estimates.

All additions to utility plant are recorded at cost.  Business combinations pursuant to ASC Topic 805 may result in a purchase price allocation and the acquired assets are required to be evaluated by the applicable regulatory agency.  Artesian Wastewater acquired TESI in January 2022 and Artesian Water purchased substantially all of the water operating assets from the Town of Clayton in May 2022.  As of June 30, 2022, the accounting for these transactions was preliminary.  Management’s preliminary determination of fair value of the tangible assets acquired using the cost method requires management to make significant estimates and assumptions related to economic lives of the assets, replacement costs, and physical characteristics of the tangible assets acquired.  Third-party valuation specialists are assisting with the valuation of the assets acquired.  The purchase price allocations are expected to be finalized once the valuations of assets acquired have been completed, no later than one year after the acquisition date in each case.

Reclassification

Certain accounts in the prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements.  These reclassifications had no effect on net income or stockholders' equity.

NOTE 3 – REVENUE RECOGNITION

Background

Artesian’s operating revenues are primarily attributable to contract services based upon tariff rates approved by the Delaware Public Service Commission, or DEPSC, the Maryland Public Service Commission, or MDPSC, and the Pennsylvania Public Utility Commission, or PAPUC.  Tariff contract service revenues consist of water consumption, industrial wastewater services, fixed fees for water and wastewater services including customer and fire protection fees, service charges and Distribution System Improvement Charges, or DSIC, billed to customers at rates outlined in our tariffs that represent stand-alone selling prices.  Our non-tariff contract revenues consist of Service Line Protection Plan, or SLP Plan, fees, water and wastewater contract operations, design and installation contract services, and wastewater inspection fees.  Other operating revenue primarily consists of developer guarantee contributions for wastewater and rental income for antenna agreements, which are not considered in the scope of Accounting Standards Codification 606, Revenue from Contracts with Customers.

Tariff Contract Revenues

Artesian generates revenue from the sale of water to customers in Delaware, Cecil County, Maryland, and Southern Chester County, Pennsylvania once a customer requests service in our territory.  We recognize water consumption revenue at tariff rates on a cycle basis for the volume of water transferred to customers based upon meter readings for actual gallons of water consumed as well as unbilled amounts for estimated usage from the date of the last meter reading to the end of the accounting period.  As actual usage amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results.  Estimates are made on an individual customer basis, based on one of three methods: the previous year’s consumption in the same period, the previous billing period’s consumption, or averaging. While actual usage for individual customers may differ materially from the estimate based on management judgments described above, we believe the overall total estimate of consumption and revenue for the fiscal period will not differ materially from actual billed consumption.  The majority of our water customers are billed for water consumed on a monthly basis, while the remaining customers are billed on a quarterly basis.  As a result, we record unbilled operating revenue (contract asset) for any estimated usage through the end of the accounting period that will be billed in the next monthly or quarterly billing cycle.

Artesian generates revenue from industrial wastewater services provided to a customer in Sussex County, Delaware.  We recognize industrial wastewater service revenue at a contract rate on a monthly basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of wastewater transferred.  These services are invoiced at the end of every month based on the actual meter readings for that month, and therefore there is no contract asset or liability associated with this revenue.  The contract also provides for a minimum required volume of wastewater flow to our facility.  At each year end, any shortfall of the actual volume from the required minimum volume is billed to the industrial customer and recorded as revenue.  Additionally, if during the course of the year it is probable that the actual volume will not meet the minimum required volume, estimated revenue amounts would be recorded for the pro rata minimum volume, constrained for potential flow capacity that could occur in the remainder of the year.  Pursuant to a settlement agreement, the minimum required volume was prorated on a seven month basis beginning June 1, 2021 and ending December 31, 2021.

9

Artesian generates revenue from metered wastewater services provided to customers in Sussex County, Delaware.  We recognize metered wastewater services at tariff rates on a cycle basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of water transferred, as well as unbilled amounts for estimated volume from the date of the last meter reading to the end of the accounting period.  As actual volume amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results.  Estimates are made on an individual customer basis, based on one of three methods: the previous year’s volume in the same period, the previous billing period’s volume, or averaging. While actual usage for individual customers may differ materially from the estimate based on management judgments described above, we believe the overall total estimate of volume and revenue for the fiscal period will not differ materially from actual billed consumption.  The majority of these wastewater customers are billed for the volume of water transferred on a quarterly basis.  As a result, we record unbilled operating revenue (contract asset) for any estimated volume through the end of the accounting period that will be billed in the next monthly cycle.

Artesian generates fixed-fee revenue for water and wastewater services provided to customers once a customer requests service in our territory.  Our wastewater territory is located in Sussex County, Delaware.  We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of the Company remaining ready to provide them water and wastewater service.  These contract services are billed either in advance or arrears at tariff rates on a monthly, quarterly or semi-annual basis.  For contract services billed in arrears, we record unbilled operating revenue (contract asset) for any services through the end of the accounting period that will be billed in the next monthly or quarterly cycle.  For contract services billed in advance, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided.  This deferred revenue is netted with unbilled operating revenue on the Condensed Consolidated Balance Sheet.

Artesian generates service charges primarily from non-payment fees, such as water shut-off and reconnection fees and finance charges.  These fees are billed and recognized as revenue at the point in time when our tariffs indicate the Company has the right to payment such as days past due have been reached or shut-offs and reconnections have been performed.  There is no contract asset or liability associated with these fees.

Artesian generates revenue from DSIC, which are surcharges applied to water customer tariff rates in Delaware related to specific types of water distribution system improvements.  This rate is calculated on a semi-annual basis based on an approved projected revenue requirement over the following six-month period.  This rate is adjusted up or down at the next DSIC filing to account for any differences between actual earned revenue and the projected revenue requirement.  Since DSIC revenue is a surcharge applied to tariff rates, we recognize DSIC revenue based on the same guidelines as noted above depending on whether the surcharge was applied to consumption revenue or fixed-fee revenue.

Accounts receivable related to tariff contract revenues are typically due within 25 days of invoicing. An allowance for doubtful accounts is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current conditions.  We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant.  However, due to the COVID-19 pandemic causing hardships for many utility customers, the Company experienced longer receivable cycles throughout 2020 and into 2021 and made an adjustment to increase the reserve for bad debt by $0.5 million in 2020.  In June 2021 we made an adjustment to reduce the reserve by $0.3 million.  We will continue to monitor factors that affect the reserve for bad debt.

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Non-tariff Contract Revenues

Artesian generates SLP Plan revenue once a customer requests service to cover all parts, materials and labor required to repair or replace leaking water service lines, leaking or clogged sewer lines, or water and wastewater lines within the customer’s residence, up to an annual limit.  We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of having service line protection services.  These contract services are billed in advance on a monthly or quarterly basis.  As a result, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided.  Accounts receivable from SLP Plan customers are typically due within 25 days of invoicing.  An allowance for doubtful accounts is calculated as a percentage of total SLP Plan contract revenue.  We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant.

Artesian generates contract operation revenue from water and wastewater operation services provided to customers.  We recognize revenue from these operation contracts, which consist primarily of monthly operation and maintenance services, over time as customers receive and consume the benefits of such services performed. The majority of these services are invoiced in advance at the beginning of every month and are typically due within 30 days, and therefore there is no contract asset or liability associated with most of these revenues.  We have one operation contract that was paid in advance resulting in a contract liability for services that have not yet been provided.  An allowance for doubtful accounts is provided based on a periodic analysis of individual account balances, including an evaluation of days outstanding, payment history, recent payment trends, and our assessment of our customers’ creditworthiness.  The related allowance for doubtful accounts and associated bad debt expense has not been significant.

Artesian generates design and installation revenue for services related to the design and construction of wastewater infrastructure for a state agency under contract.  We recognize revenue from these services over time as services are performed using the percentage-of-completion method based on an input method of incurred costs (cost-to-cost).  These services are invoiced at the end of every month based on incurred costs to date.  As of June 30, 2022, there is no associated contract asset or liability.  There is no allowance for doubtful accounts or bad debt expense associated with this revenue.

Artesian generates inspection fee revenue for inspection services related to onsite wastewater collection systems installed by developers of new communities.  These fees are paid by developers in advance when a service is requested for a new phase of a development.  Inspection fee revenue is recognized on a per lot basis once the inspection of the infrastructure that serves each lot is completed.  As a result, we record deferred revenue (contract liability) for any amounts related to infrastructure not yet inspected.  There are no accounts receivable, allowance for doubtful accounts or bad debt expense associated with inspection fee contracts.

Sales Tax

The majority of Artesian’s revenues are earned within the State of Delaware, where there is no sales tax.  Revenues earned in the State of Maryland and the Commonwealth of Pennsylvania are related primarily to the sale of water by a public water utility and are exempt from sales tax.  Therefore, no sales tax is collected on revenues.

Disaggregated Revenues

The following table shows the Company’s revenues disaggregated by service type; all revenues are generated within a similar geographical location:

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(in thousands)	Three months ended June 30, 2022		Three months ended June 30, 2021			Six months ended June 30, 2022		Six months ended June 30, 2021
Tariff Revenue
Consumption charges	$	12,182	$	12,660		$	22,749	$	23,078
Fixed fees		7,751		6,872			15,529		13,871
Service charges		137		119			293		320
DSIC		1,282		1,316			2,464		2,488
Metered wastewater services		129		—			269		—
Industrial wastewater services		422		(384	)		828		(379	)
Total Tariff Revenue	$	21,903	$	20,583		$	42,132	$	39,378
Non-Tariff Revenue
Service line protection plans	$	1,217	$	1,134		$	2,439	$	2,230
Contract operations		242		217			453		447
Design and installation		978		62			1,101		212
Inspection fees		66		52			106		136
Total Non-Tariff Revenue	$	2,503	$	1,465		$	4,099	$	3,025
Other Operating Revenue	$	605	$	421		$	967	$	710
Total Operating Revenue	$	25,011	$	22,469		$	47,198	$	43,113

Contract Assets and Contract Liabilities

Our contract assets and liabilities consist of the following:

(in thousands)	June 30, 2022		December 31, 2021
Contract Assets – Tariff	$	3,156	$	2,144
Deferred Revenue
Deferred Revenue – Tariff	$	1,179	$	1,227
Deferred Revenue – Non-Tariff		404		287
Total Deferred Revenue	$	1,583	$	1,514

For the six months ended June 30, 2022, the Company recognized revenue of $1.2 million from amounts that were included in Deferred Revenue – Tariff at the beginning of the year and revenue of $0.3 million from amounts that were included in Deferred Revenue – Non- Tariff at the beginning of the year.

The changes in Contract Assets and Deferred Revenue are primarily due to normal timing differences between our performance and customer payments.

Remaining Performance Obligations

As of June 30, 2022 and December 31, 2021, Deferred Revenue – Tariff is recorded net of contract assets within Unbilled operating revenues and represents our remaining performance obligations for our fixed fee water and wastewater services, all of which are expected to be satisfied and associated revenue recognized in the next three months.

As of June 30, 2022 and December 31, 2021, Deferred Revenue – Non-Tariff is recorded within Other current liabilities and represents our remaining performance obligations for our SLP Plan services, wastewater inspections and one operation contract, which are expected to be satisfied and associated revenue recognized within the next three months, one year and seven years for the SLP Plan revenue, inspection fee revenue and contract operations revenue, respectively.

NOTE 4 – LEASES

The Company leases land and office equipment under operating leases from non-related parties.  Our leases have remaining lease terms of 20 years to 74 years, some of which include options to automatically extend the leases for up to 66 years.  Payments made under operating leases are recognized in the consolidated statement of operations on a straight-line basis over the period of the lease.  The annual lease payments for the land operating leases increase each year either by the most recent increase in the Consumer Price Index or by 3%, as applicable based on the lease agreements.  Periodically, the annual lease payment for one operating land lease is determined based on the fair market value of the applicable parcel of land.  None of the operating leases contain contingent rent provisions.  The commencement date of all the operating leases is the earlier of the date we become legally obligated to make rent payments or the date we may exercise control over the use of the land or equipment.  The Company currently does not have any financing leases and does not have any lessor leases that require disclosure.

Management made certain assumptions related to the separation of lease and nonlease components and to the discount rate used when calculating the right of use asset and liability amounts for the operating leases.  As our leases do not provide an implicit rate, we use our incremental borrowing rates for long term and short term agreements and apply the rates accordingly based on the term of the lease agreements to determine the present value of lease payments.

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Rent expense for all operating leases except those with terms of 12 months or less comprises:

	(in thousands)
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Minimum rentals	$	2	$	7	$	9	$	14
Contingent rentals		—		—		—		—
	$	2	$	7	$	9	$	14

Supplemental cash flow information related to leases is as follows:

	(in thousands)
	Six Months Ended		Six Months Ended
	June 30, 2022		June 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9	$	14
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	445	$	450

Supplemental balance sheet information related to leases is as follows:

	(in thousands, except lease term and discount rate)
	June 30, 2022			December 31, 2021
Operating Leases:
Operating lease right-of-use assets	$	445		$	451
Other current liabilities	$	2			6
Operating lease liabilities		440			440
Total operating lease liabilities	$	442		$	446
Weighted Average Remaining Lease Term
Operating leases	61 years			61 years
Weighted Average Discount Rate
Operating leases		5.0	%		5.0	%

Maturities of operating lease liabilities that have initial or remaining non-cancelable lease terms in excess of one year as of June 30, 2022 are as follows:

	(in thousands)
	Operating Leases
Year
2023	$	24
2024		24
2025		24
2026		24
2027		25
Thereafter		1,330
Total undiscounted lease payments	$	1,451
Less effects of discounting		(1,009	)
Total lease liabilities recognized	$	442

As of June 30, 2022, we have not entered into operating or finance leases that will commence at a future date.

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NOTE 5 – STOCK COMPENSATION PLANS

On December 9, 2015, the Company's stockholders approved the 2015 Equity Compensation Plan, or the 2015 Plan. The 2015 Plan provides that grants may be in any of the following forms: incentive stock options, nonqualified stock options, stock units, stock awards, dividend equivalents and other stock-based awards. The 2015 Plan is administered and interpreted by the Compensation Committee, or the Committee, of the Board of Directors of the Company, or the Board. The Committee has the authority to determine the individuals to whom grants will be made under the 2015 Plan, the type, size and terms of the grants, the time when grants will be made and the duration of any applicable exercise or restriction period (subject to the limitations of the 2015 Plan), and deal with any other matters arising under the 2015 Plan. The Committee presently consists of three directors, each of whom is a non-employee director of the Company. All of the employees of the Company and its subsidiaries and non-employee directors of the Company are eligible for grants under the 2015 Plan. 

Compensation expense, for the three and six months ended June 30, 2022 of approximately $55,000 and $104,000, respectively, was recorded for restricted stock awards issued in May 2021 and May 2022.   Compensation expense, for the three and six months ended June 30, 2021 of approximately $49,000 and $91,000, respectively, was recorded for restricted stock awards issued in May 2020 and May 2021.  Costs were determined based on the fair value on the dates of the awards and those costs were charged to income over the service periods associated with the awards.

There was no stock compensation cost capitalized as part of an asset.

On May 3, 2022, 5,000 shares of Class A Common Stock, or Class A Stock, were granted as restricted stock awards.  The fair value per share was $45.58, the closing price of the Class A Stock as recorded on the Nasdaq Global Select Market on May 3, 2022.  Prior to their release date, these restricted stock awards may be subject to forfeiture in the event of the recipient’s termination of service.

On May 4, 2021, 5,000 shares of Class A Common Stock, or Class A Stock, were granted as restricted stock awards.  The fair value per share was $40.11, the closing price of the Class A Stock as recorded on the Nasdaq Global Select Market on May 4, 2021.  Prior to their release date, these restricted stock awards may be subject to forfeiture in the event of the recipient’s termination of service.

The following summary reflects changes in the shares of Class A Stock underlying options and restricted stock awards for the six months ended June 30, 2022:

	Options									Restricted Awards
	Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (Yrs.)		Aggregate Intrinsic Value (in thousands)		Outstanding Restricted Stock Awards			Weighted Average Grant Date FairValue
Plan options/restricted stock awards
Outstanding at January 1, 2022		83,000		$	21.65			$	2,048		5,000		$	40.11
Granted		—			—				—		5,000			45.58
Exercised/vested and released		(35,750	)		20.93				905		(5,000	)		40.11
Expired/cancelled		—			—				—		—			—
Outstanding at June 30, 2022		47,250		$	22.20		1.425	$	1,274		5,000		$	40.11
Exercisable/vested at June 30, 2022		47,250		$	22.20		1.425	$	1,274		—			—

The total intrinsic value of options exercised during the six months ended June 30, 2022 was approximately $905,000.

There were no unvested option shares outstanding under the 2015 Plan during the six months ended June 30, 2022.

As of June 30, 2022, there were no unrecognized expenses related to non-vested option shares granted under the 2015 Plan.  

As of June 30, 2022, there was $191,000 total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2015 Plan.  The cost will be recognized over 0.84 years, the remaining vesting period for the restricted stock awards.

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NOTE 6 – OTHER DEFERRED ASSETS

The investment in CoBank, which is a cooperative bank, is related to certain outstanding First Mortgage Bonds and is a required investment in the bank based on the underlying long-term debt agreements.  Other deferred assets is primarily associated with the acquisition of TESI in January 2022 based on the preliminary purchase price allocation.  The purchase price allocation will be finalized once the valuation of assets acquired has been completed, no later than one year after the acquisition date.  In addition, other deferred assets includes the Mountain Hill Water Company acquisition.

In thousands	June 30, 2022	December 31, 2021
Investment in CoBank	$5,351	$4,850
Other deferred assets	1,765	247
	$7,116	$5,097

NOTE 7 - REGULATORY ASSETS

The FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain expenses are recoverable through rates charged to our customers, without a return on investment, and are deferred and amortized during future periods using various methods as permitted by the DEPSC, MDPSC, and PAPUC.

The deferred income taxes will be amortized over future years as the tax effects of temporary differences that previously flowed through to our customers are reversed.

Debt related costs include debt issuance costs and other debt related expense.  The DEPSC has approved deferred regulatory accounting treatment for issuance costs associated with Artesian Water’s First Mortgage bonds. Debt issuance costs and other debt related expenses are reviewed during Artesian Water’s rate applications as part of its cost of capital calculations.

Regulatory expenses amortized on a straight-line basis are noted below:

Expense	Years Amortized
Deferred contract costs and other	5
Rate case studies	5
Delaware rate proceedings	2.5
Maryland rate proceedings	5
Debt related costs	15 to 30 (based on term of related debt)
Goodwill (resulting from acquisition of Mountain Hill Water Company in 2008)	50
Deferred acquisition costs (resulting from purchase of water assets in Cecil County, Maryland in 2011 and Port Deposit, Maryland in 2010)	20
Franchise Costs (resulting from purchase of water assets in Cecil County, Maryland in 2011)	80

Regulatory assets, net of amortization, comprise:
	(in thousands)
	June 30, 2022		December 31, 2021
Deferred income taxes	$	475	$	355
Deferred contract costs and other		258		288
Debt related costs		4,829		4,902
Goodwill		269		273
Deferred acquisition and franchise costs		483		503
	$	6,314	$	6,321

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NOTE 8 – REGULATORY LIABILITIES

FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency.  Certain obligations are deferred and/or amortized as determined by the DEPSC, MDPSC, and PAPUC.  Regulatory liabilities represent excess recovery of cost or other items that have been deferred because it is probable such amounts will be returned to customers through future regulated rates.

Utility plant retirement cost obligation consists of estimated costs related to the potential removal and replacement of facilities and equipment on the Company’s water and wastewater properties.  Effective January 1, 2012, as authorized by the DEPSC, when depreciable units of utility plant are retired, any cost associated with retirement, less any salvage value or proceeds received, is charged to a regulated retirement liability.  Each year the liability is increased by an annual amount authorized by the DEPSC.    

Pursuant to the enactment of the Tax Cuts and Jobs Act, or TCJA, on December 22, 2017, the Company adjusted its existing deferred income tax balances to reflect the decrease in the corporate income tax rate from 34% to 21% (see Note 11) resulting in a decrease in the net deferred income tax liability of $24.3 million, of which $22.8 million was reclassified to a regulatory liability related to Artesian Water and Artesian Water Maryland.  The regulatory liability amount is subject to certain Internal Revenue Service normalization rules that require the benefits to customers be spread over the remaining useful life of the underlying assets giving rise to the associated deferred income taxes.  On January 31, 2019, the DEPSC approved the amortization of the regulatory liability amount of $22.2 million over a period of 49.5 years beginning February 1, 2018, subject to audit at a later date. In May 2022, the Company received a rate order from the DEPSC instructing the Company to continue amortizing the liability over a period of 49.5 years, subject to review in the Company’s next base rate filing.  The MDPSC has not issued a final order on the regulatory liability amount of $0.6 million regarding the effects of the TCJA on Maryland customers.

Regulatory liabilities comprise:
	(in thousands)
	June 30, 2022		December 31, 2021
Utility plant retirement cost obligation	$	169	$	149
Deferred income taxes (related to TCJA)		21,463		21,111
	$	21,632	$	21,260

NOTE 9 - NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE

Basic net income per share is based on the weighted average number of common shares outstanding. Diluted net income per share is based on the weighted average number of common shares outstanding, the potentially dilutive effect of employee stock options and restricted stock awards.

The following table summarizes the shares used in computing basic and diluted net income per share:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Weighted average common shares outstanding during the period for Basic computation		9,452		9,395		9,438		9,381
Dilutive effect of employee stock options and awards		18		30		26		35
Weighted average common shares outstanding during the period for Diluted computation		9,470		9,425		9,464		9,416

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For the three and six months ended June 30, 2022 and 2021, no shares of restricted stock awards were excluded from the calculations of diluted net income per share.

The Company has 15,000,000 authorized shares of Class A Stock and 1,040,000 authorized shares of Class B Common Stock, or Class B Stock. As of June 30, 2022, 8,577,620 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. As of June 30, 2021, 8,519,129 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. The par value for both classes is $1.00 per share.

Equity per common share was $19.17 and $18.94 at June 30, 2022 and December 31, 2021, respectively. These amounts were computed by dividing common stockholders' equity by the number of weighted average shares of common stock outstanding on June 30, 2022 and December 31, 2021, respectively.

NOTE 10 - REGULATORY PROCEEDINGS

Our water and wastewater utilities generate operating revenue from customers based on rates that are established by state public service commissions through a rate-setting process that may include public hearings, evidentiary hearings and the submission of evidence and testimony in support of the Company's requested level of rates.

We are subject to regulation by the following state regulatory commissions:

• The DEPSC, regulates both Artesian Water and Artesian Wastewater.

• The MDPSC, regulates both Artesian Water Maryland and Artesian Wastewater Maryland.

• The PAPUC, regulates Artesian Water Pennsylvania.

Our water and wastewater utility operations are also subject to regulation under the federal Safe Drinking Water Act of 1974, or Safe Drinking Water Act, the Clean Water Act of 1972, or the Clean Water Act, and related state laws, and under federal and state regulations issued under these laws.  These laws and regulations establish criteria and standards for drinking water and for wastewater discharges.  Capital expenditures and operating costs required as a result of water quality standards and environmental requirements have been traditionally recognized by state regulatory commissions as appropriate for inclusion in establishing rates.

Water and Wastewater Rates

Our regulated utilities periodically seek rate increases to cover the cost of increased operating expenses, increased financing expenses due to additional investments in utility plant and other costs of doing business.  In Delaware, utilities are permitted by law to place rates into effect, under bond, on a temporary basis pending completion of a rate increase proceeding. The first temporary increase may be up to the lesser of $2.5 million on an annual basis or 15% of gross water sales.  Should the rate case not be completed within seven months, by law, the utility may put the entire requested rate relief, up to 15% of gross water sales, in effect under bond until a final resolution is ordered and placed into effect.  If any such rates are found to be in excess of rates the DEPSC finds to be appropriate, the utility must refund customers the portion found to be in excess with interest.  The timing of our rate increase requests is therefore dependent upon the estimated cost of the administrative process in relation to the investments and expenses that we hope to recover through the rate increase.  We can provide no assurances that rate increase requests will be approved by applicable regulatory agencies and, if approved, we cannot guarantee that these rate increases will be granted in a timely or sufficient manner to cover the investments and expenses for which we initially sought the rate increase.

Other Proceedings

Delaware law permits water utilities to put into effect, on a semi-annual basis, increases related to specific types of distribution system improvements through a DSIC. This charge may be implemented by water utilities between general rate increase applications that normally recognize changes in a water utility's overall financial position. The DSIC approval process is less costly when compared to the approval process for general rate increase requests. The DSIC rate applied between base rate filings is capped at  7.50% of the amount billed to customers under otherwise applicable rates and charges, and the DSIC rate increase applied cannot exceed 5.0% within any 12-month period.

The following table summarizes (1) Artesian Water’s applications with the DEPSC to collect DSIC rates and (2) the rates upon which eligible plant improvements are based:

Application Date	11/20/20
DEPSC Approval Date	12/14/20
Effective Date	01/01/21
Cumulative DSIC Rate	7.50%
Net Eligible Plant Improvements – Cumulative Dollars (in millions)	$43.1
Eligible Plant Improvements – Installed Beginning Date	10/01/2014
Eligible Plant Improvements – Installed Ending Date	04/30/2019

The rate reflects the eligible plant improvements installed through April 30, 2019.  The DSIC rate effective January 1, 2021 is still subject to audit by the DEPSC at a later date. For the three and six months ended June 30, 2022, we earned approximately $1.3 million and $2.5 million in DSIC revenue, respectively.  For the three and six months ended June 30, 2021, we earned approximately $1.3 million and $2.5 million in DSIC revenue, respectively.

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NOTE 11 – INCOME TAXES

Deferred income taxes are provided in accordance with FASB ASC Topic 740 on all differences between the tax basis of assets and liabilities and the amounts at which they are carried in the consolidated financial statements based on the enacted tax rates expected to be in effect when such temporary differences are expected to reverse. The Company’s rate regulated utilities recognize regulatory liabilities, to the extent considered in ratemaking, for deferred taxes provided in excess of the current statutory tax rate and regulatory assets for deferred taxes provided at rates less than the current statutory rate.  Such tax-related regulatory assets and liabilities are reported at the revenue requirement level and amortized to income as the related temporary differences reverse, generally over the lives of the related properties.

Under FASB ASC Topic 740, an uncertain tax position represents our expected treatment of a tax position taken, or planned to be taken in the future, that has not been reflected in measuring income tax expense for financial reporting purposes.  The Company establishes reserves for uncertain tax positions based upon management's judgment as to the sustainability of these positions. These accounting estimates related to the uncertain tax position reserve require judgments to be made as to the sustainability of each uncertain tax position based on its technical merits. The Company believes its tax positions comply with applicable law and that it has adequately recorded reserves as required. However, to the extent the final tax outcome of these matters is different than the estimates recorded, the Company would then adjust its tax reserves or unrecognized tax benefits in the period that this information becomes known.  The statute of limitations for the 2017 tax returns lapsed during the fourth quarter of 2021, which resulted in the reversal of the reserve in the amount of approximately $26,000.  The Company has elected to recognize accrued interest (net of related tax benefits) and penalties related to uncertain tax positions as a component of its income tax expense.  The Company has accrued approximately $10,000 in penalties and interest for the six months ended June 30, 2022. The Company remains subject to examination by federal and state authorities for the tax years 2018 through 2021.

Investment tax credits were deferred through 1986 and are recognized as a reduction of deferred income tax expense over the estimated economic useful lives of the related assets.

NOTE 12 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value.

Current Assets and Liabilities

For those current assets and liabilities that are considered financial instruments, the carrying amounts approximate fair value because of the short maturity of those instruments.

Long-term Financial Liabilities

All of Artesian Resources’ outstanding long-term debt as of June 30, 2022 and December 31, 2021 was fixed-rate.  The fair value of the Company’s long-term debt is determined by discounting their future cash flows using current market interest rates on similar instruments with comparable maturities consistent with FASB ASC 825.  Under the fair value hierarchy, the fair value of the long-term debt in the table below is classified as Level 2 measurements.  Level 2 is valued using observable inputs other than quoted prices.  The fair values for long-term debt differ from the carrying values primarily due to interest rates that differ from the current market interest rates.  The carrying amount and fair value of Artesian Resources' long-term debt (including current portion) are shown below:

In thousands
	June 30, 2022		December 31, 2021
Carrying amount	$	175,593	$	144,850
Estimated fair value	$	168,490	$	163,182

The fair value of Advances for Construction cannot be reasonably estimated due to the inability to estimate accurately the timing and amounts of future refunds expected to be paid over the life of the contracts.  Refund payments are based on the water sales to new customers in the particular development constructed.  The fair value of Advances for Construction would be less than the carrying amount because these financial instruments are non-interest bearing.

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NOTE 13 – RELATED PARTY TRANSACTIONS

Mr. Michael Houghton currently serves as a director.  During 2021, Mr. Houghton was a Partner in the law firm of Morris, Nichols, Arsht & Tunnell LLP, or MNAT, in Wilmington, Delaware.  Mr. Houghton retired from MNAT as a Partner, effective January 1, 2022, however, Mr. Houghton continues to perform legal services for MNAT as an independent contractor and non-partner.  In the normal course of business, the Company utilized the services of MNAT in 2021 for various regulatory, real estate and public policy matters.  Approximately $58,000 and  $71,000 was paid to MNAT during the three and six months ended June 30, 2021, respectively, for legal services and director related services.

As set forth in the Charter of the Audit Committee of the Board, the Audit Committee is responsible for reviewing and, if appropriate, approving all related party transactions between us and any officer, any director, any person known to be the beneficial owner of more than 5% of any class of the Company's voting securities or any other related person that would potentially require disclosure.  In its review and approval of the related party transactions with MNAT, the Audit Committee considered the nature of the related person's interest in the transactions; the satisfactory performance of work contracted with the related party prior to the election of Mr. Houghton as a director; and the material terms of the transactions, including, without limitation, the amount and type of transactions, the importance of the transactions to the related person, the importance of the transactions to the Company and whether the transactions would impair the judgment of a director or officer to act in the best interest of the Company.  The Audit Committee approves only those related person transactions that are in, or are consistent with, the best interests of the Company and its stockholders.

NOTE 14 – BUSINESS COMBINATIONS

As part of the Company’s growth strategy, on January 14, 2022 Artesian Wastewater completed its agreement to acquire TESI, which provides regulated wastewater services in Delaware.  Artesian Wastewater purchased all of the stock of TESI from Middlesex Water Company for $6.4 million in cash and other consideration, including forgiveness of a $2.1 million note due from Middlesex, consisting of $3.1 million paid at closing. This acquisition more than doubled the number of wastewater customers served by Artesian in Sussex County, Delaware.  The acquisition is being accounted for as a business combination under ASC Topic 805, “Business Combinations,” in accordance with the acquisition method whereby the total purchase price consideration will be allocated to intangible assets and utility plant assets acquired and liabilities assumed based on their respective estimated fair values.  The acquisition method of accounting requires, among other things, that assets acquired, and liabilities assumed in a business purchase combination be recognized at their fair values as of the acquisition date.  The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions.  The Company is still gathering detailed records for valuing utility plant assets and related contributions in aid of construction at replacement cost adjusted for depreciation and valuing real property using a comparative sales approach in order to complete the purchase price allocation for the items as well as some of the assumed liabilities.  The purchase price allocation will be finalized once the valuation of assets acquired has been completed, no later than one year after the acquisition date.  Any goodwill as a result of the transaction is not expected to be deductible for tax purposes.

The TESI acquisition was approved by the DEPSC on October 27, 2021, subject to the DEPSC determining the appropriate ratemaking treatment of the acquisition price and the assets acquired in Artesian Wastewater’s next base rate case.

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The Company reflected revenue of $0.7 million and $1.4 million for the three and six months ended June 30, 2022 , respectively, in its condensed consolidated statement of operations related to the acquisition.  The pro forma revenue for the three and six months ended June 30, 2022 is estimated to be approximately $0.7 million and $1.4 million, respectively.  The Company anticipates the pro forma effects of revenue for the three and six months ended June 30, 2021 to be approximately the same given there has not been any changes in the rates.  The pro forma information is not necessarily indicative of the Company’s future results.  Any pro forma effects of earnings is not practicable, as we continue to integrate TESI operations and adjust the operating cost structure as it relates to operating expenses reflective of synergies of the combined operations, and therefore would not present an accurate comparison.

The table below sets forth the preliminary purchase price allocation of this acquisition as of June 30, 2022.  The preliminary purchase price allocation is provisional and there could be material changes to the estimates below.

(In thousands)
		TESI
	Utility plant	$	19,455
	Cash		280
	Other assets		3,580
	Total assets		23,315
	Less: Liabilities and contributions in aid of construction (CIAC)
	Liabilities		3,536
	CIAC		16,657
	Net cash purchase price	$	3,122

Additionally, as part of the Company’s growth strategy, on May 26, 2022, Artesian Water completed its purchase of substantially all of the water system operating assets from the Town of Clayton, or Clayton, a Delaware municipality located in Kent County, Delaware, including Clayton’s exclusive franchise territory and the right to provide water service to Clayton’s existing customers, or the Clayton Water System.  The total purchase price was $5.0 million, less the current payoff amount of secured debt or debt associated with the Clayton Water System.  At closing, Artesian Water paid approximately $3.4 million of the total purchase price.  The remaining $1.6 million is payable in five equal annual installments on the anniversary date of the closing date.  Each annual installment is payable with interest at an annual rate of 2.0%. The acquisition was accounted for as a business combination under ASC Topic 805.  The preliminary purchase price allocation is $8.9 million of utility plant assets offset by $3.8 million of CIAC.  This preliminary purchase price allocation will be finalized once the valuation of assets acquired has been completed, no later than one year after the acquisition date.

This transfer of Clayton’s exclusive franchise territory was approved by the DEPSC on April 20, 2022.  The DEPSC will determine the appropriate ratemaking treatment of the acquisition price and the assets acquired in Artesian Water’s next base rate case.  The pro forma effects of the business acquired are not material to the Company’s financial position or results of operations based on estimated annual revenue related to customers acquired.

NOTE 15 – GEOGRAPHIC CONCENTRATION OF CUSTOMERS

Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide water utility service to customers within their established service territory in all three counties of Delaware and in portions of Maryland and Pennsylvania, pursuant to rates filed with and approved by the DEPSC, the MDPSC and the PAPUC.  As of June 30, 2022, Artesian Water was serving approximately 94,000 customers, Artesian Water Maryland was serving approximately 2,600 customers and Artesian Water Pennsylvania was serving approximately 40 customers.

Artesian Wastewater and TESI provide wastewater utility service to customers within their established service territory in Sussex County, Delaware pursuant to rates filed with and approved by the DEPSC. The number of wastewater customers served more than doubled following the acquisition of TESI in January 2022.  As of June 30, 2022, Artesian Wastewater combined with TESI were serving approximately 7,300 customers, including one large industrial customer.

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NOTE 16 – IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

There was no new guidance issued by the FASB during the six months ended June 30, 2022 that is applicable to the Company.

NOTE 17 – SUBSEQUENT EVENT

On July 19, 2022, final judgment was entered by the United States District Court, or Court, for a Consent Decree between the Delaware Sand and Gravel Remedial Trust, or Trust, and the United States Environmental Protection Agency, or USEPA, that governs the implementation of Amendment No 2 to the USEPA’s 1988 Record of Decision for the Delaware Sand & Gravel Landfill Superfund Site, or Site, located in New Castle County, Delaware, issued on December 12, 2017, or ROD Amendment No. 2, confirming, among other things, the terms and conditions set forth in a Settlement Agreement upon which The Chemours Company FC, LLC, Hercules, LLC, Waste Management of Delaware, Inc., SC Holdings, Inc., Cytec Industries, Inc., Zeneca Inc., and Bayer CropScience Inc., collectively the Percentage Settlors, and the Trust, on one hand, and Artesian Water, on the other hand, have agreed to resolve certain of Artesian Water’s claims and issues relating to releases of contaminants from the Site.

ROD Amendment No. 2 sets forth the remedy for the contamination existing at and emanating from the Site, or the Remedy, to address a release of contaminants of concern and of emerging concern, or COC’s, from the Site into groundwater.  Artesian Water has found in groundwater that Artesian Water uses for public potable water supply certain COC’s that the Remedy is designed to address, as a result of which Artesian has incurred, and potentially will incur additional, capital and operating costs to treat the groundwater to meet applicable drinking water standards.  The Remedy includes requirements that are directly linked to Artesian’s continued operation of the treatment plant associated with groundwater around the Site.

As set forth in the Settlement Agreement, Artesian Water shall have access to financial assurances that the Percentage Settlors have provided, or will provide, to the USEPA in connection with the Consent Decree governing the implementation of the Remedy.  In addition, the Trust shall reimburse Artesian Water for past capital and operating costs, totaling approximately $10.0 million, with approximately $2.5 million due by August 18, 2022, within 30 days after the Court’s July 19, 2022 approval of the Consent Decree.  The remaining $7.5 million will be payable in three equal installments annually on the anniversary date of the Court’s approval of the Consent Decree.  In addition, the Trust shall reimburse Artesian Water for documented reasonable and necessary capital and operating costs after July 1, 2021 that Artesian Water incurs to treat Site-related COC’s. Any reimbursements Artesian Water receives from the Trust shall be subject to final determination by the DEPSC as to the appropriate regulatory rate-making treatment. The Trust’s reimbursement of such costs shall end if and when, based upon testing information from the Trust’s Remedy facilities and Artesian Water’s facilities, treatment of Site-related COC’s is no longer necessary for Artesian Water to meet the treatment levels that Artesian Water chooses to not exceed in water it distributes to the general public throughout its service territory to provide a margin of safety in complying with applicable drinking water standards.

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ITEM 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Statements in this Quarterly Report on Form 10-Q that express our "belief," "anticipation" or "expectation," as well as other statements that are not historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act and the Private Securities Litigation Reform Act of 1995.  Statements regarding specific and overall impacts of the COVID-19 global pandemic on our financial condition and results of operations, our goals, priorities, growth and expansion plans and expectation for our water and wastewater subsidiaries and non-regulated subsidiaries, customer base growth opportunities in Delaware and Cecil County, Maryland, our belief regarding our capacity to provide water services for the foreseeable future to our customers, our belief relating to our compliance and the cost to achieve compliance with relevant governmental regulations, our expectation of the timing of decisions by regulatory authorities, the impact of weather on our operations and the execution of our strategic initiatives, our expectation of the timing for construction on new projects, our expectation relating to the adoption of recent accounting pronouncements, contract operations opportunities, legal proceedings, our properties, deferred tax assets, adequacy of our available sources of financing, the expected recovery of expenses related to our long-term debt, our expectation to be in compliance with financial covenants in our debt instruments, our ability to refinance our debt as it comes due, our ability to adjust our debt level, interest rate, maturity schedule and structure, the timing and terms of renewals of our lines of credit, plans to increase our wastewater treatment operations, engineering services and other revenue streams less affected by weather, expected future contributions to our postretirement benefit plan, anticipated growth in our non-regulated division, the impact of recent acquisitions on our ability to expand and foster relationships, anticipated investments in certain of our facilities and systems and the sources of funding for such investments, and the sufficiency of internally generated funds and credit facilities to provide working capital and our liquidity needs are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties that could cause actual results to differ materially from those projected.  Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", "projects", "forecasts", "may", "should", variations of such words and similar expressions are intended to identify such forward-looking statements.  Certain factors as discussed under Item 1A -Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2021, and this Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, such as changes in weather, changes in our contractual obligations, changes in government policies, the timing and results of our rate requests, failure to receive regulatory approval, changes in economic and market conditions generally, and other matters could cause results to differ materially from those in the forward-looking statements.  Additionally, many of these risks and uncertainties are currently elevated by and may or will continue to be elevated by the COVID-19 pandemic.  While the Company may elect to update forward-looking statements, we specifically disclaim any obligation to do so and you should not rely on any forward-looking statement as a representation of the Company's views as of any date subsequent to the date of the filing of this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 2022

OVERVIEW

Our profitability is primarily attributable to the sale of water. Gross water sales composed 80.2% of total operating revenues for the six months ended June 30, 2022.  Our profitability is also attributed to the various contract operations, water, sewer and internal SLP Plans, wastewater services and other services we provide.  Water sales are subject to seasonal fluctuations, particularly during summer when water demand may vary with rainfall and temperature.  In the event temperatures during the typically warmer months are cooler than expected, or rainfall is greater than expected, the demand for water may decrease and our revenues may be adversely affected.  We believe the effects of weather are short term and do not materially affect the execution of our strategic initiatives. Our wastewater services, contract operations, SLP Plans and other services provide a revenue stream that is not affected by changes in weather patterns.

While water sales are our primary source of revenues, we continue to seek growth opportunities to provide wastewater services in Delaware and the surrounding areas. We also continue to explore and develop relationships with developers and municipalities in order to increase revenues from contract water and wastewater operations, wastewater management services, and design, construction and engineering services. We plan to continue developing and expanding our contract operations and other services in a manner that complements our growth in water service to new customers. Our anticipated growth in these areas is subject to changes in residential and commercial construction, which may be affected by interest rates, inflation and general housing and economic market conditions.  We anticipate continued growth in our non-regulated division due to our water, sewer, and internal SLP Plans.

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COVID-19 Pandemic

As of June 30, 2022, the Company’s financial results and business operations have not been materially adversely affected by the coronavirus, or COVID-19, outbreak, which was declared a pandemic in March 2020.  However, we have experienced delays in procuring some materials and supplies.  While we have been successful in managing these delays, there is no assurance that our future financial results or business operations will not be negatively affected.  The full impact of the COVID-19 outbreak continues to evolve as of the date of this report.  Management is actively monitoring the situation and impacts on its operations, suppliers, industry, and workforce.

Inflation

We are affected by inflation, most notably by the continually increasing costs required to maintain, improve and expand our service capability.  The cumulative effect of inflation results in significantly higher facility replacement costs which must be recovered from future cash flows.  Our ability to recover increases in investments in facilities is dependent upon future rate increases, which are subject to approval by the applicable regulatory authority.  We can provide no assurances that any future rate increase request will be approved, and if approved, we cannot guarantee that any rate increase will be granted in a timely manner and/or will be sufficient in amount to cover costs for which we initially sought the rate increase.  The impact of inflation could adversely affect our results of operations, financial position or cash flows.

Materials and Supplies

We are highly dependent on the availability of essential materials and parts from our suppliers for expansion, construction and maintenance of our services.  The majority of the materials required for our water and wastewater utility business are typically under contract at fixed prices, however, supply chain issues associated with the COVID-19 pandemic resulted in price increases and delays in procuring certain materials and equipment.  We have been successful in minimizing these delays and cost increases with thorough planning and pre-ordering, however there is no assurance that our future financial results or business operations will not be negatively affected.

Water Division

Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide water service to residential, commercial, industrial, governmental, municipal and utility customers.  Increases in the number of customers contribute to increases, or help to offset any intermittent decreases, in our operating revenue.  As of June 30, 2022, the number of metered water customers in Delaware increased approximately 3.3% compared to June 30, 2021.  The number of metered water customers in Maryland increased approximately 2.0% compared to June 30, 2021.  The number of metered water customers in Pennsylvania remained consistent compared to June 30, 2021.  For the six months ended June 30, 2022, approximately 4.0 billion gallons of water were distributed in our Delaware systems and approximately 65.1 million gallons of water were distributed in our Maryland systems.

Wastewater Division

Artesian Wastewater owns wastewater collection and treatment infrastructure and began providing regulated wastewater services to customers in Delaware in July 2005.  Artesian Wastewater Maryland was incorporated on June 3, 2008 and is able to provide regulated wastewater services to customers in Maryland.  It is not currently providing these services in Maryland.  Our residential and commercial wastewater customers are billed a flat monthly fee, which contributes to providing a revenue stream unaffected by weather.  The number of Artesian’s Delaware wastewater customers more than doubled compared to June 30, 2021, following the acquisition of Tidewater Environmental Services, Inc., or TESI.  This acquisition agreement is discussed further in the “Strategic Direction” section below.

Non-Regulated Division

Artesian Utility provides contract water and wastewater operation services to private, municipal and governmental institutions.  Artesian Utility also offers three protection plans to customers, the WSLP Plan, the SSLP Plan, and the ISLP Plan.  SLP Plan customers are billed a flat monthly or quarterly rate, which contributes to providing a revenue stream unaffected by weather.  There has been consistent customer growth over the years.  As of June 30, 2022, the eligible customers enrolled in the WSLP Plan, the SSLP Plan and the ISLP Plan increased 3.4%, 1.3% and 14.6%, respectively, compared to June 30, 2021.  The non-utility customers enrolled in one of our three protections plans increased 1.8%.

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Strategic Direction

Our strategy is to increase customer growth, revenues, earnings and dividends by expanding our water, wastewater and SLP Plan services across the Delmarva Peninsula.  We remain focused on providing superior service to our customers and continuously seek ways to improve our efficiency and performance.  Our strategy has included a focus on building strategic partnerships with county governments, municipalities and developers.  By providing water and wastewater services, we believe we are positioned as the primary resource for developers and communities throughout the Delmarva Peninsula seeking to fill both needs simultaneously.  We believe we have a proven ability to acquire and integrate high growth, reputable entities, through which we have captured additional service territories that will serve as a base for future revenue.  We believe this experience presents a strong platform for further expansion and that our success to date also produces positive relationships and credibility with regulators, municipalities, developers and customers in both existing and prospective service areas.

In our regulated water division, our strategy is to focus on a wide spectrum of activities, which include strategic acquisitions of existing systems, expanding certificated service area, identifying new and dependable sources of supply, developing the wells, treatment plants and delivery systems to supply water to customers and educating customers on the wise use of water.  Our strategy includes focused efforts to expand through strategic acquisitions and in new regions added to our Delaware service territory over the last 10 years.  We plan to expand our regulated water service area in the Cecil County designated growth corridor and to expand our business through the design, construction, operation, management and acquisition of additional water systems.  The expansion of our exclusive franchise areas elsewhere in Maryland and the award of contracts will similarly enhance our operations within the state.

Our ability to develop partnerships with various county governments, municipalities and developers has provided a number of opportunities.  In the last four years, we completed seven acquisitions including asset purchase agreements with municipal and developer/homeowner association operated systems.

We believe that Delaware's generally lower cost of living in the region, availability of development sites in relatively close proximity to the Atlantic Ocean in Sussex County, and attractive financing rates for construction and mortgages have resulted, and will continue to result, in increases to our customer base.  Delaware’s lower property and income tax rate make it an attractive region for new home development and retirement communities.  Substantial portions of Delaware currently are not served by a public water system, which could also assist in an increase to our customer base as systems are added.

On May 26, 2022, Artesian Water completed its purchase of substantially all of the water operating assets from the Town of Clayton, or Clayton, a Delaware municipality located in Kent County, Delaware, including Clayton’s exclusive franchise territory and the right to provide water service to Clayton’s existing customers, or the Clayton Water System.  The total purchase price was $5.0 million, less the current payoff amount of secured debt or debt associated with the Clayton Water System.  This transfer of Clayton’s exclusive franchise territory was approved by the DEPSC on April 20, 2022.

In our regulated wastewater division, we foresee significant growth opportunities and will continue to seek strategic partnerships and relationships with developers and governmental agencies to complement existing agreements for the provision of wastewater service on the Delmarva Peninsula. There are numerous locations in Sussex County where Artesian Wastewater’s and Sussex County’s facilities are connected or integrated to allow for the movement and disposal of wastewater generated by one or the other’s system in a manner that most efficiently and cost effectively manages wastewater transmission, treatment and disposal.  In addition, Artesian Wastewater plans to utilize our larger regional wastewater facilities to expand service areas to new customers while transitioning our smaller treatment facilities into regional pump stations in order to gain additional efficiencies in the treatment and disposal of wastewater. We believe this will reduce operational costs at the smaller treatment facilities in the future because they will be converted from treatment and disposal plants to pump stations to assist with transitioning the flow of wastewater from one regional facility to another.  In addition, since closing the transaction with TESI noted below, Artesian’s Delaware wastewater subsidiaries are the sole regional regulated wastewater utilities in Delaware, which we believe will enable us to increase efficiencies in the treatment and disposal of wastewater and provide additional opportunities to expand our wastewater operations.

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On January 14, 2022, Artesian Wastewater acquired TESI, a wholly-owned subsidiary of Middlesex Water Company, or Middlesex, that provides regulated wastewater services in Delaware.  Artesian Wastewater purchased all of the stock of TESI from Middlesex for $6.4 million in cash and other consideration, including, forgiveness of a $2.1 million note due from Middlesex.  This acquisition more than doubled the number of wastewater customers served by Artesian in Sussex County, Delaware and included all residents in the Town of Milton.

Artesian Wastewater began operating its Sussex Regional Recharge Facility in late June 2021, shortly after our large industrial customer received its process wastewater treatment operating permit.  The associated customer agreement includes a required minimum wastewater flow.  Pursuant to a settlement agreement, for the calendar year 2021 only, the minimum required volume of wastewater was prorated on a seven-month basis beginning June 1, 2021 and ending December 31, 2021.

The general need for increased capital investment in our water and wastewater systems is due to a combination of population growth, more protective water quality standards, aging infrastructure and acquisitions.  Our planned and budgeted capital improvements over the next three years include projects for water infrastructure improvements and expansion in both Delaware and Maryland and wastewater infrastructure improvements and expansion in Delaware.  The DEPSC and MDPSC have generally recognized the operating and capital costs associated with these improvements in setting water and wastewater rates for current customers and capacity charges for new customers.

In our non-regulated division, we continue pursuing opportunities to expand our contract operations.  Through Artesian Utility, we will seek to expand our contract design, engineering and construction services of water and wastewater facilities for developers, municipalities and other utilities.  We also anticipate continued growth due to our water, sewer and internal SLP Plans.  Artesian Development owns two nine-acre parcels of land, located in Sussex County, Delaware, which will allow for construction of a water treatment facility and wastewater treatment facility.  Artesian Storm Water was formed to expand contract work related to the design, installation, maintenance and repair services associated with existing or proposed storm water management systems in Delaware and the surrounding areas.

Results of Operations – Analysis of the Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021.

Operating Revenues

Revenues totaled $25.0 million for the three months ended June 30, 2022, $2.5 million, or 11.3%, more than revenues for the three months ended June 30, 2021.  Other utility operating revenue increased approximately $1.9 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021.  This increase is primarily due to an increase in wastewater revenue associated with industrial wastewater services that started in June 2021, residential customer growth resulting from the acquisition of TESI in January 2022 and organic residential customer growth.

Non-utility operating revenue increased approximately $1.0 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021.  This increase is primarily due to an increase in contract service revenue related to a contract for the design and construction of wastewater infrastructure and an increase in Service Line Protection Plan revenue.

Water sales revenue decreased $0.4 million, or 1.8%, for the three months ended June 30, 2022 from the corresponding period in 2021, primarily due to a decrease in overall water consumption, partially offset by an increase in fixed fee revenue related to added customers.  We realized 78.9% and 89.4% of our total operating revenue for the three months ended June 30, 2022 and June 30, 2021, respectively, from the sale of water.

Operating Expenses

Operating expenses, excluding depreciation and income taxes, increased $1.5 million, or 12.8%, for the three months ended June 30, 2022, compared to the same period in 2021.  Non-utility operating expenses increased $1.0 million, utility operating expenses increased $0.4 million and property and other taxes increased $0.1 million.

Non-utility operating expenses increased $1.0 million primarily due to an increase in costs associated with the wastewater infrastructure design and construction contract and an increase in plumbing services related to Service Line Protection Plan repairs.

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Utility operating expenses increased $0.4 million, or 4.2%, for the three months ended June 30, 2022 compared to the three months ended June 30, 2021.  The net increase is primarily related to the following.

Repair and maintenance costs increased $0.4 million, primarily related to an increase in tank painting costs under contract, an increase in water and wastewater treatment costs, an increase in overall maintenance costs associated with the TESI acquisition and an increase in fuel costs.

Administrative costs increased $0.3 million, primarily due to an adjustment made in June 2021 to reduce the additional bad debt reserve from 2020 associated with the COVID-19 pandemic.

Payroll and employee benefit costs increased $0.2 million, primarily related to an increase in overall compensation.

Purchased power costs increased $0.1 million, primarily due to an increase in usage related to the additional operational costs associated with the TESI acquisition and upgraded wastewater treatment facilities, in addition to an increase in overall water operations.

Purchased water costs decreased $0.6 million, related to a decrease of water purchased under a new contract, effective January 2022, in which the minimum amount of water required to be purchased was reduced.

Property and other taxes increased $0.1 million, or 5.4%, primarily due to an increase in payroll taxes, related to increased payroll related expenses.  In addition, utility plant subject to taxation increased.  Property taxes are assessed on land, buildings and certain utility plant, which include the footage and size of pipe, hydrants and wells.

The ratio of operating expense, excluding depreciation and income taxes, to total revenue was 53.5% for the three months ended June 30, 2022, compared to 52.8% for the three months ended June 30, 2021.

Depreciation and amortization expense increased $0.1 million, or 2.7%, primarily due to continued investment in utility plant providing supply, treatment, storage and distribution of water to customers and service to our wastewater customers.

Federal and state income tax expense increased $0.2 million, or 11.9%, primarily due to higher pre-tax income in 2022 compared to 2021.

Interest Charges

Long-term debt interest increased $0.2 million, primarily related to an increase in long-term debt interest associated with the Series W First Mortgage Bond issued on April 29, 2022.

Net Income

Our net income applicable to common stock increased $0.5 million, or 12.0%.  Total operating revenues increased $2.5 million, mostly offset by a $1.9 million increase in total operating expenses and $0.2 million increase in interest charges.

Results of Operations – Analysis of the Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021.

Operating Revenues

Revenues totaled $47.2 million for the six months ended June 30, 2022, $4.1 million, or 9.5%, more than revenues for the six months ended June 30, 2021. Other utility operating revenue increased approximately $3.0 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.  This increase is primarily due to an increase in wastewater revenue associated with residential customer growth resulting from the acquisition of TESI in January 2022, industrial wastewater services that started in June 2021, as well as organic residential customer growth.

Non-utility operating revenue increased approximately $1.1 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.  This increase is primarily due to an increase in contract service revenue related to a contract for the design and construction of wastewater infrastructure and an increase in Service Line Protection Plan revenue.

Water sales revenue remained consistent for the six months ended June 30, 2022 from the corresponding period in 2021.  Overall water consumption decreased, partially offset by an increase in fixed fee revenue related to added customers.  We realized 80.2% and 87.9% of our total operating revenue for the six months ended June 30, 2022 and June 30, 2021, respectively, from the sale of water.

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Operating Expenses

Operating expenses, excluding depreciation and income taxes, increased $2.6 million, or 11.1%, for the six months ended June 30, 2022, compared to the same period in 2021.  Utility operating expenses increased $1.4 million, non-utility expenses increased $1.1 million and property and other taxes increased $0.1 million.

Utility operating expenses increased $1.4 million, or 7.3%, for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.  The net increase is primarily related to the following.

Repair and maintenance costs increased $1.0 million, related to an increase in maintenance costs primarily associated with water treatment facilities and equipment, including an increase in water treatment filter replacements, an increase in tank painting costs under contract, an increase in wastewater treatment costs and an increase in fuel costs.  In addition, overall maintenance costs increased related to the TESI acquisition.

Administrative costs increased $0.5 million, primarily due to an adjustment made in June 2021 to reduce the additional bad debt reserve from 2020 associated with the COVID-19 pandemic.  In addition, outside contract services for wastewater treatment associated with the TESI acquisition increased.

Payroll and employee benefit costs increased $0.5 million, primarily related to an increase in overall compensation.

Purchased power costs increased $0.2 million, primarily due to an increase in usage related to the additional operational costs associated with the TESI acquisition and upgraded wastewater treatment facilities, in addition to an increase in overall water operations.

Purchased water costs decreased $0.8 million, related to a decrease of water purchased under a new contract, effective January 2022, in which the minimum amount of water required to be purchased was reduced.

Non-utility operating expenses increased $1.1 million primarily due to an increase in costs associated with the wastewater infrastructure design and construction contract and an increase in plumbing services related to Service Line Protection Plan repairs.

Property and other taxes increased $0.1 million, or 5.5%, primarily due to an increase in payroll taxes, related to increased payroll related expenses.  In addition, utility plant subject to taxation increased.  Property taxes are assessed on land, buildings and certain utility plant, which include the footage and size of pipe, hydrants and wells.

The ratio of operating expense, excluding depreciation and income taxes, to total revenue was 55.8% for the six months ended June 30, 2022, compared to 55.0% for the six months ended June 30, 2021.

Depreciation and amortization expense increased $0.1 million, or 2.5%, primarily due to continued investment in utility plant providing supply, treatment, storage and distribution of water to customers and service to our wastewater customers.

Federal and state income tax expense increased $0.3 million, or 8.7%, primarily due to higher pre-tax income in 2022 compared to 2021.

Interest Charges

Long-term debt interest increased $0.2 million, primarily related to an increase in long-term debt interest associated with the Series W First Mortgage Bond issued on April 29, 2022.

Net Income

Our net income applicable to common stock increased $0.8 million, or 9.4%.  Total operating revenues increased $4.1 million, mostly offset by a $3.1 million increase in total operating expenses and $0.2 million increase in interest charges.

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LIQUIDITY AND CAPITAL RESOURCES

Overview

Our primary sources of liquidity for the six months ended June 30, 2022 were $13.6 million of cash provided by operating activities, $30.0 million principal amount from a new First Mortgage Series Bond issued in April 2022, $8.0 million in net contributions and advances from developers, and $0.9 million in net proceeds from the issuance of common stock.  Cash flow from operating activities is primarily provided by our utility operations, and is impacted by the timeliness and adequacy of rate increases and changes in water consumption as a result of year-to-year variations in weather conditions, particularly during the summer.  A significant part of our ability to maintain and meet our financial objectives is to ensure that our investments in utility plant and equipment are recovered in the rates charged to customers.  As such, from time to time, we file rate increase requests to recover increases in operating expenses and investments in utility plant and equipment.  We will continue to borrow on available lines of credit in order to satisfy current liquidity needs.  In addition, the Company has a long history of paying regular quarterly dividends as approved by our Board of Directors using net cash from operating activities.

Investment in Plant and Systems

The primary focus of our investments is to continue to provide high quality reliable service to our growing service territory.  Capital expenditures during the first six months of 2022 were $29.6 million compared to $19.4 million during the same period in 2021.  During the first six months of 2022, we continue to focus our investment through our rehabilitation program for transmission and distribution facilities by replacing aging or deteriorating mains, installation of new main, enhancing or improving existing treatment facilities and replacing aging wells and pumping equipment to better serve our customers.  In May 2022, we completed the purchase of substantially all of the water operating assets from the Town of Clayton.  We also continue to invest in wastewater projects, including the acquisition of TESI in January 2022.  Developers contributed $3.0 million of the total investment during the first six months of 2022.

We depend on the availability of capital for expansion, construction and maintenance.  We have several sources of liquidity to finance our investment in utility plant and other fixed assets.  We estimate that future investments will be financed by our operations and external sources, including short-term borrowings under our revolving credit agreements discussed below. We expect to fund our activities for the next twelve months using our available cash balances, bank credit lines, projected cash generated from operations, state revolving fund loans and capital market financing.  We believe that internally generated funds along with existing credit facilities will be adequate to provide sufficient working capital to maintain normal operations and to meet our financing requirements.  However, because part of our business strategy is to expand through strategic acquisitions, we may seek additional debt financing or issue additional equity securities to finance future acquisitions or for other purposes.  There is no assurance that we will be able to secure funding on terms acceptable to us, or at all.  Our cash flows from operations are primarily derived from water sales revenues and may be materially affected by changes in water sales due to weather and the timing and extent of increases in rates approved by state public service commissions.

Lines of Credit and Long-Term Debt

At June 30, 2022, Artesian Resources had a $40 million line of credit with Citizens Bank, or Citizens, which is available to all subsidiaries of Artesian Resources.  As of June 30, 2022, there was $34.0 million of available funds under this line of credit.  The previous interest rate for borrowings under this line was the London Interbank Offered Rate, or LIBOR, plus 1.00%.  It is expected that the LIBOR rate for USD currency will be discontinued after June 30, 2023.  As a result effective May 20, 2022, this line of credit agreement was amended to replace LIBOR with the Daily Secured Overnight Financing Rate, or SOFR.  The interest rate is a one month SOFR plus 10 basis points, or Term SOFR, plus an applicable margin of 0.85%.  Term SOFR cannot be less than 0.00%.  This is a demand line of credit and therefore the financial institution may demand payment for any outstanding amounts at any time.  The term of this line of credit expires on the earlier of May 21, 2023 or any date on which Citizens demands payment. The Company expects to renew this line of credit.

At June 30, 2022, Artesian Water had a $20 million line of credit with CoBank, ACB, or CoBank, that allows for the financing of operations for Artesian Water, with up to $10 million of this line available for the operations of Artesian Water Maryland.  As of June 30, 2022, there was $16.4 million of available funds under this line of credit.  The interest rate for borrowings under this line allows the Company to select either LIBOR plus 1.50% or a weekly variable rate established by CoBank; the Company has historically used the weekly variable interest rate.  The term of this line of credit expires on October 30, 2022. Artesian Water expects to renew this line of credit.

The Company’s material cash requirements include the following lines of credit commitments and contractual obligations:

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Material Cash Requirements	Payments Due by Period
In thousands	Less than 1 Year		1-3 Years		4-5 Years		After 5 Years		Total
First mortgage bonds (principal and interest)	$	7,924	$	15,773	$	15,569	$	240,933	$	280,289
State revolving fund loans (principal and interest)		820		1,483		1,116		4,057		7,476
Promissory note (principal and interest)		961		1,921		1,924		11,094		15,900
Asset purchase contractual obligation (principal and interest)		345		672		647		---		1,664
Lines of credit		9,580		---		---		---		9,580
Operating leases		24		48		49		1,330		1,451
Operating agreements		59		78		83		804		1,024
Unconditional purchase obligations		774		1,525		1,103		---		3,402
Tank painting contractual obligation		392		392		---		---		784
Total contractual cash obligations	$	20,879	$	21,892	$	20,581	$	258,218	$	321,570

Artesian’s long-term debt agreements and revolving lines of credit contain customary affirmative and negative covenants that are binding on us (which are in some cases subject to certain exceptions), including, but not limited to, restrictions on our ability to make certain loans and investments, guarantee certain obligations, enter into, or undertake, certain mergers, consolidations or acquisitions, transfer certain assets or change our business.  As of June 30, 2022, we were in compliance with these covenants.

Long-term debt obligations reflect the maturities of certain series of our first mortgage bonds, which we intend to refinance when due if not refinanced earlier.  One first mortgage bond is subject to redemption in a principal amount equal to $150,000 plus interest per calendar quarter.  The state revolving fund loan obligation and promissory note obligation have an amortizing mortgage payment payable over a 20-year period.  The first mortgage bonds, the state revolving fund loan and the promissory note have certain financial covenant provisions, the violation of which could result in default and require the obligation to be immediately repaid, including all interest.  We have not experienced conditions that would result in our default under these agreements.

On April 29, 2022, Artesian Water and CoBank entered into a Bond Purchase Agreement, or the Agreement, relating to the issue and sale by Artesian Water to CoBank of a $30 million principal amount First Mortgage Bond, Series W, or the Bond, due April 30, 2047, or the Maturity Date.  The Bond was issued pursuant to Artesian Water’s Indenture of Mortgage dated as of July 1, 1961, as amended and supplemented by supplemental indentures, including the Twenty-Fifth Supplemental Indenture dated as of April 29, 2022, or the Supplemental Indenture, from Artesian Water to Wilmington Trust Company, as Trustee.  The Supplemental Indenture is a first mortgage lien against substantially all of Artesian Water’s utility plant.  The proceeds from the sale of the Bond were used to pay down outstanding lines of credit of the Company and a loan payable to Artesian Resources, with any additional proceeds used to fund capital investments in Artesian Water.  The Delaware Public Service Commission approved the issuance of the Bond on April 20, 2022.  The Bond carries an annual interest rate of 4.43% through but excluding the Maturity Date.  Interest is payable on June 30th, September 30th, December 30th and March 30th in each year and on the Maturity Date, beginning June 30, 2022, until Artesian Water’s obligation with respect to the payment of principal, premium (if any) and interest shall be discharged.  Overdue payments shall bear interest as provided in the Supplemental Indenture. The term of the Bond also includes certain limitations on Artesian Water’s indebtedness.

On May 26, 2022, Artesian Water completed its purchase of substantially all of the water operating assets from the Town of Clayton, or Clayton.  The total purchase price was $5.0 million, less the current payoff amount of secured debt or debt associated with the water operating assets.  At closing, Artesian Water paid approximately $3.4 million of the total purchase price.  The remaining $1.6 million is payable in five equal annual installments on the anniversary date of the closing date.  Each annual installment is payable with interest an annual rate of 2.0%.

In order to control purchased power cost, in August 2018 Artesian Water entered into an electric supply contract with MidAmerican effective from September 2018 through May 2022.  In February 2021, Artesian Water entered into a new electric supply contract with MidAmerican that is effective from May 2021 to May 2025.  The fixed rate was lowered 5.6% starting in May 2021.  In August 2018, Artesian Water Maryland entered into an electric supply agreement with Constellation NewEnergy, Inc., effective from May 2019 through May 2022.  In February 2022, Artesian Water Maryland entered into an electric supply agreement with Constellation NewEnergy, Inc., effective from May 2022 through November 2025.  In January 2022, following the acquisition of Tidewater Environmental Services, Inc., TESI dba Artesian Wastewater assumed an electricity supply contract with WGL Energy that is effective through December 2024.

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Payments for unconditional purchase obligations reflect minimum water purchase obligations based on rates that are subject to change under two interconnection agreements with the Chester Water Authority.  One agreement, that expired on December 31, 2021, had a “take or pay” clause requiring us to purchase 3 million gallons per day.  The other agreement is effective from January 1, 2022 through December 31, 2026, includes automatic five year renewal terms, unless terminated by either party, and has a “take or pay” clause which required us to purchase water on a step down schedule through July 5, 2022, and now requires us to purchase a minimum of 0.5 million gallons per day.  In addition, payments for unconditional purchase obligations reflect minimum water purchase obligations based on a contract rate under our interconnection agreement with the Town of North East, which expires June 26, 2024.

In April 2021, Artesian Water entered into a 3-year agreement with Worldwide Industries Corporation effective July 1, 2021 to paint elevated water storage tanks.  Pursuant to the agreement, the total expenditure for the three years is $1.2 million.

Critical Accounting Assumptions, Estimates and Policies; Recent Accounting Pronouncements

This discussion and analysis of our financial condition and results of operations is based on the accounting policies used and disclosed in our 2021 consolidated financial statements and accompanying notes that were prepared in accordance with accounting principles generally accepted in the United States of America and included as part of our annual report on Form 10-K for the year ended December 31, 2021.  The preparation of those financial statements required management to make assumptions and estimates that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements as well as the reported amounts of revenues and expenses during the reporting periods.  Actual amounts or results could differ from those based on such assumptions and estimates.

Our critical accounting assumptions, estimates and policies are described in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the year ended December 31, 2021.  There have been no changes in our critical accounting assumptions, estimates and policies.  Our significant accounting policies are described in our notes to the 2021 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2021.

Information concerning our implementation and the impact of recent accounting pronouncements issued by the FASB is included in the notes to our 2021 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2021 and also in the notes to our unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q.  We did not adopt any accounting policy in the first six months of 2022 that had a material impact on our financial condition, liquidity or results of operations.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to the risk of fluctuating interest rates in the normal course of business.  Our policy is to manage interest rates through the use of fixed rate long-term debt and, to a lesser extent, short-term debt.  The Company's exposure to interest rate risk related to existing fixed rate, long-term debt is due to the term of the majority of our First Mortgage Bonds and the term of the promissory note, which have final maturity dates ranging from 2028 to 2049, and interest rates ranging from 4.24% to 5.96%, which exposes the Company to interest rate risk as interest rates may drop below the existing fixed rate of the long-term debt prior to such debt’s maturity.  In addition, the Company has interest rate exposure on $60 million of variable rate lines of credit, with two banks, under which the interim bank loans payable at June 30, 2022 were approximately $9.6 million.  An increase in the variable interest rates will result in an increase in the cost of borrowing on these variable rate lines of credit.  Also, changes in SOFR could affect our operating results and liquidity.  We are also exposed to market risk associated with changes in commodity prices.  Our risks associated with price increases in chemicals, electricity and other commodities are mitigated by our ability to recover our costs through rate increases to our customers.  We have also sought to mitigate future significant electric price increases by signing multi-year supply contracts at fixed prices.

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ITEM 4 – CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report.  Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective in providing reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.  In addition, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective to achieve the foregoing objectives. A control system cannot provide absolute assurance, however, that the objectives of the control system are met and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

(b) Change in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

Periodically, we are involved in other proceedings or litigation arising in the ordinary course of business.  We do not believe that the ultimate resolution of these matters will materially affect our business, financial position or results of operations.  However, we cannot ensure that we will prevail in any litigation and, regardless of the outcome, may incur significant litigation expense and may have significant diversion of management attention.

On July 19, 2022, final judgment was entered by the United States District Court, or Court, for a Consent Decree between the Delaware Sand and Gravel Remedial Trust, or Trust, and the United States Environmental Protection Agency, or USEPA, that governs the implementation of Amendment No 2 to the USEPA’s 1988 Record of Decision for the Delaware Sand & Gravel Landfill Superfund Site, or Site, located in New Castle County, Delaware, issued on December 12, 2017, or ROD Amendment No. 2, confirming, among other things, the terms and conditions set forth in a Settlement Agreement upon which The Chemours Company FC, LLC, Hercules, LLC, Waste Management of Delaware, Inc., SC Holdings, Inc., Cytec Industries, Inc., Zeneca Inc., and Bayer CropScience Inc., collectively the Percentage Settlors, and the Trust, on one hand, and Artesian Water, on the other hand, have agreed to resolve certain of Artesian Water’s claims and issues relating to releases of contaminants from the Site.

ROD Amendment No. 2 sets forth the remedy for the contamination existing at and emanating from the Site, or the Remedy, to address a release of contaminants of concern and of emerging concern, or COC’s, from the Site into groundwater.  Artesian Water has found in groundwater that Artesian Water uses for public potable water supply certain COC’s that the Remedy is designed to address, as a result of which Artesian has incurred, and potentially will incur additional, capital and operating costs to treat the groundwater to meet applicable drinking water standards.  The Remedy includes requirements that are directly linked to Artesian’s continued operation of the treatment plant associated with groundwater around the Site.

As set forth in the Settlement Agreement, Artesian Water shall have access to financial assurances that the Percentage Settlors have provided, or will provide, to the USEPA in connection with the Consent Decree governing the implementation of the Remedy.  In addition, the Trust shall reimburse Artesian Water for past capital and operating costs, totaling approximately $10.0 million, with approximately $2.5 million due by August 18, 2022, within 30 days after the Court’s July 19, 2022 approval of the Consent Decree.  The remaining $7.5 million will be payable in three equal installments annually on the anniversary date of the Court’s approval of the Consent Decree.  In addition, the Trust shall reimburse Artesian Water for documented reasonable and necessary capital and operating costs after July 1, 2021 that Artesian Water incurs to treat Site-related COC’s. Any reimbursements Artesian Water receives from the Trust shall be subject to final determination by the DEPSC as to the appropriate regulatory rate-making treatment. The Trust’s reimbursement of such costs shall end if and when, based upon testing information from the Trust’s Remedy facilities and Artesian Water’s facilities, treatment of Site-related COC’s is no longer necessary for Artesian Water to meet the treatment levels that Artesian Water chooses to not exceed in water it distributes to the general public throughout its service territory to provide a margin of safety in complying with applicable drinking water standards.

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ITEM 1A – RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021, which could materially affect our business, financial condition or future results. There have been no material changes to the risk factors described in such Annual Report on Form 10-K.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 – MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 – OTHER INFORMATION

None.

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ITEM 6 - EXHIBITS

Exhibit No.	Description
4.1	Twenty-Fifth Supplemental Indenture dated as of April 29, 2022, between Artesian Water Company, Inc. and Wilmington Trust Company, as trustee.
4.2	Bond Purchase Agreement, dated April 29, 2022, by and between Artesian Water Company, Inc., and CoBank, ACB.
10.1	Amendment to Asset Purchase Agreement, dated May 11, 2022, by and among Artesian Water Company, Inc. a Delaware corporation, and the Town of Clayton, a Delaware municipality.*
10.2	Settlement Agreement upon which The Chemours Company FC, LLC, Hercules, LLC, Waste Management of Delaware, Inc., SC Holdings, Inc., Cytec Industries, Inc., Zeneca Inc., and Bayer CropScience Inc., collectively the Percentage Settlors, and the Delaware Sand and Gravel Remedial Trust, on one hand, and Artesian Water Company, Inc., on the other hand, have agreed to resolve certain of Artesian Water’s claims and issues relating to releases of contaminants from the Delaware Sand & Gravel Landfill Superfund Site.*
31.1	Certification of Chief Executive Officer of the Registrant required by Rule 13a–14(a) under the Securities Exchange Act of 1934, as amended.*
31.2	Certification of Chief Financial Officer of the Registrant required by Rule 13a–14(a) under the Securities Exchange Act of 1934, as amended.*
32	Certification of Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350).**
101.BAL	Inline XBRL Condensed Consolidated Balance Sheets (unaudited)*
101.OPS	Inline XBRL Condensed Consolidated Statements of Operations (unaudited)*
101.CSH	Inline XBRL Condensed Consolidated Statements of Cash Flows (unaudited)*
101.NTS	Inline XBRL Notes to the Condensed Consolidated Financial Statements (unaudited)*
104	The cover page from Artesian Resources Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, formatted in Inline XBRL (contained in exhibit 101).*

*   Filed herewith

** Furnished herewith

33

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ARTESIAN RESOURCES CORPORATION

Date: August 5, 2022	By:	/s/ DIAN C. TAYLOR
		Dian C. Taylor (Principal Executive Officer)

Date: August 5, 2022	By:	/s/ DAVID B. SPACHT
		David B. Spacht (Principal Financial Officer)

*   Filed herewith

** Furnished herewith

34

EX-31.1

Exhibit 31.1
Certification of Chief Executive Officer of Artesian Resources Corporation required by Rule 13a – 14 (a) under the Securities Act of 1934, as amended
I, Dian C. Taylor, certify that:
1.	I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2022 of Artesian Resources Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)		Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)		Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  August 5, 2022			/s/ DIAN C. TAYLOR
			Dian C. Taylor
			Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2
Certification of Chief Financial Officer of Artesian Resources Corporation required by Rule 13a – 14 (a) under the Securities Act of 1934, as amended
I, David B. Spacht, certify that:
1.	I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2022 of Artesian Resources Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)		Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)		Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 5, 2022			/s/ DAVID B. SPACHT
			David B. Spacht
			Chief Financial Officer (Principal Financial Officer)

EX-32

Exhibit 32
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350
I, Dian C. Taylor, Chief Executive Officer, and David B. Spacht, Chief Financial Officer, of Artesian Resources Corporation, a Delaware corporation (the "Company"), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on our knowledge:
(1)	The Company's Quarterly Report on Form 10-Q for the period ended June 30, 2022 (the " Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78m(a) or Section 78o(d)), as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Report and results of operations of the Company for the period covered by the Report.
Date:  August 5, 2022

CHIEF EXECUTIVE OFFICER:	CHIEF FINANCIAL OFFICER:
/s/ DIAN C. TAYLOR	/s/ DAVID B. SPACHT
Dian C. Taylor	David B. Spacht
These certifications accompany the Report to which they relate, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

EX-10

FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT

THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this “Amendment”), is entered into this 15 day of May 2022, between Artesian Water Company, Inc., a Delaware corporation (“Buyer”), and the Town of Clayton, a Delaware municipality (“Seller”).

Recitals

WHEREAS,Buyer and Seller entered into that certain Asset Purchase Agreement dated as of February 16, 2022 (the “Asset Purchase Agreement”); and

WHEREAS, Buyer and Seller desire to modify certain terms and provisions of the Asset Purchase Agreement as hereinafter set forth:

NOW, THEREFORE, in consideration of the mutual promises contained in this Amendment, the sufficiency of which is hereby acknowledged by the parties, the parties hereto grant, covenant and agree to and with each other as follows:

1.Modification of Purchase Price.  Section 2.3(a) of the Asset Purchase Agreement is hereby deleted in its entirety and replaced with the following:

“(a)  Purchase Price for the Purchased Assets.  In consideration of the sale, assignment, transfer conveyance and delivery of the Purchased Assets by Seller to Buyer and in reliance on the representations, warranties, covenants and agreements made by Seller in this Agreement, Buyer shall pay Seller as set forth below:

(i) at the Closing, the sum of Three Million One Hundred Thousand and 00/100 Dollars ($3,100,000.00) (the “Cash Purchase Price”), plus the current payoff amount of any secured debt or debt associated with the water system, including the Real Property (which payoff amounts shall be paid directly to such lenders by Buyer) (the “Loan Payoff Amount”); and

(ii) In addition to the Cash Purchase Price and the Loan Payoff Amount, Buyer shall pay to Seller the difference between Five Million and 00/100 Dollars ($5,000,000.00) and the combined sum of the Cash Purchase Price and the Loan Payoff Amount, in five (5) equal annual installments (collectively, the “Annual Installments” and each, individually, an “Annual Installment”).  The first such Annual Installment shall be due and payable one (1) year after the date of Closing.  Each subsequent Annual Installment shall be due and payable one (1) year thereafter until all such Annual Installments have been paid by Buyer to Seller.  Each Annual Installment shall be payable with interest at an annual rate of two percent (2.0%) calculated from the date of Closing to the date of its payment.  Such Annual Installments shall be funded with the fees specified in Section 7.4(c).”

2.Grain Mill Station Well Site Parcel

(a)The parties agree and acknowledge that Seller does not currently have right, title and interest in Tax Parcel No. 1-04-01807-05-3500-00001 (the “Grain Mill Station Well Site Parcel”) referenced in the Asset Purchase Agreement and that such parcel of real property will not be sold, assigned, transferred, conveyed and delivered to Buyer at Closing.

(b)The parties hereby agree that any and all references to “Purchased Assets” and/or “Real Property” shall be amended to exclude the Grain Mill Station Well Site Parcel and any and all references to the Grain Mill Station Well Site Parcel are hereby deemed deleted.

(c)The parties hereby agree that Seller will take all reasonable efforts to acquire right, title and interest in the Grain Mill Station Well Site Parcel.  If and when Seller acquires such right, title and interest in the Grain Mill Station Well Site Parcel, Seller will convey such right, title and interest to Buyer.  Any and all applicable references deemed deleted per 2(b) will be reinstated as applicable upon such conveyance.

3.Meter Reading.  Section 3.2 of the Asset Purchase Agreement is hereby deleted in its entirety and replaced with the following:

“On the day before or the date of Closing, Seller shall, with the assistance of Buyer as necessary, read the meters of all Municipal Water Utility customers.  Seller shall retain all rights to accounts receivable relating to the Municipal Water Utility as of the date of Seller’s final meter reading and be responsible for the collection thereof.”

4.Miscellaneous.

(a)All capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Asset Purchase Agreement.

(b)This Amendment may not be modified, altered or amended except by a subsequent written instrument executed by all the parties hereto.  Except as expressly set forth herein, all terms and conditions set forth in the Asset Purchase Agreement remain in full force and effect.

(c)This Amendment shall inure to the benefit of and be binding upon the parties hereto, their successors and assigns for the faithful performance of the covenants and conditions contained herein.

(d)Each of the parties hereto represents and warrants that they are duly authorized to execute and deliver this Amendment.

(f)If any term, covenant or condition of this Amendment or its application to any person or circumstances shall be invalid or unenforceable, the remainder of this Amendment, or the application of such term or provision to persons or circumstances other than those to which it is held invalid or unenforceable shall not be affected, and each term shall be valid and enforceable to the fullest extent permitted by law.

(g)This Amendment will become effective upon execution by all parties.

(h)This Amendment may be executed and delivered in one or more counterparts and by facsimile or electronic means, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

[Signature page follows]

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.

BUYER:

ATTEST:ARTESIAN WATER COMPANY, INC.

A Delaware corporation

______________________By:_________________________________

Name:  Courtney Emerson      Nicholle R. Taylor

Title:     General Counsel and      President

             Acting Secretary

SELLER:

ATTEST:TOWN OF CLAYTON,

A Delaware Municipality

______________________By:_________________________________

Name:      Nickolaus Smith

Title:      Mayor

15765823

EX-102

SETTLEMENT AGREEMENT

This Settlement Agreement (“Agreement”) sets forth the terms and conditions upon which the Percentage Settlors¹ and the Trust, on the one hand, and Artesian, on the other hand, have agreed to resolve certain claims and issues relating to releases of contaminants from the Site.

RECITALS

WHEREAS, on or about December 12, 2017 the USEPA issued ROD Amendment No. 2; and

WHEREAS, ROD Amendment No. 2 sets forth the Selected Remedy as determined by the USEPA for the Site that is intended, in pertinent part, to address a release of COCs from the Site into groundwater; and

WHEREAS, Artesian has found in groundwater that Artesian uses for public potable water supply at Llangollen certain COCs that the Selected Remedy is designed to address, and therefore Artesian has incurred and potentially will incur additional capital costs, and has incurred and will continue to incur operating expenses, to treat the groundwater at Llangollen to meet Applicable Drinking Water Standards; and

WHEREAS, based upon modeling performed by the Trust, the manner in which Artesian conducts pumping at Llangollen influences the manner in which COCs migrate from the Site through groundwater; and

WHEREAS, even after the Trust implements the Selected Remedy, including installing interceptor wells near the Site, Site-related COCs will continue to reach Llangollen for some period of time, initially because some COCs will have migrated beyond the Trust’s interceptor wells.

WHEREAS, the Selected Remedy includes requirements that are directly linked to Artesian’s continued operation of Llangollen, including, among other things:

(1) The Trust’s restoration of groundwater in the “Area of Attainment” within the Upper Potomac Aquifer, which has been impacted by releases of COCs from the Site;

(2) The continued operation of Llangollen’s production wells;

(3) The continued extraction of groundwater at Llangollen with treatment by Artesian utilizing existing systems for BCEE, 1,4-dioxane and manganese;

(4) The distribution of water by Artesian to its customers that meets Applicable Drinking Water Standards, and

(5) The Trust’s implementation of a groundwater monitoring program to ensure that the remedial action is meeting the short term goal of containment.

NOW THEREFORE, in consideration of the representations, warranties, covenants and agreements of the Parties set forth herein, as well as other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

TERMS AND CONDITIONS

I.Definitions

The following terms shall have the following definitions when used in this Agreement:

A. “Applicable Drinking Water Standards” means all standards established by an applicable law, ordinance, statute, rule, regulation, or governmental agency, as amended from time to time, that apply to potable water that Artesian supplies to the public, including, without limitation, all applicable primary and secondary drinking water standards, maximum contaminant levels, health advisory levels, and action levels, including the risk- and health-based performance standards specified in Section 2.12.7 of ROD Amendment No. 2.

B. “Area of Attainment 1” means the area designated as AoA-1 (Area of Attainment for Selected Area) on the figure attached hereto as Exhibit A, which is Figure 6.1 to the USEPA-approved February 2021 Pre-Design Investigation Evaluation Report (as referenced in Section 3.7 of the Scope of Work attached to the Consent Decree).   The USEPA may adjust the contours of the Area of Attainment 1 based on information developed in the course of implementing the Selected Remedy; such adjustments shall be incorporated herein.

C. “Army Creek Only Parties” means E.I. DuPont de Nemours & Company, BP Amoco Chemical Company (now known as INEOS US Chemicals Company), and The Goodyear Tire & Rubber Company.

D. “Artesian” means Artesian Water Company, Inc.

E. “ASR” means Artesian’s permitted aquifer storage and recovery facility at Llangollen, through which Artesian is capable of storing and withdrawing a maximum of One Hundred Thirty Million (130,000,000) gallons of treated, potable water for public consumption.  Artesian’s practice prior to this Agreement has been to store treated water in the ASR during winter months, and withdraw as much as one hundred percent (100%) of the stored supply in the ASR during summer months with the timing of changing between injection and withdrawal influenced by several factors.  Artesian is permitted to bank treated water from one year to the next year if it is not drawn.

F. “BCEE” means bis(2-chloroethyl)ether.

G. “Capital Projects” means work to add to, enhance, modify or replace treatment systems to treat Site-related COCs.

H. “Claims” means claims, actions, causes of action, rights, liabilities, obligations, costs, liens, demands, agreements, promises, rights, rights to subrogation, rights to contribution and indemnification, and remedies of every kind, type, description, and nature, whether known or unknown, direct, indirect, and/or consequential, punitive, statutory, equitable, foreseen and/or unforeseen.

I. “COCs” means collectively contaminants of concern and of emerging concern, defined as anything: (1) exceeding or prohibited by Applicable Drinking Water Standards; (2) included on any USEPA Contaminant Candidate List published by USEPA pursuant to the Section 1412(b)(1) of the Safe Drinking Water Act, 42 U.S.C. Section 300g-1(b)(1); and (3) without limitation of the foregoing, as defined by any Record of Decision or Consent Decree applicable to the Site, all as amended from time to time.

J. “Compensable Capital Costs” means documented reasonable and necessary capital costs that Artesian incurs hereafter for Capital Projects to treat Site-related COCs and shall be comprised of (i) the actual cost of materials; (ii) the actual cost of installation; (iii) an allowance, equal to fifteen percent (15%) of the estimated cost of materials and installation, to cover Artesian’s costs of planning, engineering, design and obtaining permits; purchasing, ordering and expediting; freight; inspection and handling of material; storage and inventory carrying costs; contractual negotiations (including related legal charges, but excluding any legal charges related to negotiations amongst the Parties); bidding; coordination with contractors and inspection of their work; sterilization of mains and interconnections within Artesian’s system; administrative overhead; and such other costs as necessarily incurred by Artesian in the performance of its obligations hereunder; and, (iv) if ever finally determined applicable in accordance with Paragraph III.B.5.g.iv. below, state and federal taxes on the value of the Compensable Capital Costs.

K. “Compensable Operating Expenses” means documented reasonable and necessary operating expenses that Artesian incurs  from July 1, 2021, to treat Site-related COCs, such as, for example, purchasing hydrogen peroxide and UV bulbs for the UV-AOP system that treats 1,4-dioxane, replacement of activated carbon, the lawful disposal of wastes generated as a result of Artesian’s treatment of Site-related COCs that reach Llangollen, electric costs for operating systems to treat Site-related COCs, and like consumables and replacement equipment.   For the avoidance of doubt, Compensable Operating Expenses shall be of the same type and nature as incorporated into the calculation of Past Operating Costs, as set forth on Exhibit B.  Exhibit B also sets forth the procedures that Artesian will follow for replacement of activated carbon and for billing the Trust for electrical costs.  Compensable Operating Expenses shall also include operating expenses incurred by Artesian to treat COCs originating from the Western Lobe, provided that such COCs can be treated by Existing Treatment Systems.

L. “Consent Decree” means the judicial Consent Decree between the Trust and the USEPA that governs the implementation of ROD Amendment No. 2.

M.  “DNREC” means the Delaware Department of Natural Resources and Environmental Control.

N. “DRBC” means the Delaware River Basin Commission, which has exclusive jurisdiction over groundwater withdrawals from the Delaware River basin in excess of one million gallons per day, and therefore grants Artesian allocations for Llangollen from time to time.

O. “Existing Treatment Systems” shall have the meaning set forth in Paragraph III.B.1.b.

P. “Financial Assurances” means those financial assurances that the Percentage Settlors have provided, or will provide, to the USEPA in connection with the Consent Decree governing implementation of the Selected Remedy.

Q. “IRS” means the United States Internal Revenue Service.

R. “Known COCs” means BCEE, 1,4-dioxane, and manganese.

S. “Llangollen” means the Llangollen well field that Artesian owns and operates, which is situated near the Site.

T. “MGD” means million gallons per day.

U. “Option Period VI.A.” shall have the meaning set forth in Paragraph VI.A.3.

V. “Option Period VI.B.” shall have the meaning set forth in Paragraph VI.B.1

W. “Party” or “Parties” means, either individually or collectively, Artesian, the Percentage Settlors, and the Trust.

X. “Past Capital Costs” means the $8,662,410 in capital costs incurred by Artesian prior to the date of this Agreement to treat Site-related COCs, which the Trust shall reimburse as provided in Paragraph III.B.5.g.i. of this Agreement.

Y. “Past Operating Costs” means the $1,320,092 in operating costs incurred by Artesian through June 30, 2021, to treat Site-related COCs, which the Trust shall reimburse as provided in Paragraph III.B.5.g.i. of this Agreement.

Z. “Percentage Settlors” means collectively The Chemours Company FC, LLC, Hercules LLC, Waste Management of Delaware, Inc., SC Holdings, Inc., Cytec Industries, Inc., Zeneca Inc., and Bayer CropScience Inc.

AA. “PSC” means the Delaware Public Service Commission, which has exclusive jurisdiction over Artesian as a public water utility of the State of Delaware.

BB. “ROD Amendment No. 2” means Amendment No. 2 to the USEPA’s 1988 Record of Decision for the DS&G Superfund Site, issued on December 12, 2017.

CC. “Selected Remedy” means the remedy for the contamination existing at and emanating from the Site that was selected by the USEPA through ROD Amendment No. 2 and as more fully described in Section 1.4 of the ROD Amendment No. 2, attached hereto as Exhibit C, as such remedy may be modified, with EPA approval, during the design and implementation process.

DD. “Site-related COCs” means COCs emanating from the Site in groundwater, being the Known COCs and such other COCs as the USEPA may identify hereafter as emanating from the Site at levels requiring treatment to meet Applicable Drinking Water Standards or Target Treatment Levels.

EE. “Site” means the Delaware Sand & Gravel Landfill Superfund Site, encompassing approximately 27 acres, located two miles south of the City of New Castle in New Castle County, Delaware. The Site is located along Grantham Lane, east of U.S. Highway 13 (Dupont Highway) and west of Delaware Route 9 (River Road). It comprises an area of residential and light-industrial land use and is bounded to the north and northeast by the Norfolk Southern Railroad tracks and to the west by Army Creek which discharges into the Delaware River less than one mile east of the Site and depicted generally on the map attached to the Consent Decree as Appendix C. The Site includes all contaminated groundwater affected by the release of hazardous substances from the Delaware Sand and Gravel Landfill Superfund Site and from the Eastern Lobe of the Army Creek Landfill Superfund Site, but it excludes groundwater impacted solely by releases of contaminants, pollutants, or hazardous substances from the Western Lobe of the Army Creek Landfill Superfund Site.

FF. “Target Treatment Levels” means the levels that Artesian chooses to not exceed in water it distributes to the general public throughout its service territory to provide a margin of safety in complying with Applicable Drinking Water Standards.  With respect to naturally occurring substances, such as iron and manganese, Artesian’s Target Treatment Levels are one-half of applicable Maximum Contaminant Levels as set forth within the Applicable Drinking Water Standards.  With respect to man-made, non-naturally occurring COCs, Artesian strives to meet a Target Treatment Level of non-detect using approved methods by an Office of Drinking Water (“ODW”) or USEPA certified laboratory or a laboratory as mutually agreed upon by the Parties, with reporting limits below the Applicable Drinking Water Standards. Artesian balances its goal of meeting Target Treatment Levels with other factors, including technological limitations and efficient use of resources.  Artesian’s Target Treatment Levels for Llangollen, as adjusted from time to time hereafter, shall be the same Target Treatment Levels that Artesian applies at its other public water supply well and treatment facilities.

GG. “Trust” means the Delaware Sand & Gravel Remedial Trust.

HH. “USEPA” means the United States Environmental Protection Agency.

II. “Western Lobe of the Army Creek Superfund Site” or “Western Lobe” means the Western Lobe of the Army Creek Superfund Site as defined in the Consent Decree.

II.Western Lobe.  This Agreement does not apply to or affect in any way any Claims relating to waste deposited in or COCs being released from the Western Lobe, except as specifically provided in the definition of Compensable Operating Expenses.

III.Cooperation for Capture of Site-Related COCs in Groundwater

A. Guiding Principle.  The Trust shall implement the Selected Remedy as set forth in ROD Amendment No. 2, in accordance with its obligations under the Consent Decree. The Army Creek Only Parties will contribute funds to the implementation of the Selected Remedy in accordance with a separate agreement with the Trust.  The Parties recognize that implementation of the Selected Remedy requires coordination and cooperation between the Parties. All Parties shall strive to cooperate and communicate with each other in all matters relating to implementation of the Selected Remedy.  The Parties shall use their respective current and future capabilities and facilities cooperatively to allow the Trust to capture Site-related COCs that migrate from the Site through groundwater and to allow Artesian to use Llangollen as a source of potable water at its maximum permitted capacity that is consistent with the Trust’s obligation to implement the Selected Remedy.  The Parties anticipate that, over the extended period of time through which this Agreement may govern conduct between the Parties, both foreseeable and unforeseeable changes in circumstances will occur.  The Parties’ shall, consistent with the terms of this Agreement, do what is reasonably within their power to ensure the capture, extraction and treatment of Site-related COCs in groundwater in accordance with the Selected Remedy and the terms herein.  Artesian shall operate Llangollen, including its treatment systems, in a manner that targets the extraction and treatment of Site-related COCs to the extent required to meet Applicable Drinking Water Standards.  When treating groundwater to remove Site-related COCs, Artesian may go beyond Applicable Drinking Water Standards and strive to achieve Target Treatment Levels.  The Parties agree that the Trust shall, in accordance with the provisions of this Agreement, compensate Artesian for (a) Past Capital Costs; (b) Past Operating Costs; (c) Compensable Capital Costs; (d) Compensable Operating Expenses; and (e) any loss of use of Artesian facilities, including the ASR, due to Site-related COCs that reach Llangollen, subject to the terms of this Agreement.  Artesian agrees that any future costs it incurs and any future action that it takes in response to a loss of use of an Artesian facility pursuant to this Agreement and for which it seeks reimbursement from the Trust shall be cost-effective (to the greatest extent reasonably possible), and Artesian will employ the same level of due diligence and care that it would ordinarily employ in incurring costs for its normal business operations.

B. Operational Premise of the Parties’ Agreement.  Based upon modeling performed by the Trust, the Parties anticipate that their efforts as agreed upon herein, when combined with the Trust’s other Selected Remedy activities, will effectively capture and remove Site-related COCs.  Once the Trust has implemented the Selected Remedy and Artesian has remediated Site-related COCs in the Area of Attainment 1 beyond the influence of the Trust’s Selected Remedy extraction wells, the Trust shall, subject to any required USEPA approval, control migration of Site-related COCs in groundwater at the Site without reliance upon Artesian operating Llangollen in any particular manner.  The Parties understand and agree that the rate at which Artesian pumps at Llangollen will impact the ability of the Trust’s facilities (as implemented  pursuant to ROD Amendment No. 2) to capture Site-related COCs in groundwater and that Artesian’s continued pumping at Llangollen is an integral component of the Selected Remedy.  The Parties further anticipate that, in order to maintain capture of Site-related COCs in groundwater, Artesian may be required to continue to operate Llangollen in accordance with this Agreement even after all Site-related COCs in groundwater extracted from Llangollen are remediated to below the Applicable Drinking Water Standards.

1.Artesian’s Existing Llangollen Facilities And Capabilities.

a. Governmental approvals.  Artesian represents that, as of the date hereof, Artesian has governmental approvals authorizing the following at Llangollen:

DRBC allocation:  2.218 MGD for the entire Llangollen wellfield

Aggregate DNREC permits for the Llangollen wellfield: 2.218 MGD

The permitted approvals reflected above do not include supply drawn from the ASR, from which Artesian can draw another 1.44 MGD given sufficient treated water in the facility.

Artesian’s maximum permitted Llangollen pumpage capability equals 3.658 MGD, and Artesian has sufficient utility plant installed to produce that total.

b. Treatment Capabilities.  Artesian represents that, as of the date hereof, Artesian has the following treatment capabilities installed at Llangollen (the “Existing Treatment Systems”), which relate to the following Site-related COCs:

An aerator to adjust pH levels, which improves treatment results of subsequent treatment measures

Pureflow filters that remove manganese.  The manganese treatment is designed to treat 0.3 mg/l down to 0.05 mg/l

Ultra Violet Advanced Oxidation Process (UV – AOP) reactors that break down 1,4-dioxane.  The 1,4-dioxane treatment system is designed for a 2 log reduction from 30 ppm to 0.3 ppm

Granular activated carbon that filters out BCEE and quenches hydrogen peroxide from the UV – AOP process.  BCEE is treated close to non-detect, with breakthrough on the lag filter as the indicator for changing the carbon.

2.Potential Future Capital Projects.

a. Artesian shall make any changes to its Existing Treatment Systems and operations that are required to meet the Applicable Drinking Water Standards.  If Artesian determines that Capital Projects are required to treat Site-related COCs in order to meet the Target Treatment Levels for the contaminant, Artesian shall promptly notify the Trust of such determination and the Parties shall work together in good faith to develop the most appropriate and cost-effective treatment option that will enable Artesian to meet the Target Treatment Levels, which will provide Artesian a margin of safety in meeting the Applicable Drinking Water Standards.  The Trust shall reimburse Artesian for the costs of designing, installing, operating and maintaining such option as Compensable Capital Costs in accordance with the billing terms set forth in Paragraphs III.B.5.g.ii. and iii.  The Trust shall not be obligated to reimburse Artesian for any new or enhanced treatment system that Artesian designs without prior notice to the Trust, it being understood that the design and installation of new or enhanced treatment systems shall progress in a manner intended to result in the treatment systems being installed and operational prior to any COCs reaching levels that preclude use of Llangollen as a source of potable water under Applicable Drinking Water Standards.  The Trust also shall not be obligated to reimburse Artesian for any new or enhanced treatment system that is not required to address a Site-related COC.

b. From time to time, the Trust may propose to Artesian alternative treatment technologies that are more efficient and cost-effective than those systems already installed for Site-related COCs, and Artesian agrees to consider any such proposals in good faith and shall only reject such proposal if it has a reasonable basis to do so.

3.Joint Obligations Of The Parties.  The Parties shall comply with the following:

a. Designated Contacts.  Each Party shall at all times while this Agreement is in effect have a designated contact that can be reached by post, telephone and email.  The Parties’ designated contacts shall communicate as frequently and in whatever manner as is mutually acceptable, and such communications shall be in addition to the meetings required by Paragraph III.B.3.b. hereof.  The Parties may change their designated contacts from time to time by giving written notice to the other Party as provided in Paragraph IX below.  The Parties’ designees as of the date of this Agreement are:

Artesian:

Ms. Virginia Eisenbrey, Assistant Director of Operations

Artesian Water Company, Inc.

664 Churchmans Road

Newark, Delaware 19702

Telephone: (302) 453-6925

Email: veisenbrey@artesianwater.com

Trust and Percentage Settlors:

Douglas Sutton, Chairman and Project Coordinator

DS&G Remedial Trust

100 East Market Street, Suite 1

Newport, Delaware 19804

Telephone: (732) 233-1161

Email: dsutton@hgl.com

b. Recurring Meetings.  The Parties shall meet to discuss matters relating to the Selected Remedy and/or this Agreement by such methods, such as in person or remotely, and at such places, dates and times as are mutually acceptable.  The Parties may bring their consultants and other agents, and such meetings may, by agreement, include the USEPA or other third parties.  Such meetings shall initially occur on approximately a semi-annual basis, with additional meetings as requested by the Parties or required by circumstances.

c. Requests for Operational Cooperation.  The Parties shall, whenever reasonably possible, cooperate and comply with requests from the other Party with respect to operating their respective Llangollen and Selected Remedy facilities in a particular manner to further the goals of this Agreement.  As examples, if the Trust asks Artesian to pump more from a particular Llangollen well to better capture Site-related COCs, or if Artesian asks the Trust to pump more at its interceptor wells in advance of planned maintenance of Llangollen facilities, each Party shall cooperate and use good faith efforts to comply with the reasonable requests of the other Party.  Unreasonable requests include, without limitation, requests for cooperation that would result in a failure to capture Site-related COCs, prevent Artesian from using Llangollen to meet the needs of its customers, threaten the integrity of Artesian’s water treatment facilities, or require either Party to pump more water from its facilities than it is capable of pumping and/or disposing.  If a reasonable request for cooperation from the Trust causes Artesian to incur additional cost or sustain financial loss, the Trust shall compensate Artesian for such cost or loss, provided that the Trust shall not be required to compensate Artesian for speculative future losses or costs that Artesian would otherwise incur in the normal course of business.  Any cost, loss, or lost capacity for which Artesian seeks reimbursement from the Trust pursuant to this Paragraph is subject to the auditing provisions set forth in Paragraph III.B.5.g.iii.6., below.

d. Timely Communication Regarding Anticipated Non-Compliance.  If any Party becomes aware that it will not be able to comply with any of the terms of this Agreement, it shall provide specific information about the issue to the other Party within five (5) business days of that determination.

4.Artesian Obligations.  Subject to Paragraph IV (Force Majeure) hereof and the terms of this Agreement:

a. Standard of Care.  Artesian and its respective agents, servants and employees shall use sound technical, engineering and environmental principles, practices, procedures and judgment and shall apply the degree of care and skill necessary to assure that its Llangollen facilities are designed, built, operated and maintained for the purposes set forth herein in accordance with good professional practices.

b. Compliance with Applicable Laws.  Artesian shall at all times comply with all applicable laws, ordinances, statutes, rules and regulations.

c. Pumpage.  Subject to subsequent agreement of the Parties in connection with Paragraph III.B.3.c. hereof, the following shall be Artesian’s planned draws for production wells at Llangollen over rolling consecutive 90-day periods:

Well AWC-2 = 25.9 million gallons (200 gpm)

Wells AWC-6R and/or AWC-7 = 38.9 million gallons (300 gpm)

Well AWC-G3R = 64.8 million gallons (500 gpm), noting Artesian has applied to have that allocation increased to 155.5 million gallons (1200 gpm), which application shall not be opposed by the Trust.

Artesian shall comply with this provision until the USEPA determines that such pumping is no longer required to capture Site-related COCs.

d. Treating and Disposing.  Artesian shall use its treatment facilities at Llangollen to treat raw water drawn from its Llangollen wells until such treatment is no longer required in order for Artesian to achieve Target Treatment Levels for Site-related COCs.  Artesian shall arrange for the transportation and disposal in accordance with all applicable laws, ordinances, statutes, rules, regulations and requirements of any hazardous materials that result from such treatment.

e. Information sharing.  Artesian shall provide the Trust information and appropriate documentation about:

i.            Pumpage for each Llangollen well monthly; and

ii.            All pre-treatment water quality test results for Site-related COCs within 30 days of receipt; and

iii. All point of entry water quality tests for Site-related COCs within 30 days of receipt; and

iv. Planned and unplanned maintenance/outages of  Llangollen wells or treatment systems expected to last more than fourteen (14) days; and

v. Upon reasonable request from time to time, provide test results for potable water being drawn from the ASR; and

vi. New capital costs and expenses; and

vii. Orders or directives issued to Artesian by the PSC, the Delaware Office of Drinking Water, and any other pertinent regulators related to or concerning COCs in water it withdraws from Llangollen; and

viii. On-going expenses attributable to Site-related COCs; and

ix. Any other documents or information reasonably required by the Trust to meet its obligations to implement the Selected Remedy as set forth in the ROD Amendment No. 2 and the Consent Decree, with any reasonable and incremental associated costs incurred by Artesian to provide paid by the Trust.

f. Testing.  Upon reasonable request by the Trust on a case-by-case basis, agents of the Trust may, in the presence of Artesian’s representative(s), draw samples for testing from Artesian’s Llangollen facilities.

g. Access to Artesian Facilities.  Upon reasonable request by the Trust, Artesian shall provide authorized representatives of the Trust with access to inspect the Existing Treatment Systems and any systems or facilities subsequently constructed or installed at the expense of the Trust.  The Trust shall defend, indemnify and hold Artesian harmless with respect to any Claims by any person or entity relating to or arising from the access granted, except to the extent that such Claim is caused by the negligent, reckless or intentional acts or omissions of Artesian or any person or entity acting under its control or supervision.

5.Trust Obligations:  Subject to Paragraph IV (Force Majeure) hereof and the terms of the Agreement:

a. Standard of Care.  The Trust and its respective agents, servants and employees shall use sound technical, engineering and environmental principles, practices, procedures and judgment and shall apply the degree of care and skill necessary to assure that its Selected Remedy facilities are designed, built, operated and maintained for the purposes set forth herein in accordance with good professional practices.

b. Compliance with Applicable Laws.  Trust shall at all times comply with all applicable laws, ordinances, statutes, rules and regulations.

c. Implement the Selected Remedy.  The Trust shall implement the Selected Remedy as set forth in ROD Amendment No. 2 pursuant to the Consent Decree.  The Parties understand that the USEPA may, from time to time, seek to impose additional requirements on the Trust beyond what is currently set forth in ROD Amendment No. 2 and the Consent Decree.  To the extent that those additional requirements are formally incorporated into the Selected Remedy or the Consent Decree, the Trust shall be responsible for their implementation. The Parties understand and agree that this Agreement may need to be amended to accommodate any such additional requirements; provided, however, the Trust shall not have the power or authority to agree to any Selected Remedy measure that would require performance by Artesian without Artesian’s prior written consent, which shall not be unreasonably withheld. Paragraph XI.I. shall govern any such amendment.  Nothing in this Paragraph shall limit the rights of the Trust to lawfully contest actions or requirements of the USEPA under the Consent Decree or as related to the Site.

d. Information sharing.  The Trust shall monthly provide Artesian information and appropriate documentation regarding:

i.           Any information relating to insolvency, receivership, or filings for protection from creditors by any of the Percentage Settlors, or an inability of the Trust to meet its financial obligations to Artesian; and

ii.          The specifications and location for each of the interceptor wells, monitoring wells, and other Selected Remedy (as it may be amended from time to time) facilities designed or intended to capture or remediate Site-related COCs in groundwater that have been or hereafter are installed; and

iii. Pumpage at the interceptor wells; and

iv. Any planned abandonment of any monitoring wells for Artesian’s prior comment; and

v. All modeling output that the Trust delivers to the USEPA relating to the capture of Site-related COCs in groundwater; and

vi. All water quality test results from the Trust’s Selected Remedy facilities; and

vii. Planned and unplanned outages of the Trust’s Selected Remedy facilities expected to last longer than fourteen (14) days in duration.

e. Testing.  Upon reasonable request on a case-by-case basis, agents of Artesian may, in the presence of the Trust’s representative(s), draw samples for testing from the Trust’s Selected Remedy facilities.

f. Financial Assurance of Payment.  Artesian shall have access to the Financial Assurances in accordance with Paragraph XI.E.7. of this Agreement.

g. Financial Compensation.  The Trust shall pay Artesian for:

i.   Past Capital Costs and Past Operating Costs.  The Trust shall reimburse Artesian for Past Capital Costs and Past Operating Costs in accordance with the following schedule:

1. $2,165,602.50, which amounts to one quarter of Past Capital Costs, and $330,023, which amounts to one quarter of Past Operating Costs, within thirty (30) days after the Court’s approval of the Consent Decree;

2. $2,165,602.50, which amounts to one quarter of Past Capital Costs, and $330,023, which amounts to one quarter of Past Operating Costs, on or before the first annual anniversary of the Court’s approval of the Consent Decree;

3. $2,165,602.50, which amounts to one quarter of Past Capital Costs, and $330,023, which amounts to one quarter of Past Operating Costs, on or before the second annual anniversary of the Court’s approval of the Consent Decree; and

4. $2,165,602.50, which amounts to one quarter of Past Capital Costs, and $330,023, which amounts to one quarter of Past Operating Costs, on or before the third annual anniversary of the Court’s approval of the Consent Decree.

ii.   Compensable Capital Costs and Compensable Operating Expenses.  The Trust shall reimburse Artesian for Artesian’s documented Compensable Capital Costs (if any) and Compensable Operating Expenses.  The Trust’s reimbursement of such costs shall end if and when, based upon testing information from the Trust’s Selected Remedy facilities and Artesian’s Llangollen facilities, treatment of Site-related COCs at Llangollen is no longer necessary for Artesian to meet Target Treatment Levels.  This can be on a treatment train by treatment train basis; for example, if UV-AOP treatment for 1,4-dioxane is no longer necessary, but carbon is still required for BCEE, the Trust shall continue to compensate Artesian for carbon but not for hydrogen peroxide or UV bulbs.

iii. The Trust’s payment of Artesian’s documented Compensable Capital Costs and Compensable Operating Expenses is subject to the following conditions and procedures:

1. Billing.  Artesian shall bill the Trust for Compensable Capital Costs and Compensable Operating Expenses incurred after the execution of this Agreement as set forth in Paragraphs III.B.5.g.iii.2. and 3.

2. Compensable Capital Costs.  For each Capital Project that is undertaken by Artesian in accordance with Paragraph III.B.2., Artesian shall bill the Trust for those Compensable Capital Costs that have been incurred as of each of the following project milestones:

25% project completion;

50% project completion;

75% project completion; and

100% project completion.

Such Capital Projects shall be deemed complete when fully constructed and successfully placed into operation.  The Trust shall pay Artesian the undisputed Compensable Capital Costs within forty-five (45) days of receipt of each Artesian invoice.  If the Trust fails to timely pay Artesian for any undisputed Compensable Capital Costs, interest shall accrue at the rate of 1.5% per month.

3. Compensable Operating Expenses.  Artesian shall bill the Trust monthly for Compensable Operating Expenses.  The Trust shall pay to Artesian the undisputed Compensable Operating Expenses within forty-five (45) days of receipt of each Artesian invoice.  If the Trust fails to timely pay Artesian for any undisputed Compensable Operating Expenses, interest shall accrue at the rate of 1.5% per month.

4. Billing Disputes.  The Trust reserves the right to dispute any invoice for Compensable Capital Costs or Compensable Operating Expenses that the Trust believes (i) is inconsistent with the terms of this Agreement and/or the Trust’s obligations hereunder, or (ii) lacks sufficient detail or supporting documentation.  To the extent that the Trust disputes only a portion of an invoice, the undisputed portion shall remain due and owing in accordance with the above payment schedules.  Once a dispute over an invoice (or any portion thereof) is resolved, the balance determined to be due pursuant to such dispute resolution process, shall be paid within forty-five (45) days of such determination.  Interest shall accrue at a rate of 1.5% per month on any amounts not timely paid under this Paragraph.

5. Billing address.  Artesian shall send invoices relating to this Agreement by electronic mail, with copies sent by regular mail, using the following contact information:

DS&G Remedial Trust

Attn:  Susanna A. Mays, Manager of Administration

100 East Market Street, Suite 1

Newport, DE 19804

Email: susanna@trustsc.com

The Trust may from time to time hereafter notify Artesian in writing of additional or different addresses that shall be used for billing purposes.

6. Audit.  Artesian shall maintain documentation substantiating the charges reflected in all Compensable Capital Cost and Compensable Operating Expense invoices that Artesian sends to the Trust for a minimum period of three (3) years.  The Trust may at its sole expense take reasonable steps to audit Compensable Capital Costs and Compensable Operating Expenses that Artesian bills to the Trust, and Artesian shall cooperate with any such audit. To the extent that any audit reveals an overpayment to Artesian by the Trust, the Trust shall promptly notify Artesian in writing, and Artesian shall reimburse the Trust for the amount of the overpayment within thirty (30) days of such written notice.  Artesian reserves the right to dispute any assertion by the Trust that an overpayment has occurred.  To the extent that any audit reveals an underpayment by the Trust to Artesian, the Trust shall reimburse Artesian for the amount of the underpayment within thirty (30) days of completion of the audit.  Interest shall accrue at the rate of 1.5% per month on any amount of undisputed overpayment or underpayment that remains outstanding more than thirty (30) days after completion of the audit.

iv. Taxes on Trust Reimbursement of Artesian Capital Costs.  Artesian shall report any reimbursement of Compensable Capital Costs and Past Capital Costs by the Trust as a return of capital for federal and state income tax purposes.  The Parties understand that such reimbursements are not includible in federal gross income as a consequence of the amendments to Section 118 of the Internal Revenue Code made in the 2017 legislation known as the Tax Cuts and Jobs Act because payments from the Trust to Artesian are settlement payments that are not reportable as income, and thus, that there will also be no state income tax on such reimbursements as a consequence of the amendments to Section 118 as applied under state law.  Artesian shall immediately inform the Trust if the Internal Revenue Service or other taxing authority opens an audit, examination, or other investigation or review of Artesian and raises either in writing or orally that any reimbursement of Compensable Capital Costs or Past Capital Costs by the Trust should have been included in Artesian’s gross income as a result of the aforementioned amendments to Section 118.  In that event, the Trust may, at its own expense, participate in such audit, examination, or other investigation or review and advocate on behalf of Artesian to the fullest extent allowed by law that the Trust’s reimbursement should not be included in gross income pursuant to the aforementioned amendments to Section 118.  Artesian shall cooperate in any efforts by the Trust in this regard.  In the event of a final, non-appealable determination that the Trust’s reimbursement of Compensable Capital Costs and/or Past Capital Costs is includible in gross income pursuant to the aforementioned amendments to Section 118, the Trust shall within ninety (90) days of any such determination, pay to Artesian the amount of federal and/or state income taxes due as a result of such inclusion of gross income and any interest and penalties accrued to that time resulting from the non-payment of such taxes.  For the avoidance of doubt, nothing in this section shall obligate the Trust to reimburse Artesian for any taxes imposed on Artesian for the Trust’s reimbursement of Compensable Capital Costs and/or Past Capital Costs, where such taxes result from Artesian’s depreciation of the capital assets that were the subject of the Trust’s reimbursement or otherwise result in the reimbursement exceeding Artesian’s applicable adjusted tax basis.

IV.Force Majeure.

A. Artesian Force Majeure.  Artesian shall not be liable to the Trust if circumstances or events beyond its control prevent it from operating Llangollen as required by this Agreement, despite its good faith efforts to fulfill its obligations herein.  If Artesian anticipates or experiences such a force majeure event, Artesian shall promptly notify the Trust about the issue and the Parties shall maintain reasonable communication about the issue thereafter.  To the extent that a force majeure event (as it is defined in this Paragraph IV.A.) occurs, Artesian’s obligation to comply with those terms of this Agreement that have been specifically impacted by the force majeure event shall be temporarily stayed.  All other obligations of the Agreement shall remain in full force and effect.  Artesian, in cooperation with the Trust, shall thereafter exercise reasonable efforts to resolve the force majeure event.  Subject to Paragraph VI of this Agreement, if and when the force majeure event is resolved, Artesian shall resume its compliance with those obligations that were stayed as a result of the force majeure event and the Trust’s obligation to reimburse Artesian for related costs and expenses shall resume.  Force majeure shall not include normal seasonal events, normal inclement weather or the failure by Artesian to make timely application for permits or approvals.

B. Trust Force Majeure.  The Trust shall not be liable to Artesian for its obligation to make payments under this Agreement if any catastrophic event beyond the control of the Trust precludes normal banking and funds transfers (such as the emergency closing of the Federal Reserve System, termination of normal mail or expedited mail services due to national emergencies, and similar events). If the Trust anticipates or experiences such a force majeure event, the Trust shall promptly notify Artesian and the Parties shall maintain reasonable communication about the event thereafter.  To the extent that a force majeure event (as it is defined in this Paragraph IV.B.) occurs, the Trust’s payment obligations under this Agreement shall be temporarily stayed.  All other obligations of the Agreement shall remain in full force and effect.  The Trust, in cooperation with Artesian, shall thereafter exercise reasonable efforts to resolve the force majeure event.  Within forty-five (45) days of the resolution of the force majeure event, the Trust shall pay Artesian all amounts that were not timely paid to Artesian because of the force majeure event and resume compliance with its payment obligations under this Agreement.

V.Disclosure of Settlement Terms.  Given Artesian’s status as a regulated public water utility and the public nature of the Selected Remedy and any Consent Decree that may be entered with respect to the Site, the terms of this settlement shall not be confidential.  Specifically, Artesian may publicly share the terms of this Agreement with the PSC, the Delaware Office of the Public Advocate, DNREC, the DRBC, and any other applicable regulator or governmental authority.

VI.Artesian Inability to Use Llangollen as a Source of Public Potable Water:

A. If  any governmental authority with jurisdiction over Artesian’s delivery of water to the public determines that the Existing Treatment Systems and any appropriate and cost-effective treatment options selected pursuant to Paragraph III.B.2. are unable to meet the Applicable Drinking Water Standards for a Site-related COC preventing the use of Llangollen as a public water supply, Artesian shall provide the Trust with prompt written notice in accordance with Paragraph IX and the Parties shall proceed as follows:

1.Within forty-five (45) days of the Trust’s receipt of Artesian’s written notice, as set forth in Paragraph VI.A., above, the Trust shall pay Artesian the sum of $3 million.  No Party shall deem, interpret or construe this payment as an admission or evidence of the damage, if any, incurred by Artesian for the loss of Llangollen as a public water supply, including but not limited to property damage or diminution of property value.  The Parties further agree that, in any final resolution of Artesian’s claim for damages pursuant to this Section VI.A., the Trust shall be credited the full amount of the payment set forth in this Paragraph, including Artesian’s repayment of some or all of the Trust’s payment if the final resolution of the Trust’s obligation is less than $3 million.

2.The Parties shall implement the following dispute resolution  process to resolve Artesian’s claim for damages, if any, for the loss of Llangollen as a public water supply due to Site-related COCs:

a. Negotiated Resolution.  Within sixty (60) days of the Trust’s receipt of Artesian’s written notice, as set forth in Paragraph VI.A., above, Artesian shall submit to the Trust (i) a position paper setting forth in detail the damages Artesian is claiming as a result of the loss of Llangollen as a public water supply due to Site-related COCs, any corresponding compensation from the Trust that Artesian claims to be owed, and a summary of the arguments supporting that position, and (ii) the name and title of the representatives, and of any other persons who will accompany the representatives, who will represent Artesian in negotiations concerning the compensation issue.  Within sixty (60) days of receipt of Artesian’s position paper, the Trust shall submit to Artesian (i) a responsive position paper and (ii) the name and title of the representatives, and of any other persons who will accompany the representatives, who will represent the Trust in negotiations concerning the compensation issue.  Each Party shall designate a representative who is at a higher level than the person(s) with direct responsibility for administration of this Agreement.  If possible, said representative will have the authority to settle the compensation issue, but such authority shall not be required to conduct executive negotiations under this provision.  Absent further agreement of the Parties, within twenty-one (21) days after the Trust’s delivery of its position paper, the representatives of the Parties shall meet at a mutually acceptable time and place in New Castle County, Delaware and negotiate in good faith to resolve the compensation issue.  In the event that the representatives are successful in negotiating a tentative resolution but either representative does not have authority to settle the compensation issue, each representative shall convey the proposed resolution to the appropriate decision-making personnel immediately following the conclusion of negotiations, and the Parties shall thereafter have fifteen (15) calendar days to issue a formal approval of the proposed resolution in writing.  Nothing in this Paragraph shall prevent the Parties from commencing negotiations prior to the delivery of position papers.

Unless otherwise agreed by the Parties, the above-described negotiation shall end forty-five (45) days after the first meeting of representatives, unless the Parties agree to a longer or shorter time.

b. Non-Binding Mediation.  Unless otherwise agreed by the Parties, if the compensation issue is not resolved by negotiation pursuant to the procedures set forth in Paragraph VI.A.2.a., above, then the Parties shall commence non-binding mediation to resolve the issue as follows:

The Parties shall provide to JAMS or its successor (or to any other mediation service provider to which the Parties mutually agree) a written request for mediation, setting forth a summary of the issues and the relief requested, along with the position papers exchanged pursuant to Paragraph VI.A.2.a.  The Parties shall cooperate with JAMS (or the Parties’ selected mediation service provider) and with one another in selecting a single mediator from the JAMS panel of neutrals (or the Parties’ selected mediation service provider) with expertise in environmental and utility law and in scheduling the mediation proceedings.  In the event that the Parties cannot agree on a neutral mediator, each Party shall submit to JAMS (or the Parties’ selected mediation service provider) a list of its three most-preferred neutrals, and JAMS (or the Parties’ selected mediation service provider) shall thereafter use the lists to select a neutral mediator for the Parties.  The Parties agree to abide by that selection.  The Parties agree that they will thereafter participate in the mediation in good faith and that they will share the external costs of such mediation equally.  Absent further agreement of the Parties, the mediation shall occur at a time and place in New Castle County, Delaware that is mutually acceptable to the Parties and the selected mediator.

c. Litigation.  Unless the Parties mutually agree to extend the time period for mediation, if the Parties have not resolved the compensation issue within 75 days of the commencement of non-binding mediation, any Party may commence litigation concerning the damages incurred by Artesian as a result of the loss of Llangollen as a public water supply and any corresponding compensation from the Trust that Artesian may be owed.  Each Party hereby consents to the exclusive jurisdiction of the state and federal courts in New Castle County of the State of Delaware for all such litigation proceedings.  Each of the Parties irrevocably consents to the service of any process, pleading, notices or other papers by electronic mail, with copies sent by regular mail, using that Party’s contact information and address set forth herein, or by any other method provided or permitted under the laws of the State of Delaware.  Each Party hereby irrevocably submits to the jurisdiction of the aforementioned federal or state courts (and any related appellate courts) with respect to any action or proceeding arising out of or relating to Artesian’s right (or lack thereof) to compensation from the Trust for the loss of Llangollen as a public water supply due to Site-related COCs.  In addition to any damages, costs, expenses and other relief that may be granted by the court, the Party that substantially prevails shall be entitled to have its reasonable attorney and expert fees paid by the other Party.

d. The provisions of Paragraphs XI.E.4. through XI.E.7. shall apply as if incorporated within this Paragraph VI.A.2.

3.Upon the Parties reaching a final resolution through the process set forth in Paragraph VI.A.2., above, and for a period of six (6) months thereafter (the “Option Period VI.A.”), the Trust shall have an exclusive option to purchase all or any portion of the Llangollen real property, plant, equipment and supplies that the Trust determines it needs to meet its obligations under the Consent Decree.  Artesian shall cooperate with the Trust in making such determination.  The purchase price for such plant, equipment and supplies shall be based upon Artesian’s actual cost reduced by accumulated depreciation and payments for treatment plant capital costs that the Trust has previously paid Artesian.  The purchase price for real property shall be based on current market value, as determined by a mutually-acceptable independent appraisal, it being understood that the Trust shall purchase from Artesian all parcels where it takes ownership of wells, structures, and/or fixtures, unless such structures and/or fixtures can be relocated to other parcels and the Trust elects to do so.  If either Party disagrees with the value(s) assigned by the independent appraiser, such Party may invoke the Dispute Resolution process set forth in Paragraphs XI.D. and XI.E.  Transfer of ownership of Llangollen facilities from Artesian to the Trust shall be subject to approval from the Delaware Public Service Commission.

4.Regardless of whether the Trust purchases any of the Llangollen real property, plant, equipment and supplies pursuant to the previous Paragraph, the Trust shall warrant in writing to Artesian that any real property, plant, equipment and supplies at the Llangollen wellfield that the Trust does not purchase from Artesian is not required for the Trust to comply with the Consent Decree, and Artesian may, at its sole cost and expense, make such alternative use, or dispose, of such unneeded property as Artesian elects.  Regardless of which Llangollen assets are acquired by the Trust, if any, Artesian shall at the Trust’s cost take any commercially reasonable, necessary and proper steps to disconnect Llangollen from Artesian’s broader public water system.  Artesian shall take commercially reasonable steps to ensure that (i) its removal of any Llangollen plant, equipment or supplies not acquired by the Trust and (ii) its disconnecting of Llangollen from its broader public water system do not adversely impact the Llangollen real property, plant, equipment and supplies acquired by the Trust, it being understood that the Trust will need to identify, pay for the removal and disconnecting required, and to pay for and implement an alternative means of disposing of treated water at Llangollen.

5.During the time period in which the Parties are implementing the procedures set forth in Paragraphs VI.A.1. and VI.A.2., above, during the Option Period VI.A., and if the Trust exercises its option pursuant to Paragraph VI.A.3., until the transfer of all or any portion of the Llangollen real property, plant, equipment and supplies to the Trust is complete, Artesian shall continue to extract and treat water from Llangollen as required to meet the obligations of the Trust under the Consent Decree if the Trust secures a lawful means of disposing of such water, in accordance with the terms of this Agreement and if authorized by the applicable governmental authorities.  The Trust shall be responsible for the costs associated with the extraction, treatment and disposal of such treated water pursuant to the terms of this Agreement.  Artesian shall cooperate with the Trust in minimizing the cost of extracting, treating and disposing of such water.

6.If the Trust exercises its option pursuant to Paragraph VI.A.3., upon the transfer of all or any portion of the Llangollen real property, plant, equipment and supplies to the Trust, both Artesian’s operational obligations and the Trust’s obligation to reimburse Artesian for Compensable Operating Expenses under this Agreement shall terminate and be of no further force or effect.  Upon the transfer of all or any portion of the Llangollen real property, plant, equipment and supplies to the Trust pursuant to this Paragraph VI.A., the Trust can make whatever additions and modifications to its real property, plant, equipment and/or supplies as the Trust deems necessary or appropriate, and Artesian shall have no involvement in the design, installation, operation or funding of such additions and/or modifications.

B. For reasons unrelated to Site-related COCs:  Artesian shall provide the Trust with prompt written notice in accordance with Paragraph IX if it determines that it can no longer use Llangollen, in whole or in part, as a public water supply source for reasons unrelated to Site-related COCs, and the Parties shall proceed as follows:

1.The Trust shall have an exclusive option to purchase all or any portion of the Llangollen real property that Artesian has determined that it can no longer use, as well as, plant, equipment and supplies that the Trust determines it needs to meet its obligations under the Consent Decree, which option shall be exercised, if ever, within six (6) months of Artesian providing the notice to the Trust set forth in Paragraph VI.B. (the “Option Period VI.B.”).  Artesian shall cooperate with the Trust in making such determination.  The purchase price for such plant, equipment and supplies shall be based upon Artesian’s actual cost, reduced by accumulated depreciation and payments for treatment plant capital costs that the Trust has previously paid Artesian.  The purchase price for real property shall be based on current market value, as determined by a mutually-acceptable independent appraisal, it being understood that the Trust shall purchase from Artesian all parcels that Artesian has determined that it can no longer use on which are wells, structures, and/or fixtures that the Trust determines it needs to meet its obligations under the Consent Decree, unless such structures and/or fixtures can be relocated to other parcels and the Trust elects to do so.  If either Party disagrees with the value(s) assigned by the independent appraiser, such Party may invoke the Dispute Resolution process set forth in Paragraphs XI.D. and XI.E.  Transfer of ownership of Llangollen facilities from Artesian to the Trust shall be subject to approval from the Delaware Public Service Commission.

2.Regardless of whether the Trust purchases any of the Llangollen real property, plant, equipment and supplies pursuant to the previous Paragraph, the Trust shall warrant in writing to Artesian that any real property, plant, equipment and supplies at the Llangollen wellfield that the Trust does not purchase from Artesian is not required for the Trust to comply with the Consent Decree, and Artesian may, at its sole cost and expense, make such alternative use, or dispose, of such unneeded property as Artesian elects.  Regardless of which Llangollen assets are acquired by the Trust, if any, Artesian shall at its cost take any commercially reasonable, necessary and proper steps to disconnect Llangollen from Artesian’s broader public water system.  Artesian also shall take commercially reasonable steps to ensure that (i) its removal of any Llangollen plant, equipment or supplies not acquired by the Trust and (ii) its disconnecting of Llangollen from its broader public water system do not adversely impact the Llangollen real property, plant, equipment and supplies acquired by the Trust, it being understood that the Trust will need to identify, pay for and implement an alternative means of disposing of treated water at Llangollen.

3.During the Option Period VI.B., and if the Trust exercises its option pursuant to Paragraph VI.B.1., until the transfer of all or any portion of the Llangollen real property, plant, equipment and supplies to the Trust is complete, Artesian shall continue to extract and treat water from Llangollen as required to meet the obligations of the Trust under the Consent Decree, if the Trust secures a lawful means of disposing of such water and if authorized by the governmental authorities.  The Trust shall be responsible for the costs associated with the extraction, treatment and disposal of such treated water pursuant to the terms of this Agreement.  Artesian shall cooperate with the Trust in minimizing the cost of extracting, treating and disposing of such water.

4.Upon the expiration of the Option Period VI.B., and if the Trust exercises its option pursuant to Paragraph VI.B.1., upon the transfer of all or any portion of the Llangollen real property, plant, equipment and supplies to the Trust, both Artesian’s operational obligations and the Trust’s obligation to reimburse Artesian for Compensable Operating Expenses under this Agreement shall terminate and be of no further force or effect.  Upon the transfer of all or any portion of the Llangollen real property, plant, equipment and supplies to the Trust pursuant to this Paragraph VI.B., the Trust can make whatever additions and modifications to its real property, plant, equipment and/or supplies as the Trust deems necessary or appropriate, and Artesian shall have no involvement in the design, installation, operation or funding of such additions and/or modifications.

C. If any applicable governmental authority reduces Artesian’s allocation for groundwater at Llangollen, the Trust after consulting with the USEPA shall determine whether the reduced allocation will adversely impact the Trust’s ability to comply with the Consent Decree, and if it will, the Parties shall cooperate in petitioning the applicable governmental authorities, including as pertinent the USEPA, to restore Artesian’s allocation for extraction of groundwater at Llangollen to allow the Trust to meet its obligations under the Consent Decree to the greatest extent possible.

VII.Applicability of Artesian’s Public Service Commission-Approved Tariff.  Nothing in this Agreement shall act as a modification, limitation or waiver of the term in Artesian’s tariff that provides as follows:

The Company [Artesian] is not liable in damages in a civil action to any person for injury, death or loss to person or property that allegedly arise from the person’s consumption of water supplied by the Company if the water supplied by the Company complied with primary maximum contaminant levels set by the State of Delaware’s Office of Drinking Water and the United States Environmental Protection Agency.

VIII.Mutual Release; Third-Party Liability.

A. Except for the obligations expressly set forth in this Agreement, the Parties mutually release and covenant not to sue each other with regard to any and all past, present, and future Claims that concern the Site and Site-related COCs.  Subject to the ACO Parties’ execution of a separate agreement conveying to Artesian a reciprocal release and covenant not to sue, Artesian releases and covenants not to sue the Army Creek Only Parties with regard to any and all past, present and future Claims that concern the Site and Site-related COCs.  Nothing in this Paragraph shall operate as a release or covenant not to sue with respect to Claims by Artesian relating to releases of COCs other than from the Site.

B. Provided that Artesian is in material compliance with its obligations under this Agreement, the Trust and the Percentage Settlors shall defend, indemnify and hold Artesian harmless with respect to any Claims by any person or entity not a Party to this Agreement relating to the Site and Site-related COCs, including any such Claims by the Army Creek Only Parties.

C. If Artesian delivers water impacted by Site-related COCs to its customers which does not meet the Applicable Drinking Water Standards in effect at the time of delivery, then Artesian shall indemnify and hold the Trust, the Percentage Settlors and the Army Creek Only Parties harmless with respect to Claims by any person or entity not a Party to this Agreement relating to the delivery of that water.

IX.Notices.  Unless otherwise provided herein, any notice required or permitted under this Agreement shall be given in writing and addressed to the Party to be notified as indicated below, or at such other addresses as the Parties may designate from time to time by written notice to the other Parties.  Each Party shall inform the others of any change in its contact information within thirty (30) days of such change:

If to Artesian:

Artesian Water Company, Inc.

Attention: Joseph A. DiNunzio, Secretary

664 Churchmans Road

Newark, Delaware 19702

Email: JDiNunzio@artesianwater.com

With a copy to:

Artesian Water Company, Inc.

Attention:  General Counsel

664 Churchmans Road

Newark, Delaware 19702

If to the Trust:

Douglas Sutton, Chairman and Project Coordinator

DS&G Remedial Trust

100 East Market Street, Suite 1

Newport, Delaware 19804

Telephone: (732) 233-1161

Email: dsutton@hgl.com

If to the Percentage Settlors:

For Bayer CropScience Inc., Successor-in-Interest to Stauffer Chemical Company:

Charles Elmendorf, President

Stauffer Management Company LLC

1800 Concord Pike, Wilmington, DE 19850

Telephone: (302) 886-6922

Email: Charles.elmendorf@astrazeneca.com

With a copy to:

Glen R. Stuart

Morgan, Lewis & Bockius LLP

1701 Market Street

Philadelphia, PA 19103

Telephone: (215) 963-5883

Email: glen.stuart@morganlewis.com

For Cytec Industries Inc., Successor-in-Interest to American Cyanamid Company:

Jeffry H. Koenig, Chief Litigation and Employment Counsel

Cytec Industries, Inc.

5 Garret Mountain Plaza

Woodland Park, NJ 07424

Telephone: (908) 463-9484

Email: jeffry.koenig@solvay.com

With a copy to:

Richard F. Ricci

Lowenstein Sandler LLP

One Lowenstein Drive

Roseland, NJ 07068

Telephone: (973) 597-2462

Email: rricci@lowenstein.com

For Hercules LLC, f/k/a Hercules Incorporated:

General Counsel

Hercules LLC

500 Hercules Rd.

Wilmington, DE 19808

With a copy to:

Steven M. Lucks

Fishkin Lucks LLP

One Riverfront Plaza, Suite 410

Newark, NJ 07102

Telephone: (973) 679-4429

Email: slucks@fishkinlucks.com

For SC Holdings, Inc., Successor-in-Interest to SCA Services, Inc.:

David Moreira, Senior Project Manager

Waste Management of Delaware, Inc.

Northeast Atlantic

4 Liberty Lane

Hampton, NH 03842

With a copy to:

Joseph F. O’Dea, Jr.

Saul Ewing Arnstein & Lehr LLP

1500 Market Street, 38^th Floor

Philadelphia, PA 19102-2186

Telephone: (215) 972-7109

Email: Joseph.odea@saul.com

For The Chemours Company FC, LLC:

Todd A. Coomes, Associate General Counsel

Chemours Legal – 655-9

1007 Market Street

Wilmington, DE 19899

Telephone: (302) 773-1306

Email: Todd.coomes@chemours.com

Sathya Yalvigi, Principal Project Director

1007 Market Street

507-4

Wilmington, DE 19898

Telephone: (302) 773-4291

Email: Sathya.V.Yalvigi@chemours.com

For Waste Management of Delaware, Inc.:

David Moreira, Senior Project Manager

Waste Management of Delaware, Inc.

Northeast Atlantic

4 Liberty Lane

Hampton, NH 03842

With a copy to:

Joseph F. O’Dea, Jr.

Saul Ewing Arnstein & Lehr LLP

1500 Market Street, 38^th Floor

Philadelphia, PA 19102-2186

Telephone: (215) 972-7109

Email: Joseph.odea@saul.com

For Zeneca Inc., f/k/a ICI Americas, Inc.:

Kevin Durning, President

Zeneca, Inc.

1800 Concord Pike, Wilmington, DE 19850

Telephone: (302) 886-5049

Email: kevin.durning@astrazeneca.com

With a copy to:

Glen R. Stuart

Morgan, Lewis & Bockius LLP

1701 Market Street

Philadelphia, PA 19103

Telephone: (215) 963-5883

Email: glen.stuart@morganlewis.com

Brett Whittleton

AkzoNobel

535 Marriott Drive, Suite 500

Nashville, TN 37214

Telephone: (312) 613-8684

Email: brett.whittleton@akzonobel.com

Peter Drucker

AkzoNobel

535 Marriott Drive, Suite 500

Nashville, TN 37214

Telephone: (615) 582-6626

Email: peter.drucker@akzonobel.com

X.Termination.  Different aspects of this Agreement shall terminate at different times as follows:

A. Suspension of Payments to Artesian and Suspension of Cooperative Use of Llangollen.  Even after the Trust’s obligation to reimburse Artesian for Compensable Operating Expenses terminates pursuant to Paragraph III.B.5.g.ii. of this Agreement, Artesian shall continue to pump Llangollen in accordance with Paragraph III.B.4.c. above until the USEPA determines that such pumping is no longer required to capture and contain Site-related COCs.  The Parties shall continue exchanging the information required by this Agreement for so long as the Trust remains obligated under the Consent Decree to implement the Selected Remedy.  If Site-related COCs again reach Llangollen at levels that require treatment to meet Target Treatment Levels, the Trust’s operating cost payments to Artesian shall resume in accordance with the terms of this Agreement, and the standard for suspending them again shall be as set forth in Paragraph III.B.5.g.ii.

XI.Miscellaneous.

A. PSC Approval as Condition Precedent; Termination.

Notwithstanding anything to the contrary in this Agreement, Artesian receiving regulatory approval from the PSC to effectuate this Agreement shall be a condition precedent to both Parties’ obligation to perform.  If the PSC does not give Artesian approval to perform the obligations set forth in this Agreement, the Agreement shall be null, void, and of no further force and effect.

B. Successors and Assigns; Third Party Beneficiaries.

Artesian may assign its rights and obligations under this Agreement to any affiliate by common ownership or control or to any successor-in-interest by operation of law, provided the assignee agrees to be subject to all rights and obligations arising hereunder and notice is promptly given to the Trust.  The Trust shall not assign its rights or obligations hereunder without Artesian’s prior written consent, which may be withheld for any reason.  There are no intended third-party beneficiaries in connection with this Agreement other than the Army Creek Only Parties, but only as specifically referenced herein.

C. Governing Law

This Agreement and the rights of the Parties relating hereto shall be governed by and construed in accordance with the laws of the State of Delaware without consideration of choice of law principles.

D. Breach, Dispute and Cure

If either Party alleges a breach of this Agreement or if a dispute arises regarding the interpretation or enforcement of any term, provision or condition of this Agreement, the Party alleging the breach or raising the dispute shall send to the other Party a notice of such breach or dispute in accordance with Paragraph IX.  If the alleged breach or dispute is capable of cure, the Party receiving the notice may notify the other Party of its intention to cure the alleged breach or resolve the dispute within fourteen (14) days after receiving written notice of the breach or dispute.  If such Party fails to provide notice of intent to cure the breach or resolve the dispute, the Parties shall initiate the dispute resolution procedures set forth in Paragraph XI.E., below.

E. Dispute Resolution; Venue

1.Negotiated Resolution of Disputes.  Within twenty-one (21) days of the end of the cure period prescribed in Paragraph XI.D., either Party may give the other Party written notice in accordance with Paragraph IX of the unresolved alleged breach or dispute.  Within 30 days after delivery of such a notice, the receiving Party shall submit to the other in conformity with Paragraph IX a written response.  The written notice and response shall include with reasonable particularity (a) a statement of each Party's position and a summary of arguments supporting that position, and (b) the name and title of the representative who will represent that Party in negotiations concerning the breach or dispute and of any other person who will accompany the representative during negotiations.  Each Party shall designate a representative for negotiations who is at a higher level than the person(s) with direct responsibility for administration of this Agreement.  If possible, said representative will have the authority to settle the breach or dispute, but such authority shall not be required to conduct executive negotiations under this provision.  Absent further agreement of the Parties, within 30 days after delivery of the response, the representatives of both Parties shall meet at a mutually acceptable time and place in New Castle County, Delaware and negotiate in good faith to resolve the breach or dispute.  In the event that the representatives are successful in negotiating a tentative resolution but either representative does not have authority to settle the breach or dispute, each representative shall convey the proposed resolution to the appropriate decision-making personnel immediately following the conclusion of negotiations, and the Parties shall thereafter have fifteen (15) calendar days to issue a formal approval of the proposed resolution in writing.

Unless otherwise agreed by the Parties, the above-described negotiation shall end forty-five (45) days after the first meeting of representatives, unless the Parties agree to a longer or shorter time.

2.Non-Binding Mediation.  Unless otherwise agreed by the Parties, if a breach or dispute is not resolved by negotiation pursuant to the procedures set forth in Paragraph XI.E.1., above, then the Parties shall commence non-binding mediation to resolve the dispute as follows:

The Parties shall provide to JAMS or its successor (or to any other mediation service provider to which the Parties mutually agree) a written request for mediation, setting forth the subject of the breach or dispute and the relief requested.  The Parties shall cooperate with JAMS (or the Parties’ selected mediation service provider) and with one another in selecting a single mediator from the JAMS panel of neutrals (or the Parties’ selected mediation service provider) with expertise in environmental and utility law and in scheduling the mediation proceedings.  In the event that the Parties cannot agree on a neutral mediator, each Party shall submit to JAMS (or the Parties’ selected mediation service provider) a list of its three most-preferred neutrals, and JAMS (or the Parties’ selected mediation service provider) shall thereafter use the lists to select a neutral mediator for the Parties.  The Parties agree to abide by that selection.  The Parties agree that they will thereafter participate in the mediation in good faith and that they will share the costs of such mediation equally.  Absent further agreement of the Parties, the mediation shall occur at a time and place in New Castle County, Delaware that is mutually acceptable to the Parties and the selected mediator.

3.Litigation.  Unless the Parties mutually agree to extend the time period for mediation, if the Parties have not resolved the breach or dispute within 75 days of the commencement of non-binding mediation, any Party may commence litigation regarding the breach or dispute.  Each Party hereby consents to the exclusive jurisdiction of the state and federal courts in New Castle County of the State of Delaware for all such litigation proceedings.  Each of the Parties irrevocably consents to the service of any process, pleading, notices or other papers by electronic mail, with copies sent by regular mail, using that Party’s contact information and address set forth herein, or by any other method provided or permitted under the laws of the State of Delaware.  Each Party hereby irrevocably submits to the jurisdiction of the aforementioned federal or state courts (and any related appellate courts) with respect to any action or proceeding arising out of or relating to this Agreement.  In addition to any damages, costs, expenses and other relief that may be granted by the court, the Party that substantially prevails shall be entitled to have its reasonable attorney and expert fees paid by the other Party.

4.Dispute Resolution Stages.  Except by mutual agreement of the Parties, at no time prior to the expiration of the 45-day negotiation period shall the Parties initiate non-binding mediation, and at no time prior to the expiration of 75 days following the commencement of non-binding mediation shall either Party initiate litigation related to this Agreement.  However, those limitations are inapplicable if either Party fails to comply with the requirements of this Paragraph XI.  This Dispute Resolution provision is without prejudice to either Parties’ right to pursue a provisional remedy authorized by law to maintain the status quo while a breach of this Agreement or some other dispute amongst the Parties is resolved in accordance with the procedures set forth above.

5.Tolling; Admissibility.  All applicable statutes of limitation and defenses based upon the passage of time shall be tolled while the dispute resolution processes set forth in this Paragraph XI are underway and for sixty (60) days thereafter.  All offers, promises, conduct and statements, whether oral or written, made by the Parties, their agents, employees, experts and attorneys in the course of the dispute resolution processes set forth in this Paragraph XI are confidential, privileged and inadmissible for any purpose, including impeachment, in any other proceeding involving the Parties, provided that evidence that is otherwise admissible or discoverable shall not be rendered inadmissible or non-discoverable as a result of its use in the dispute resolution process.

6.Preservation of Status Quo.  Nothing in this Paragraph XI shall prevent any Party from initiating litigation for equitable relief or specific performance during the pendency of the dispute resolution process.  Such litigation shall be strictly limited to such relief as is required to preserve the status quo pending the outcome of the dispute resolution process.  Each Party hereby consents to the exclusive jurisdiction of the state and federal courts in New Castle County of the State of Delaware for such litigation proceedings.

7.Access to Financial Assurances.  If any dispute between the Parties proceeds to litigation pursuant to Paragraph XI.E.3. hereof, and such litigation results in a final non-appealable judgment against the Trust, and the Trust fails to satisfy that judgment within forty-five (45) days of entry thereof, then Artesian may request, which the Trust shall not oppose, that the EPA satisfy such judgment by accessing the Financial Assurances.

F. Waiver.  Any waiver by any Party of any right or remedy arising in connection with this Agreement shall be in writing and shall be without prejudice to the rights or remedies the Party may have arising out of any subsequent or different breach.

G. Counterparts; Electronic Signatures; Integration.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This Agreement may be executed and delivered by facsimile or other electronic means.  This Agreement represents the entire understanding between the Parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, written or oral, all of which are merged herein.

H. Severability.  If any provision of this Agreement is determined by a court of competent jurisdiction to be wholly or partially unenforceable for any reason, such provision or portion shall be reformed to the least extent possible to be enforceable under applicable law and shall be enforced to the fullest extent permitted by applicable law.  If reformation of such provision or portion of this Agreement is not possible, then such provision or portion thereof will be considered separate from the remainder of this Agreement, which will remain in full force and effect.

I. Entire Agreement.  This Agreement constitutes the entire understanding between the Parties with respect to the subject matter hereof, and supersedes all previous representations and understandings, oral or written, between the Parties.  Neither this Agreement nor any of its terms may be amended, waived or discharged orally. Any amendment of this Agreement must be in writing, signed by all Parties.  All Parties participated in the drafting of this Agreement and the interpretation of any ambiguity herein shall not be affected by a claim that a particular party drafted any provision hereof.  The Parties intend that this Agreement constitutes a contract under seal.

J. Effective Date.

1.This Agreement shall take effect upon the occurrence of the following conditions:

a. The Trust, the Percentage Settlors and the Army Creek Only Parties have signed an agreement that is consistent with the terms of Section VIII.A of this Agreement;

b. The United States District Court for the District of Delaware has entered the Consent Decree, and

c. The Trust provides Artesian with written notice that the conditions set forth in subparagraphs 1 and 2 of this section have been met, and Artesian provides the Trust with written confirmation that the Agreement is in effect.  Artesian shall provide such written confirmation within ten (10) business days of notification from the Trust that the conditions identified in subparagraphs a and b of this section have been met.

2.If the conditions set forth in subparagraphs a, b and c of this section are not met within one hundred eighty (180) days of the date by which all Parties have executed this Agreement, then the Agreement shall be null and void unless the Parties agree in writing to extend such date.

Artesian Water Company, Inc.:   By: _________________________ Date:   The Delaware Sand and Gravel Remedial Trust:   By: _________________________ Date:   Bayer CropScience Inc., Successor-in- Interest to Stauffer Chemical Company:   By: _________________________ Date:   Cytec Industries Inc., Successor-in-Interest to American Cyanamid Company:   By: _________________________ Date:   Hercules LLC, f/k/a Hercules Incorporated:   By: _________________________ Date:   SC Holdings, Inc., Successor-in-Interest to SCA Services, Inc:   By: _________________________ Date:   The Chemours Company FC, LLC:   By: _________________________ Date:   Waste Management of Delaware, Inc.:   By: _________________________ Date:   Zeneca Inc., f/k/a ICI Americas, Inc.   By: _________________________ Date:

¹ Capitalized terms used throughout this Agreement are defined in Paragraph I, below.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2022	Aug. 02, 2022
Entity Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2022
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Document Transition Report	false
Entity File Number	000-18516
Entity Registrant Name	ARTESIAN RESOURCES CORPORATION
Entity Central Index Key	0000863110
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	51-0002090
Entity Address, Address Line One	664 Churchmans Road
Entity Address, City or Town	Newark
Entity Address, State or Province	DE
Entity Address, Postal Zip Code	19702
City Area Code	302
Local Phone Number	453 – 6900
Title of 12(b) Security	Common Stock
Trading Symbol	ARTNA
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Class A Stock [Member]
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		8,557,647
Class B Stock [Member]
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		881,452

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
ASSETS
Utility plant, at original cost (less accumulated depreciation - 2022 - $172,261; 2021 - $159,385)	$ 639,513	$ 590,431
Current assets
Cash and cash equivalents	220	92
Accounts receivable (less allowance for doubtful accounts - 2022 - $466; 2021 - $429)	8,114	8,367
Income tax receivable	766	2,234
Unbilled operating revenues	2,149	1,080
Materials and supplies	2,869	1,933
Prepaid property taxes	21	2,306
Prepaid expenses and other	2,792	2,652
Total current assets	16,931	18,664
Other assets
Non-utility property (less accumulated depreciation - 2022- $956; 2021 - $919)	3,759	3,751
Other deferred assets	7,116	5,097
Operating lease right of use assets	445	451
Total other assets	11,320	9,299
Regulatory assets, net	6,314	6,321
Total Assets	674,078	624,715
Stockholders' equity
Common stock	9,459	9,414
Preferred stock	0	0
Additional paid-in capital	105,984	104,989
Retained earnings	65,459	63,607
Total stockholders' equity	180,902	178,010
Long-term debt, net of current portion	173,597	143,259
Total stockholders' equity and long term debt	354,499	321,269
Current liabilities
Lines of credit	9,580	26,703
Current portion of long-term debt	1,996	1,591
Dividends payable	2,581	0
Accounts payable	8,576	10,206
Accrued expenses	3,748	4,038
Overdraft payable	334	30
Accrued interest	896	917
Income taxes payable	792	0
Customer and other deposits	2,394	2,273
Other	2,593	1,448
Total current liabilities	33,490	47,206
Commitments and contingencies (Note 11)
Deferred credits and other liabilities
Net advances for construction	4,174	4,295
Operating lease liabilities	440	440
Regulatory liabilities	21,632	21,260
Deferred investment tax credits	447	456
Deferred income taxes	52,701	53,133
Total deferred credits and other liabilities	79,394	79,584
Net contributions in aid of construction	206,695	176,656
Total Liabilities and Stockholders' Equity	$ 674,078	$ 624,715

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
ASSETS
Utility Plant, accumulated depreciation	$ 172,261	$ 159,385
Current assets
Accounts receivable, allowance for doubtful accounts	466	429
Other assets
Non-utility Property, accumulated depreciation	$ 956	$ 919

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Operating revenues
Total Operating Revenues	$ 25,011	$ 22,469	$ 47,198	$ 43,113
Operating expenses
Utility operating expenses	10,070	9,661	20,566	19,166
Non-utility operating expenses	1,905	862	2,847	1,777
Depreciation and amortization	3,055	2,976	6,140	5,988
State and federal income taxes	1,725	1,542	3,144	2,893
Property and other taxes	1,413	1,341	2,914	2,761
Total Operating Expenses	18,168	16,382	35,611	32,585
Operating income	6,843	6,087	11,587	10,528
Other income, net
Allowance for funds used during construction (AFUDC)	324	371	505	615
Miscellaneous (expense) income	(33)	(59)	1,412	1,343
Income before interest charges	7,134	6,399	13,504	12,486
Interest charges	2,088	1,894	3,975	3,775
Net income applicable to common stock	$ 5,046	$ 4,505	$ 9,529	$ 8,711
Income per common share:
Basic (in dollars per share)	$ 0.53	$ 0.48	$ 1.01	$ 0.93
Diluted (in dollars per share)	$ 0.53	$ 0.48	$ 1.01	$ 0.93
Weighted average common shares outstanding:
Basic (in shares)	9,452	9,395	9,438	9,381
Diluted (in shares)	9,470	9,425	9,464	9,416
Cash dividends per share of common stock (in dollars per share)	$ 0.2729	$ 0.2610	$ 0.5404	$ 0.5181
Water Sales [Member]
Operating revenues
Total Operating Revenues	$ 19,722	$ 20,078	$ 37,865	$ 37,908
Other Utility Operating Revenue [Member]
Operating revenues
Total Operating Revenues	2,914	1,014	5,440	2,390
Non-Utility Operating Revenue [Member]
Operating revenues
Total Operating Revenues	$ 2,375	$ 1,377	$ 3,893	$ 2,815

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 9,529	$ 8,711
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	6,140	5,988
Deferred income taxes, net	(640)	(3,073)
Stock compensation	104	92
AFUDC, equity portion	(349)	(415)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net of allowance for doubtful accounts	204	434
Income tax receivable	1,468	559
Unbilled operating revenues	(704)	(599)
Materials and supplies	(936)	68
Prepaid property taxes	2,862	1,891
Prepaid expenses and other	(130)	(754)
Other deferred assets	511	(467)
Regulatory assets	185	(71)
Regulatory liabilities	(254)	(297)
Income taxes payable	792	2,362
Accounts payable	(4,680)	(1,071)
Accrued expenses	(934)	(124)
Accrued interest	(21)	(25)
Deposits and other	441	567
NET CASH PROVIDED BY OPERATING ACTIVITIES	13,588	13,776
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (net of AFUDC, equity portion)	(23,266)	(19,418)
Investment in acquisitions, net of cash acquired	(6,341)	0
Proceeds from sale of assets	41	15
NET CASH USED IN INVESTING ACTIVITIES	(29,566)	(19,403)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayments) under lines of credit agreements	(17,123)	(1,120)
Deferred debt issuance cost	(102)	0
Increase in overdraft payable	304	403
Net advances and contributions in aid of construction	8,013	9,786
Net proceeds from issuance of common stock	936	941
Issuance of long-term debt	30,000	1,720
Dividends paid	(5,096)	(4,856)
Principal repayments of long-term debt	(826)	(906)
NET CASH PROVIDED BY FINANCING ACTIVITIES	16,106	5,968
NET INCREASE IN CASH AND CASH EQUIVALENTS	128	341
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	92	28
CASH AND CASH EQUIVALENTS AT END OF PERIOD	220	369
Non-cash Investing and Financing Activity:
Utility plant received as construction advances and contributions	3,243	2,334
Dividends declared but not paid	2,581	2,454
Amounts included in accounts payable and accrued payables related to capital expenditures	1,761	2,723
Supplemental Cash Flow Information:
Interest paid	3,996	3,800
Income taxes paid	743	3,248
Preliminary purchase price of allocation of investment in acquisitions:
Utility plant	28,335	0
Cash	280	0
Other assets	3,580	0
Total assets	32,195	0
Less:
Liabilities	3,536	0
Future contractual obligation payable to seller	1,569	0
CIAC	20,469	0
Cash paid for acquisitions	6,621	0
Cash received from acquisitions	280	0
Net cash paid for acquisitions	$ 6,341	$ 0

XML

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands		Common Stock [Member] Common Shares Class A Non-Voting [Member]		Common Stock [Member] Common Shares Class B Voting [Member]		Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance at Dec. 31, 2020		$ 8,475		$ 882		$ 103,463	$ 56,606	$ 169,426
Balance (in shares) at Dec. 31, 2020		8,475	[1],[2],[3]	882	[4]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		$ 0		$ 0		0	4,206	4,206
Cash dividends declared
Common stock		0		0		0	(2,406)	(2,406)
Issuance of common stock
Dividend reinvestment plan		$ 3		$ 0		95	0	98
Dividend reinvestment plan (in shares)		3	[1],[2],[3]	0	[4]
Employee stock options and awards	[3]	$ 22		$ 0		438	0	460
Employee stock options and awards (in shares)	[3]	22	[1],[2]	0	[4]
Employee Retirement Plan	[1]	$ 2		$ 0		84	0	86
Employee Retirement Plan (in shares)	[1]	2	[2],[3]	0	[4]
Balance at Mar. 31, 2021		$ 8,502		$ 882		104,080	58,406	171,870
Balance (in shares) at Mar. 31, 2021		8,502	[1],[2],[3]	882	[4]
Balance at Dec. 31, 2020		$ 8,475		$ 882		103,463	56,606	169,426
Balance (in shares) at Dec. 31, 2020		8,475	[1],[2],[3]	882	[4]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income								8,711
Balance at Jun. 30, 2021		$ 8,518		$ 882		104,453	58,007	171,860
Balance (in shares) at Jun. 30, 2021		8,518	[1],[2],[3]	882	[4]
Balance at Mar. 31, 2021		$ 8,502		$ 882		104,080	58,406	171,870
Balance (in shares) at Mar. 31, 2021		8,502	[1],[2],[3]	882	[4]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		$ 0		$ 0		0	4,505	4,505
Cash dividends declared
Common stock		0		0		0	(4,904)	(4,904)
Issuance of common stock
Dividend reinvestment plan		$ 2		$ 0		103	0	105
Dividend reinvestment plan (in shares)		2	[1],[2],[3]	0	[4]
Employee stock options and awards	[3]	$ 11		$ 0		165	0	176
Employee stock options and awards (in shares)	[3]	11	[1],[2]	0	[4]
Employee Retirement Plan	[1]	$ 3		$ 0		105	0	108
Employee Retirement Plan (in shares)	[1]	3	[2],[3]	0	[4]
Balance at Jun. 30, 2021		$ 8,518		$ 882		104,453	58,007	171,860
Balance (in shares) at Jun. 30, 2021		8,518	[1],[2],[3]	882	[4]
Balance at Dec. 31, 2021		$ 8,532		$ 882		104,989	63,607	178,010
Balance (in shares) at Dec. 31, 2021		8,532	[1],[2],[3]	882	[4]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		$ 0		$ 0		0	4,483	4,483
Cash dividends declared
Common stock		0		0		0	(2,518)	(2,518)
Issuance of common stock
Dividend reinvestment plan		$ 2		$ 0		87	0	89
Dividend reinvestment plan (in shares)		2	[1],[2],[3]	0	[4]
Employee stock options and awards	[3]	$ 22		$ 0		475	0	497
Employee stock options and awards (in shares)	[3]	22	[1],[2]	0	[4]
Employee Retirement Plan	[1]	$ 0		$ 0		0	0	0
Employee Retirement Plan (in shares)	[1]	0	[2],[3]	0	[4]
Balance at Mar. 31, 2022		$ 8,556		$ 882		105,551	65,572	180,561
Balance (in shares) at Mar. 31, 2022		8,556	[1],[2],[3]	882	[4]
Balance at Dec. 31, 2021		$ 8,532		$ 882		104,989	63,607	178,010
Balance (in shares) at Dec. 31, 2021		8,532	[1],[2],[3]	882	[4]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income								9,529
Balance at Jun. 30, 2022		$ 8,577		$ 882		105,984	65,459	180,902
Balance (in shares) at Jun. 30, 2022		8,577	[1],[2],[3]	882	[4]
Balance at Mar. 31, 2022		$ 8,556		$ 882		105,551	65,572	180,561
Balance (in shares) at Mar. 31, 2022		8,556	[1],[2],[3]	882	[4]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		$ 0		$ 0		0	5,046	5,046
Cash dividends declared
Common stock		0		0		0	(5,159)	(5,159)
Issuance of common stock
Dividend reinvestment plan		$ 2		$ 0		97	0	99
Dividend reinvestment plan (in shares)		2	[1],[2],[3]	0	[4]
Employee stock options and awards	[3]	$ 19		$ 0		336	0	355
Employee stock options and awards (in shares)	[3]	19	[1],[2]	0	[4]
Employee Retirement Plan	[1]	$ 0		$ 0		0	0	0
Employee Retirement Plan (in shares)	[1]	0	[2],[3]	0	[4]
Balance at Jun. 30, 2022		$ 8,577		$ 882		$ 105,984	$ 65,459	$ 180,902
Balance (in shares) at Jun. 30, 2022		8,577	[1],[2],[3]	882	[4]

[1] Artesian Resources Corporation registered 200,000 shares of Class A Common Stock, subsequently adjusted for stock splits, available for purchase through the Company’s 401(k) retirement plan.

[2] At June 30, 2022 and June 30, 2021, Class A Common Stock had 15,000,000 shares authorized.  For the same periods, shares issued, inclusive of treasury shares, were 8,606,597 and 8,548,106, respectively.

[3] Under the Equity Compensation Plan, effective December 9, 2015, or the 2015 Plan, Artesian Resources Corporation authorized up to 331,500 shares of Class A Common Stock for issuance of grants in the form of stock options, stock units, dividend equivalents and other stock-based awards, subject to adjustment in certain circumstances as discussed in the 2015 Plan. Includes stock compensation expense for June 30, 2022, and June 30, 2021, see Note 5-Stock Compensation Plans.

[4] At June 30, 2022 and June 30, 2021, Class B Common Stock had 1,040,000 shares authorized and 881,452 shares issued.

XML

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	Jun. 30, 2022	Jun. 30, 2021	Dec. 09, 2015
Common Shares Class A Non-Voting [Member]
Common stock, par value (in dollars per share)	$ 1.00
Common stock, shares authorized (in shares)	15,000,000
Common Stock Shares Issued (in shares)	8,577,620	8,519,129
Common Shares Class B Voting [Member]
Common stock, par value (in dollars per share)	$ 1.00
Common stock, shares authorized (in shares)	1,040,000
Common Stock Shares Issued (in shares)	881,452	881,452
Common Stock [Member] | Common Shares Class A Non-Voting [Member]
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized (in shares)	15,000,000	15,000,000
Common Stock Shares Issued (in shares)	8,606,597	8,548,106
Shares available for purchase through retirement plans (in shares)	200,000
Shares authorized for issuance of grants under equity compensation plan (in shares)			331,500
Common Stock [Member] | Common Shares Class B Voting [Member]
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized (in shares)	1,040,000	1,040,000
Common Stock Shares Issued (in shares)	881,452	881,452

XML

GENERAL

6 Months Ended

Jun. 30, 2022

GENERAL [Abstract]

GENERAL

NOTE 1 – GENERAL

Artesian Resources Corporation, or Artesian Resources, includes income from the earnings of all of our wholly owned subsidiaries. The terms "we", "our", "Artesian" and the "Company" as used herein refer to Artesian Resources and its subsidiaries.

DELAWARE REGULATED SUBSIDIARIES

Artesian Water Company, Inc., or Artesian Water, our principal subsidiary, distributes and sells water to residential, commercial, industrial, governmental, municipal and utility customers throughout the State of Delaware.  In addition, Artesian Water provides services to other water utilities, including operations and billing functions, and has contract operation agreements with private, municipal and state water providers.  Artesian Water also provides water for public and private fire protection to customers in our service territories.

On May 26, 2022, Artesian Water completed its purchase of substantially all of the water operating assets from the Town of Clayton, or Clayton, a Delaware municipality located in Kent County, Delaware, including Clayton’s exclusive franchise territory and the right to provide water service to Clayton’s existing customers, or the Clayton Water System.  The total purchase price was $5.0 million, less the current payoff amount of secured debt or debt associated with the Clayton Water System.

Artesian Wastewater Management, Inc., or Artesian Wastewater, began providing wastewater services in Sussex County, Delaware in July 2005.  Artesian Wastewater is a regulated entity that owns wastewater collection and treatment infrastructure and provides wastewater services to customers in Delaware as a regulated public wastewater service company.

In January 2022, Artesian Wastewater acquired Tidewater Environmental Services, Inc.  Artesian Wastewater operates as the parent holding company of Tidewater Environmental Services, Inc. dba Artesian Wastewater, or TESI.  TESI was incorporated in 2004 and is a regulated entity that owns wastewater collection and treatment infrastructure and provides wastewater services to customers in Sussex County, Delaware as a regulated public wastewater service company.  Artesian Wastewater purchased all of the stock of TESI from Middlesex Water Company, or Middlesex, for $6.4 million in cash and other consideration, including forgiveness of a $2.1 million note due from Middlesex.  This acquisition more than doubled the number of wastewater customers served by Artesian’s Delaware wastewater subsidiaries in Sussex County, Delaware and included all residents within the Town of Milton.

MARYLAND REGULATED SUBSIDIARIES

Artesian Water Maryland, Inc., or Artesian Water Maryland, began operations in August 2007. Artesian Water Maryland distributes and sells water to residential, commercial, industrial and municipal customers in Cecil County, Maryland.

Artesian Wastewater Maryland, Inc., or Artesian Wastewater Maryland, was incorporated on June 3, 2008 and is able to provide regulated wastewater services to customers in the State of Maryland.  It is currently not providing these services.

PENNSYLVANIA REGULATED SUBSIDIARY

Artesian Water Pennsylvania, Inc., or Artesian Water Pennsylvania, began operations in 2002.  It provides water service to a residential community in Chester County, Pennsylvania.

OTHER SUBSIDIARIES

Our three other subsidiaries, none of which are regulated, are Artesian Utility Development, Inc., or Artesian Utility, Artesian Development Corporation, or Artesian Development, and Artesian Storm Water Services, Inc., or Artesian Storm Water.

Artesian Utility was formed in 1996 and designs and builds water and wastewater infrastructure and provides contract water and wastewater operation services on the Delmarva Peninsula to private, municipal and governmental institutions.  Artesian Utility also evaluates land parcels, provides recommendations to developers on the size of water or wastewater facilities and the type of technology that should be used for treatment at such facilities, and operates water and wastewater facilities in Delaware for municipal and governmental agencies.  Artesian Utility also contracts with developers and government agencies for design and construction of wastewater infrastructure throughout the Delmarva Peninsula.  In addition, as further discussed below, Artesian Utility operates the Water Service Line Protection Plan, or WSLP Plan, the Sewer Service Line Protection Plan, or SSLP Plan, and the Internal Service Line Protection Plan, or ISLP Plan.

Artesian Utility currently operates wastewater treatment facilities for the town of Middletown, in southern New Castle County, Delaware, or Middletown, under a 20-year contract that expires in July 2039.  Artesian Utility currently operates three wastewater treatment systems with a combined capacity of up to approximately 3.8 million gallons per day. The wastewater treatment facilities in Middletown provide reclaimed wastewater for use in spray irrigation on public and agricultural lands in the area.

Artesian Utility also offers three protection plans to customers, the WSLP Plan, the SSLP Plan and the ISLP Plan. The WSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking water service lines up to an annual limit. The SSLP Plan covers all parts, material and labor required to repair or replace participating customers' leaking or clogged sewer lines up to an annual limit.  The ISLP Plan enhances available coverage to include water and wastewater lines within customers' residences up to an annual limit.

Artesian Development is a real estate holding company that owns properties, including land approved for office buildings, a water treatment plant and wastewater facility, as well as property for current operations, including an office facility in Sussex County, Delaware.  The facility consists of approximately 10,000 square feet of office space along with nearly 10,000 square feet of warehouse space.

Artesian Storm Water, incorporated in 2017, was formed to provide design, installation, maintenance and repair services related to existing or proposed storm water management systems in Delaware and the surrounding areas.  The ability to offer storm water services will complement the primary water and wastewater services that we provide.  Artesian Storm Water is not actively seeking new opportunities.

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BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

BASIS OF PRESENTATION

NOTE 2 – BASIS OF PRESENTATION

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, for Form 10-Q.  Certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.  Accordingly, these condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes in the Company's annual report on Form 10-K for fiscal year 2021 as filed with the SEC on March 11, 2022.

The condensed consolidated financial statements include the accounts of Artesian Resources Corporation and its wholly owned subsidiaries, including its principal operating company, Artesian Water.  In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments (unless otherwise noted) necessary to present fairly the Company's balance sheet position as of June 30, 2022, the results of its operations for the three and six-month periods ended June 30, 2022 and June 30, 2021, its cash flows for the six-month periods ended June 30, 2022 and June 30, 2021 and the changes in stockholders’ equity for the three and six-month periods ended June 30, 2022 and June 30, 2021.  The December 31, 2021 Condensed Consolidated Balance Sheet was derived from the Company’s December 31, 2021 audited consolidated financial statements, but does not include all disclosures and notes normally provided in annual financial statements.

The results of operations for the interim periods presented are not necessarily indicative of the results for the full year or for future periods.

Use of Estimates

The condensed consolidated financial statements were prepared in conformity with generally accepted accounting principles in the U.S., which require management to make certain estimates and assumptions regarding the reported amounts of assets and liabilities including unbilled revenues, credit losses and reserves for bad debt, regulatory asset recovery, lease agreements and contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from management's estimates.

All additions to utility plant are recorded at cost.  Business combinations pursuant to ASC Topic 805 may result in a purchase price allocation and the acquired assets are required to be evaluated by the applicable regulatory agency.  Artesian Wastewater acquired TESI in January 2022 and Artesian Water purchased substantially all of the water operating assets from the Town of Clayton in May 2022.  As of June 30, 2022, the accounting for these transactions was preliminary.  Management’s preliminary determination of fair value of the tangible assets acquired using the cost method requires management to make significant estimates and assumptions related to economic lives of the assets, replacement costs, and physical characteristics of the tangible assets acquired.  Third-party valuation specialists are assisting with the valuation of the assets acquired.  The purchase price allocations are expected to be finalized once the valuations of assets acquired have been completed, no later than one year after the acquisition date in each case.

Reclassification

Certain accounts in the prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements.  These reclassifications had no effect on net income or stockholders' equity.

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REVENUE RECOGNITION

6 Months Ended

Jun. 30, 2022

REVENUE RECOGNITION [Abstract]

REVENUE RECOGNITION

NOTE 3 – REVENUE RECOGNITION

Background

Artesian’s operating revenues are primarily attributable to contract services based upon tariff rates approved by the Delaware Public Service Commission, or DEPSC, the Maryland Public Service Commission, or MDPSC, and the Pennsylvania Public Utility Commission, or PAPUC.  Tariff contract service revenues consist of water consumption, industrial wastewater services, fixed fees for water and wastewater services including customer and fire protection fees, service charges and Distribution System Improvement Charges, or DSIC, billed to customers at rates outlined in our tariffs that represent stand-alone selling prices.  Our non-tariff contract revenues consist of Service Line Protection Plan, or SLP Plan, fees, water and wastewater contract operations, design and installation contract services, and wastewater inspection fees.  Other operating revenue primarily consists of developer guarantee contributions for wastewater and rental income for antenna agreements, which are not considered in the scope of Accounting Standards Codification 606, Revenue from Contracts with Customers.

Tariff Contract Revenues

Artesian generates revenue from the sale of water to customers in Delaware, Cecil County, Maryland, and Southern Chester County, Pennsylvania once a customer requests service in our territory.  We recognize water consumption revenue at tariff rates on a cycle basis for the volume of water transferred to customers based upon meter readings for actual gallons of water consumed as well as unbilled amounts for estimated usage from the date of the last meter reading to the end of the accounting period.  As actual usage amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results.  Estimates are made on an individual customer basis, based on one of three methods: the previous year’s consumption in the same period, the previous billing period’s consumption, or averaging. While actual usage for individual customers may differ materially from the estimate based on management judgments described above, we believe the overall total estimate of consumption and revenue for the fiscal period will not differ materially from actual billed consumption.  The majority of our water customers are billed for water consumed on a monthly basis, while the remaining customers are billed on a quarterly basis.  As a result, we record unbilled operating revenue (contract asset) for any estimated usage through the end of the accounting period that will be billed in the next monthly or quarterly billing cycle.

Artesian generates revenue from industrial wastewater services provided to a customer in Sussex County, Delaware.  We recognize industrial wastewater service revenue at a contract rate on a monthly basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of wastewater transferred.  These services are invoiced at the end of every month based on the actual meter readings for that month, and therefore there is no contract asset or liability associated with this revenue.  The contract also provides for a minimum required volume of wastewater flow to our facility.  At each year end, any shortfall of the actual volume from the required minimum volume is billed to the industrial customer and recorded as revenue.  Additionally, if during the course of the year it is probable that the actual volume will not meet the minimum required volume, estimated revenue amounts would be recorded for the pro rata minimum volume, constrained for potential flow capacity that could occur in the remainder of the year.  Pursuant to a settlement agreement, the minimum required volume was prorated on a seven month basis beginning June 1, 2021 and ending December 31, 2021.

Artesian generates revenue from metered wastewater services provided to customers in Sussex County, Delaware.  We recognize metered wastewater services at tariff rates on a cycle basis for the volume of wastewater transferred to Artesian’s wastewater facilities based upon meter readings for actual gallons of water transferred, as well as unbilled amounts for estimated volume from the date of the last meter reading to the end of the accounting period.  As actual volume amounts are known based on recurring meter readings, adjustments are made to the unbilled estimates in the next billing cycle based on the actual results.  Estimates are made on an individual customer basis, based on one of three methods: the previous year’s volume in the same period, the previous billing period’s volume, or averaging. While actual usage for individual customers may differ materially from the estimate based on management judgments described above, we believe the overall total estimate of volume and revenue for the fiscal period will not differ materially from actual billed consumption.  The majority of these wastewater customers are billed for the volume of water transferred on a quarterly basis.  As a result, we record unbilled operating revenue (contract asset) for any estimated volume through the end of the accounting period that will be billed in the next monthly cycle.

Artesian generates fixed-fee revenue for water and wastewater services provided to customers once a customer requests service in our territory.  Our wastewater territory is located in Sussex County, Delaware.  We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of the Company remaining ready to provide them water and wastewater service.  These contract services are billed either in advance or arrears at tariff rates on a monthly, quarterly or semi-annual basis.  For contract services billed in arrears, we record unbilled operating revenue (contract asset) for any services through the end of the accounting period that will be billed in the next monthly or quarterly cycle.  For contract services billed in advance, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided.  This deferred revenue is netted with unbilled operating revenue on the Condensed Consolidated Balance Sheet.

Artesian generates service charges primarily from non-payment fees, such as water shut-off and reconnection fees and finance charges.  These fees are billed and recognized as revenue at the point in time when our tariffs indicate the Company has the right to payment such as days past due have been reached or shut-offs and reconnections have been performed.  There is no contract asset or liability associated with these fees.

Artesian generates revenue from DSIC, which are surcharges applied to water customer tariff rates in Delaware related to specific types of water distribution system improvements.  This rate is calculated on a semi-annual basis based on an approved projected revenue requirement over the following six-month period.  This rate is adjusted up or down at the next DSIC filing to account for any differences between actual earned revenue and the projected revenue requirement.  Since DSIC revenue is a surcharge applied to tariff rates, we recognize DSIC revenue based on the same guidelines as noted above depending on whether the surcharge was applied to consumption revenue or fixed-fee revenue.

Accounts receivable related to tariff contract revenues are typically due within 25 days of invoicing. An allowance for doubtful accounts is calculated as a percentage of total associated revenues based upon historical trends and adjusted for current conditions.  We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant.  However, due to the COVID-19 pandemic causing hardships for many utility customers, the Company experienced longer receivable cycles throughout 2020 and into 2021 and made an adjustment to increase the reserve for bad debt by $0.5 million in 2020.  In June 2021 we made an adjustment to reduce the reserve by $0.3 million.  We will continue to monitor factors that affect the reserve for bad debt.

Non-tariff Contract Revenues

Artesian generates SLP Plan revenue once a customer requests service to cover all parts, materials and labor required to repair or replace leaking water service lines, leaking or clogged sewer lines, or water and wastewater lines within the customer’s residence, up to an annual limit.  We recognize revenue from these services on a ratable basis over time as the customer simultaneously receives and consumes all the benefits of having service line protection services.  These contract services are billed in advance on a monthly or quarterly basis.  As a result, we record deferred revenue (contract liability) and accounts receivable for any amounts for which we have a right to invoice but for which services have not been provided.  Accounts receivable from SLP Plan customers are typically due within 25 days of invoicing.  An allowance for doubtful accounts is calculated as a percentage of total SLP Plan contract revenue.  We mitigate our exposure to credit losses by discontinuing services in the event of non-payment; accordingly, the related allowance for doubtful accounts and associated bad debt expense has not been significant.

Artesian generates contract operation revenue from water and wastewater operation services provided to customers.  We recognize revenue from these operation contracts, which consist primarily of monthly operation and maintenance services, over time as customers receive and consume the benefits of such services performed. The majority of these services are invoiced in advance at the beginning of every month and are typically due within 30 days, and therefore there is no contract asset or liability associated with most of these revenues.  We have one operation contract that was paid in advance resulting in a contract liability for services that have not yet been provided.  An allowance for doubtful accounts is provided based on a periodic analysis of individual account balances, including an evaluation of days outstanding, payment history, recent payment trends, and our assessment of our customers’ creditworthiness.  The related allowance for doubtful accounts and associated bad debt expense has not been significant.

Artesian generates design and installation revenue for services related to the design and construction of wastewater infrastructure for a state agency under contract.  We recognize revenue from these services over time as services are performed using the percentage-of-completion method based on an input method of incurred costs (cost-to-cost).  These services are invoiced at the end of every month based on incurred costs to date.  As of June 30, 2022, there is no associated contract asset or liability.  There is no allowance for doubtful accounts or bad debt expense associated with this revenue.

Artesian generates inspection fee revenue for inspection services related to onsite wastewater collection systems installed by developers of new communities.  These fees are paid by developers in advance when a service is requested for a new phase of a development.  Inspection fee revenue is recognized on a per lot basis once the inspection of the infrastructure that serves each lot is completed.  As a result, we record deferred revenue (contract liability) for any amounts related to infrastructure not yet inspected.  There are no accounts receivable, allowance for doubtful accounts or bad debt expense associated with inspection fee contracts.

Sales Tax

The majority of Artesian’s revenues are earned within the State of Delaware, where there is no sales tax.  Revenues earned in the State of Maryland and the Commonwealth of Pennsylvania are related primarily to the sale of water by a public water utility and are exempt from sales tax.  Therefore, no sales tax is collected on revenues.

Disaggregated Revenues

The following table shows the Company’s revenues disaggregated by service type; all revenues are generated within a similar geographical location:

(in thousands)	Three months ended June 30, 2022		Three months ended June 30, 2021			Six months ended June 30, 2022		Six months ended June 30, 2021
Tariff Revenue
Consumption charges	$	12,182	$	12,660		$	22,749	$	23,078
Fixed fees		7,751		6,872			15,529		13,871
Service charges		137		119			293		320
DSIC		1,282		1,316			2,464		2,488
Metered wastewater services		129		—			269		—
Industrial wastewater services		422		(384	)		828		(379	)
Total Tariff Revenue	$	21,903	$	20,583		$	42,132	$	39,378
Non-Tariff Revenue
Service line protection plans	$	1,217	$	1,134		$	2,439	$	2,230
Contract operations		242		217			453		447
Design and installation		978		62			1,101		212
Inspection fees		66		52			106		136
Total Non-Tariff Revenue	$	2,503	$	1,465		$	4,099	$	3,025
Other Operating Revenue	$	605	$	421		$	967	$	710
Total Operating Revenue	$	25,011	$	22,469		$	47,198	$	43,113

Contract Assets and Contract Liabilities

Our contract assets and liabilities consist of the following:

(in thousands)	June 30, 2022		December 31, 2021
Contract Assets – Tariff	$	3,156	$	2,144
Deferred Revenue
Deferred Revenue – Tariff	$	1,179	$	1,227
Deferred Revenue – Non-Tariff		404		287
Total Deferred Revenue	$	1,583	$	1,514

For the six months ended June 30, 2022, the Company recognized revenue of $1.2 million from amounts that were included in Deferred Revenue – Tariff at the beginning of the year and revenue of $0.3 million from amounts that were included in Deferred Revenue – Non- Tariff at the beginning of the year.

The changes in Contract Assets and Deferred Revenue are primarily due to normal timing differences between our performance and customer payments.

Remaining Performance Obligations

As of June 30, 2022 and December 31, 2021, Deferred Revenue – Tariff is recorded net of contract assets within Unbilled operating revenues and represents our remaining performance obligations for our fixed fee water and wastewater services, all of which are expected to be satisfied and associated revenue recognized in the next three months.

As of June 30, 2022 and December 31, 2021, Deferred Revenue – Non-Tariff is recorded within Other current liabilities and represents our remaining performance obligations for our SLP Plan services, wastewater inspections and one operation contract, which are expected to be satisfied and associated revenue recognized within the next three months, one year and seven years for the SLP Plan revenue, inspection fee revenue and contract operations revenue, respectively.

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LEASES

6 Months Ended

Jun. 30, 2022

LEASES [Abstract]

LEASES

NOTE 4 – LEASES

The Company leases land and office equipment under operating leases from non-related parties.  Our leases have remaining lease terms of 20 years to 74 years, some of which include options to automatically extend the leases for up to 66 years.  Payments made under operating leases are recognized in the consolidated statement of operations on a straight-line basis over the period of the lease.  The annual lease payments for the land operating leases increase each year either by the most recent increase in the Consumer Price Index or by 3%, as applicable based on the lease agreements.  Periodically, the annual lease payment for one operating land lease is determined based on the fair market value of the applicable parcel of land.  None of the operating leases contain contingent rent provisions.  The commencement date of all the operating leases is the earlier of the date we become legally obligated to make rent payments or the date we may exercise control over the use of the land or equipment.  The Company currently does not have any financing leases and does not have any lessor leases that require disclosure.

Management made certain assumptions related to the separation of lease and nonlease components and to the discount rate used when calculating the right of use asset and liability amounts for the operating leases.  As our leases do not provide an implicit rate, we use our incremental borrowing rates for long term and short term agreements and apply the rates accordingly based on the term of the lease agreements to determine the present value of lease payments.

Rent expense for all operating leases except those with terms of 12 months or less comprises:

	(in thousands)
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Minimum rentals	$	2	$	7	$	9	$	14
Contingent rentals		—		—		—		—
	$	2	$	7	$	9	$	14

Supplemental cash flow information related to leases is as follows:

	(in thousands)
	Six Months Ended		Six Months Ended
	June 30, 2022		June 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9	$	14
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	445	$	450

Supplemental balance sheet information related to leases is as follows:

	(in thousands, except lease term and discount rate)
	June 30, 2022			December 31, 2021
Operating Leases:
Operating lease right-of-use assets	$	445		$	451
Other current liabilities	$	2			6
Operating lease liabilities		440			440
Total operating lease liabilities	$	442		$	446
Weighted Average Remaining Lease Term
Operating leases	61 years			61 years
Weighted Average Discount Rate
Operating leases		5.0	%		5.0	%

Maturities of operating lease liabilities that have initial or remaining non-cancelable lease terms in excess of one year as of June 30, 2022 are as follows:

	(in thousands)
	Operating Leases
Year
2023	$	24
2024		24
2025		24
2026		24
2027		25
Thereafter		1,330
Total undiscounted lease payments	$	1,451
Less effects of discounting		(1,009	)
Total lease liabilities recognized	$	442

As of June 30, 2022, we have not entered into operating or finance leases that will commence at a future date.

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STOCK COMPENSATION PLANS

6 Months Ended

Jun. 30, 2022

STOCK COMPENSATION PLANS [Abstract]

STOCK COMPENSATION PLANS

NOTE 5 – STOCK COMPENSATION PLANS

On December 9, 2015, the Company's stockholders approved the 2015 Equity Compensation Plan, or the 2015 Plan. The 2015 Plan provides that grants may be in any of the following forms: incentive stock options, nonqualified stock options, stock units, stock awards, dividend equivalents and other stock-based awards. The 2015 Plan is administered and interpreted by the Compensation Committee, or the Committee, of the Board of Directors of the Company, or the Board. The Committee has the authority to determine the individuals to whom grants will be made under the 2015 Plan, the type, size and terms of the grants, the time when grants will be made and the duration of any applicable exercise or restriction period (subject to the limitations of the 2015 Plan), and deal with any other matters arising under the 2015 Plan. The Committee presently consists of three directors, each of whom is a non-employee director of the Company. All of the employees of the Company and its subsidiaries and non-employee directors of the Company are eligible for grants under the 2015 Plan. 

Compensation expense, for the three and six months ended June 30, 2022 of approximately $55,000 and $104,000, respectively, was recorded for restricted stock awards issued in May 2021 and May 2022.   Compensation expense, for the three and six months ended June 30, 2021 of approximately $49,000 and $91,000, respectively, was recorded for restricted stock awards issued in May 2020 and May 2021.  Costs were determined based on the fair value on the dates of the awards and those costs were charged to income over the service periods associated with the awards.

There was no stock compensation cost capitalized as part of an asset.

On May 3, 2022, 5,000 shares of Class A Common Stock, or Class A Stock, were granted as restricted stock awards.  The fair value per share was $45.58, the closing price of the Class A Stock as recorded on the Nasdaq Global Select Market on May 3, 2022.  Prior to their release date, these restricted stock awards may be subject to forfeiture in the event of the recipient’s termination of service.

On May 4, 2021, 5,000 shares of Class A Common Stock, or Class A Stock, were granted as restricted stock awards.  The fair value per share was $40.11, the closing price of the Class A Stock as recorded on the Nasdaq Global Select Market on May 4, 2021.  Prior to their release date, these restricted stock awards may be subject to forfeiture in the event of the recipient’s termination of service.

The following summary reflects changes in the shares of Class A Stock underlying options and restricted stock awards for the six months ended June 30, 2022:

	Options									Restricted Awards
	Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (Yrs.)		Aggregate Intrinsic Value (in thousands)		Outstanding Restricted Stock Awards			Weighted Average Grant Date FairValue
Plan options/restricted stock awards
Outstanding at January 1, 2022		83,000		$	21.65			$	2,048		5,000		$	40.11
Granted		—			—				—		5,000			45.58
Exercised/vested and released		(35,750	)		20.93				905		(5,000	)		40.11
Expired/cancelled		—			—				—		—			—
Outstanding at June 30, 2022		47,250		$	22.20		1.425	$	1,274		5,000		$	40.11
Exercisable/vested at June 30, 2022		47,250		$	22.20		1.425	$	1,274		—			—

The total intrinsic value of options exercised during the six months ended June 30, 2022 was approximately $905,000.

There were no unvested option shares outstanding under the 2015 Plan during the six months ended June 30, 2022.

As of June 30, 2022, there were no unrecognized expenses related to non-vested option shares granted under the 2015 Plan.  

As of June 30, 2022, there was $191,000 total unrecognized expenses related to non-vested awards of restricted shares awarded under the 2015 Plan.  The cost will be recognized over 0.84 years, the remaining vesting period for the restricted stock awards.

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OTHER DEFERRED ASSETS

6 Months Ended

Jun. 30, 2022

OTHER DEFERRED ASSETS [Abstract]

OTHER DEFERRED ASSETS

NOTE 6 – OTHER DEFERRED ASSETS

The investment in CoBank, which is a cooperative bank, is related to certain outstanding First Mortgage Bonds and is a required investment in the bank based on the underlying long-term debt agreements.  Other deferred assets is primarily associated with the acquisition of TESI in January 2022 based on the preliminary purchase price allocation.  The purchase price allocation will be finalized once the valuation of assets acquired has been completed, no later than one year after the acquisition date.  In addition, other deferred assets includes the Mountain Hill Water Company acquisition.

In thousands	June 30, 2022	December 31, 2021
Investment in CoBank	$5,351	$4,850
Other deferred assets	1,765	247
	$7,116	$5,097

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REGULATORY ASSETS

6 Months Ended

Jun. 30, 2022

REGULATORY ASSETS [Abstract]

REGULATORY ASSETS

NOTE 7 - REGULATORY ASSETS

The FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain expenses are recoverable through rates charged to our customers, without a return on investment, and are deferred and amortized during future periods using various methods as permitted by the DEPSC, MDPSC, and PAPUC.

The deferred income taxes will be amortized over future years as the tax effects of temporary differences that previously flowed through to our customers are reversed.

Debt related costs include debt issuance costs and other debt related expense.  The DEPSC has approved deferred regulatory accounting treatment for issuance costs associated with Artesian Water’s First Mortgage bonds. Debt issuance costs and other debt related expenses are reviewed during Artesian Water’s rate applications as part of its cost of capital calculations.

Regulatory expenses amortized on a straight-line basis are noted below:

Expense	Years Amortized
Deferred contract costs and other	5
Rate case studies	5
Delaware rate proceedings	2.5
Maryland rate proceedings	5
Debt related costs	15 to 30 (based on term of related debt)
Goodwill (resulting from acquisition of Mountain Hill Water Company in 2008)	50
Deferred acquisition costs (resulting from purchase of water assets in Cecil County, Maryland in 2011 and Port Deposit, Maryland in 2010)	20
Franchise Costs (resulting from purchase of water assets in Cecil County, Maryland in 2011)	80

Regulatory assets, net of amortization, comprise:
	(in thousands)
	June 30, 2022		December 31, 2021
Deferred income taxes	$	475	$	355
Deferred contract costs and other		258		288
Debt related costs		4,829		4,902
Goodwill		269		273
Deferred acquisition and franchise costs		483		503
	$	6,314	$	6,321

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REGULATORY LIABILITIES

6 Months Ended

Jun. 30, 2022

REGULATORY LIABILITIES [Abstract]

REGULATORY LIABILITIES

NOTE 8 – REGULATORY LIABILITIES

FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency.  Certain obligations are deferred and/or amortized as determined by the DEPSC, MDPSC, and PAPUC.  Regulatory liabilities represent excess recovery of cost or other items that have been deferred because it is probable such amounts will be returned to customers through future regulated rates.

Utility plant retirement cost obligation consists of estimated costs related to the potential removal and replacement of facilities and equipment on the Company’s water and wastewater properties.  Effective January 1, 2012, as authorized by the DEPSC, when depreciable units of utility plant are retired, any cost associated with retirement, less any salvage value or proceeds received, is charged to a regulated retirement liability.  Each year the liability is increased by an annual amount authorized by the DEPSC.    

Pursuant to the enactment of the Tax Cuts and Jobs Act, or TCJA, on December 22, 2017, the Company adjusted its existing deferred income tax balances to reflect the decrease in the corporate income tax rate from 34% to 21% (see Note 11) resulting in a decrease in the net deferred income tax liability of $24.3 million, of which $22.8 million was reclassified to a regulatory liability related to Artesian Water and Artesian Water Maryland.  The regulatory liability amount is subject to certain Internal Revenue Service normalization rules that require the benefits to customers be spread over the remaining useful life of the underlying assets giving rise to the associated deferred income taxes.  On January 31, 2019, the DEPSC approved the amortization of the regulatory liability amount of $22.2 million over a period of 49.5 years beginning February 1, 2018, subject to audit at a later date. In May 2022, the Company received a rate order from the DEPSC instructing the Company to continue amortizing the liability over a period of 49.5 years, subject to review in the Company’s next base rate filing.  The MDPSC has not issued a final order on the regulatory liability amount of $0.6 million regarding the effects of the TCJA on Maryland customers.

Regulatory liabilities comprise:
	(in thousands)
	June 30, 2022		December 31, 2021
Utility plant retirement cost obligation	$	169	$	149
Deferred income taxes (related to TCJA)		21,463		21,111
	$	21,632	$	21,260

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NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE

6 Months Ended

Jun. 30, 2022

NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE [Abstract]

NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE

NOTE 9 - NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE

Basic net income per share is based on the weighted average number of common shares outstanding. Diluted net income per share is based on the weighted average number of common shares outstanding, the potentially dilutive effect of employee stock options and restricted stock awards.

The following table summarizes the shares used in computing basic and diluted net income per share:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Weighted average common shares outstanding during the period for Basic computation		9,452		9,395		9,438		9,381
Dilutive effect of employee stock options and awards		18		30		26		35
Weighted average common shares outstanding during the period for Diluted computation		9,470		9,425		9,464		9,416

For the three and six months ended June 30, 2022 and 2021, no shares of restricted stock awards were excluded from the calculations of diluted net income per share.

The Company has 15,000,000 authorized shares of Class A Stock and 1,040,000 authorized shares of Class B Common Stock, or Class B Stock. As of June 30, 2022, 8,577,620 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. As of June 30, 2021, 8,519,129 shares of Class A Stock and 881,452 shares of Class B Stock were issued and outstanding. The par value for both classes is $1.00 per share.

Equity per common share was $19.17 and $18.94 at June 30, 2022 and December 31, 2021, respectively. These amounts were computed by dividing common stockholders' equity by the number of weighted average shares of common stock outstanding on June 30, 2022 and December 31, 2021, respectively.

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REGULATORY PROCEEDINGS

6 Months Ended

Jun. 30, 2022

REGULATORY PROCEEDINGS [Abstract]

REGULATORY PROCEEDINGS

NOTE 10 - REGULATORY PROCEEDINGS

Our water and wastewater utilities generate operating revenue from customers based on rates that are established by state public service commissions through a rate-setting process that may include public hearings, evidentiary hearings and the submission of evidence and testimony in support of the Company's requested level of rates.

We are subject to regulation by the following state regulatory commissions:

• The DEPSC, regulates both Artesian Water and Artesian Wastewater.

• The MDPSC, regulates both Artesian Water Maryland and Artesian Wastewater Maryland.

• The PAPUC, regulates Artesian Water Pennsylvania.

Our water and wastewater utility operations are also subject to regulation under the federal Safe Drinking Water Act of 1974, or Safe Drinking Water Act, the Clean Water Act of 1972, or the Clean Water Act, and related state laws, and under federal and state regulations issued under these laws.  These laws and regulations establish criteria and standards for drinking water and for wastewater discharges.  Capital expenditures and operating costs required as a result of water quality standards and environmental requirements have been traditionally recognized by state regulatory commissions as appropriate for inclusion in establishing rates.

Water and Wastewater Rates

Our regulated utilities periodically seek rate increases to cover the cost of increased operating expenses, increased financing expenses due to additional investments in utility plant and other costs of doing business.  In Delaware, utilities are permitted by law to place rates into effect, under bond, on a temporary basis pending completion of a rate increase proceeding. The first temporary increase may be up to the lesser of $2.5 million on an annual basis or 15% of gross water sales.  Should the rate case not be completed within seven months, by law, the utility may put the entire requested rate relief, up to 15% of gross water sales, in effect under bond until a final resolution is ordered and placed into effect.  If any such rates are found to be in excess of rates the DEPSC finds to be appropriate, the utility must refund customers the portion found to be in excess with interest.  The timing of our rate increase requests is therefore dependent upon the estimated cost of the administrative process in relation to the investments and expenses that we hope to recover through the rate increase.  We can provide no assurances that rate increase requests will be approved by applicable regulatory agencies and, if approved, we cannot guarantee that these rate increases will be granted in a timely or sufficient manner to cover the investments and expenses for which we initially sought the rate increase.

Other Proceedings

Delaware law permits water utilities to put into effect, on a semi-annual basis, increases related to specific types of distribution system improvements through a DSIC. This charge may be implemented by water utilities between general rate increase applications that normally recognize changes in a water utility's overall financial position. The DSIC approval process is less costly when compared to the approval process for general rate increase requests. The DSIC rate applied between base rate filings is capped at  7.50% of the amount billed to customers under otherwise applicable rates and charges, and the DSIC rate increase applied cannot exceed 5.0% within any 12-month period.

The following table summarizes (1) Artesian Water’s applications with the DEPSC to collect DSIC rates and (2) the rates upon which eligible plant improvements are based:

Application Date	11/20/20
DEPSC Approval Date	12/14/20
Effective Date	01/01/21
Cumulative DSIC Rate	7.50%
Net Eligible Plant Improvements – Cumulative Dollars (in millions)	$43.1
Eligible Plant Improvements – Installed Beginning Date	10/01/2014
Eligible Plant Improvements – Installed Ending Date	04/30/2019

The rate reflects the eligible plant improvements installed through April 30, 2019.  The DSIC rate effective January 1, 2021 is still subject to audit by the DEPSC at a later date. For the three and six months ended June 30, 2022, we earned approximately $1.3 million and $2.5 million in DSIC revenue, respectively.  For the three and six months ended June 30, 2021, we earned approximately $1.3 million and $2.5 million in DSIC revenue, respectively.

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INCOME TAXES

6 Months Ended

Jun. 30, 2022

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 11 – INCOME TAXES

Deferred income taxes are provided in accordance with FASB ASC Topic 740 on all differences between the tax basis of assets and liabilities and the amounts at which they are carried in the consolidated financial statements based on the enacted tax rates expected to be in effect when such temporary differences are expected to reverse. The Company’s rate regulated utilities recognize regulatory liabilities, to the extent considered in ratemaking, for deferred taxes provided in excess of the current statutory tax rate and regulatory assets for deferred taxes provided at rates less than the current statutory rate.  Such tax-related regulatory assets and liabilities are reported at the revenue requirement level and amortized to income as the related temporary differences reverse, generally over the lives of the related properties.

Under FASB ASC Topic 740, an uncertain tax position represents our expected treatment of a tax position taken, or planned to be taken in the future, that has not been reflected in measuring income tax expense for financial reporting purposes.  The Company establishes reserves for uncertain tax positions based upon management's judgment as to the sustainability of these positions. These accounting estimates related to the uncertain tax position reserve require judgments to be made as to the sustainability of each uncertain tax position based on its technical merits. The Company believes its tax positions comply with applicable law and that it has adequately recorded reserves as required. However, to the extent the final tax outcome of these matters is different than the estimates recorded, the Company would then adjust its tax reserves or unrecognized tax benefits in the period that this information becomes known.  The statute of limitations for the 2017 tax returns lapsed during the fourth quarter of 2021, which resulted in the reversal of the reserve in the amount of approximately $26,000.  The Company has elected to recognize accrued interest (net of related tax benefits) and penalties related to uncertain tax positions as a component of its income tax expense.  The Company has accrued approximately $10,000 in penalties and interest for the six months ended June 30, 2022. The Company remains subject to examination by federal and state authorities for the tax years 2018 through 2021.

Investment tax credits were deferred through 1986 and are recognized as a reduction of deferred income tax expense over the estimated economic useful lives of the related assets.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2022

FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 12 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value.

Current Assets and Liabilities

For those current assets and liabilities that are considered financial instruments, the carrying amounts approximate fair value because of the short maturity of those instruments.

Long-term Financial Liabilities

All of Artesian Resources’ outstanding long-term debt as of June 30, 2022 and December 31, 2021 was fixed-rate.  The fair value of the Company’s long-term debt is determined by discounting their future cash flows using current market interest rates on similar instruments with comparable maturities consistent with FASB ASC 825.  Under the fair value hierarchy, the fair value of the long-term debt in the table below is classified as Level 2 measurements.  Level 2 is valued using observable inputs other than quoted prices.  The fair values for long-term debt differ from the carrying values primarily due to interest rates that differ from the current market interest rates.  The carrying amount and fair value of Artesian Resources' long-term debt (including current portion) are shown below:

In thousands
	June 30, 2022		December 31, 2021
Carrying amount	$	175,593	$	144,850
Estimated fair value	$	168,490	$	163,182

The fair value of Advances for Construction cannot be reasonably estimated due to the inability to estimate accurately the timing and amounts of future refunds expected to be paid over the life of the contracts.  Refund payments are based on the water sales to new customers in the particular development constructed.  The fair value of Advances for Construction would be less than the carrying amount because these financial instruments are non-interest bearing.

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RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2022

RELATED PARTY TRANSACTIONS [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 13 – RELATED PARTY TRANSACTIONS

Mr. Michael Houghton currently serves as a director.  During 2021, Mr. Houghton was a Partner in the law firm of Morris, Nichols, Arsht & Tunnell LLP, or MNAT, in Wilmington, Delaware.  Mr. Houghton retired from MNAT as a Partner, effective January 1, 2022, however, Mr. Houghton continues to perform legal services for MNAT as an independent contractor and non-partner.  In the normal course of business, the Company utilized the services of MNAT in 2021 for various regulatory, real estate and public policy matters.  Approximately $58,000 and  $71,000 was paid to MNAT during the three and six months ended June 30, 2021, respectively, for legal services and director related services.

As set forth in the Charter of the Audit Committee of the Board, the Audit Committee is responsible for reviewing and, if appropriate, approving all related party transactions between us and any officer, any director, any person known to be the beneficial owner of more than 5% of any class of the Company's voting securities or any other related person that would potentially require disclosure.  In its review and approval of the related party transactions with MNAT, the Audit Committee considered the nature of the related person's interest in the transactions; the satisfactory performance of work contracted with the related party prior to the election of Mr. Houghton as a director; and the material terms of the transactions, including, without limitation, the amount and type of transactions, the importance of the transactions to the related person, the importance of the transactions to the Company and whether the transactions would impair the judgment of a director or officer to act in the best interest of the Company.  The Audit Committee approves only those related person transactions that are in, or are consistent with, the best interests of the Company and its stockholders.

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BUSINESS COMBINATIONS

6 Months Ended

Jun. 30, 2022

BUSINESS COMBINATIONS [Abstract]

BUSINESS COMBINATIONS

NOTE 14 – BUSINESS COMBINATIONS

As part of the Company’s growth strategy, on January 14, 2022 Artesian Wastewater completed its agreement to acquire TESI, which provides regulated wastewater services in Delaware.  Artesian Wastewater purchased all of the stock of TESI from Middlesex Water Company for $6.4 million in cash and other consideration, including forgiveness of a $2.1 million note due from Middlesex, consisting of $3.1 million paid at closing. This acquisition more than doubled the number of wastewater customers served by Artesian in Sussex County, Delaware.  The acquisition is being accounted for as a business combination under ASC Topic 805, “Business Combinations,” in accordance with the acquisition method whereby the total purchase price consideration will be allocated to intangible assets and utility plant assets acquired and liabilities assumed based on their respective estimated fair values.  The acquisition method of accounting requires, among other things, that assets acquired, and liabilities assumed in a business purchase combination be recognized at their fair values as of the acquisition date.  The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions.  The Company is still gathering detailed records for valuing utility plant assets and related contributions in aid of construction at replacement cost adjusted for depreciation and valuing real property using a comparative sales approach in order to complete the purchase price allocation for the items as well as some of the assumed liabilities.  The purchase price allocation will be finalized once the valuation of assets acquired has been completed, no later than one year after the acquisition date.  Any goodwill as a result of the transaction is not expected to be deductible for tax purposes.

The TESI acquisition was approved by the DEPSC on October 27, 2021, subject to the DEPSC determining the appropriate ratemaking treatment of the acquisition price and the assets acquired in Artesian Wastewater’s next base rate case.

The Company reflected revenue of $0.7 million and $1.4 million for the three and six months ended June 30, 2022 , respectively, in its condensed consolidated statement of operations related to the acquisition.  The pro forma revenue for the three and six months ended June 30, 2022 is estimated to be approximately $0.7 million and $1.4 million, respectively.  The Company anticipates the pro forma effects of revenue for the three and six months ended June 30, 2021 to be approximately the same given there has not been any changes in the rates.  The pro forma information is not necessarily indicative of the Company’s future results.  Any pro forma effects of earnings is not practicable, as we continue to integrate TESI operations and adjust the operating cost structure as it relates to operating expenses reflective of synergies of the combined operations, and therefore would not present an accurate comparison.

The table below sets forth the preliminary purchase price allocation of this acquisition as of June 30, 2022.  The preliminary purchase price allocation is provisional and there could be material changes to the estimates below.

(In thousands)
		TESI
	Utility plant	$	19,455
	Cash		280
	Other assets		3,580
	Total assets		23,315
	Less: Liabilities and contributions in aid of construction (CIAC)
	Liabilities		3,536
	CIAC		16,657
	Net cash purchase price	$	3,122

Additionally, as part of the Company’s growth strategy, on May 26, 2022, Artesian Water completed its purchase of substantially all of the water system operating assets from the Town of Clayton, or Clayton, a Delaware municipality located in Kent County, Delaware, including Clayton’s exclusive franchise territory and the right to provide water service to Clayton’s existing customers, or the Clayton Water System.  The total purchase price was $5.0 million, less the current payoff amount of secured debt or debt associated with the Clayton Water System.  At closing, Artesian Water paid approximately $3.4 million of the total purchase price.  The remaining $1.6 million is payable in five equal annual installments on the anniversary date of the closing date.  Each annual installment is payable with interest at an annual rate of 2.0%. The acquisition was accounted for as a business combination under ASC Topic 805.  The preliminary purchase price allocation is $8.9 million of utility plant assets offset by $3.8 million of CIAC.  This preliminary purchase price allocation will be finalized once the valuation of assets acquired has been completed, no later than one year after the acquisition date.

This transfer of Clayton’s exclusive franchise territory was approved by the DEPSC on April 20, 2022.  The DEPSC will determine the appropriate ratemaking treatment of the acquisition price and the assets acquired in Artesian Water’s next base rate case.  The pro forma effects of the business acquired are not material to the Company’s financial position or results of operations based on estimated annual revenue related to customers acquired.

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GEOGRAPHIC CONCENTRATION OF CUSTOMERS

6 Months Ended

Jun. 30, 2022

GEOGRAPHIC CONCENTRATION OF CUSTOMERS [Abstract]

GEOGRAPHIC CONCENTRATION OF CUSTOMERS

NOTE 15 – GEOGRAPHIC CONCENTRATION OF CUSTOMERS

Artesian Water, Artesian Water Maryland and Artesian Water Pennsylvania provide water utility service to customers within their established service territory in all three counties of Delaware and in portions of Maryland and Pennsylvania, pursuant to rates filed with and approved by the DEPSC, the MDPSC and the PAPUC.  As of June 30, 2022, Artesian Water was serving approximately 94,000 customers, Artesian Water Maryland was serving approximately 2,600 customers and Artesian Water Pennsylvania was serving approximately 40 customers.

Artesian Wastewater and TESI provide wastewater utility service to customers within their established service territory in Sussex County, Delaware pursuant to rates filed with and approved by the DEPSC. The number of wastewater customers served more than doubled following the acquisition of TESI in January 2022.  As of June 30, 2022, Artesian Wastewater combined with TESI were serving approximately 7,300 customers, including one large industrial customer.

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IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Jun. 30, 2022

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

NOTE 16 – IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

There was no new guidance issued by the FASB during the six months ended June 30, 2022 that is applicable to the Company.

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SUBSEQUENT EVENT

6 Months Ended

Jun. 30, 2022

SUBSEQUENT EVENT [Abstract]

SUBSEQUENT EVENT

NOTE 17 – SUBSEQUENT EVENT

On July 19, 2022, final judgment was entered by the United States District Court, or Court, for a Consent Decree between the Delaware Sand and Gravel Remedial Trust, or Trust, and the United States Environmental Protection Agency, or USEPA, that governs the implementation of Amendment No 2 to the USEPA’s 1988 Record of Decision for the Delaware Sand & Gravel Landfill Superfund Site, or Site, located in New Castle County, Delaware, issued on December 12, 2017, or ROD Amendment No. 2, confirming, among other things, the terms and conditions set forth in a Settlement Agreement upon which The Chemours Company FC, LLC, Hercules, LLC, Waste Management of Delaware, Inc., SC Holdings, Inc., Cytec Industries, Inc., Zeneca Inc., and Bayer CropScience Inc., collectively the Percentage Settlors, and the Trust, on one hand, and Artesian Water, on the other hand, have agreed to resolve certain of Artesian Water’s claims and issues relating to releases of contaminants from the Site.

ROD Amendment No. 2 sets forth the remedy for the contamination existing at and emanating from the Site, or the Remedy, to address a release of contaminants of concern and of emerging concern, or COC’s, from the Site into groundwater.  Artesian Water has found in groundwater that Artesian Water uses for public potable water supply certain COC’s that the Remedy is designed to address, as a result of which Artesian has incurred, and potentially will incur additional, capital and operating costs to treat the groundwater to meet applicable drinking water standards.  The Remedy includes requirements that are directly linked to Artesian’s continued operation of the treatment plant associated with groundwater around the Site.

As set forth in the Settlement Agreement, Artesian Water shall have access to financial assurances that the Percentage Settlors have provided, or will provide, to the USEPA in connection with the Consent Decree governing the implementation of the Remedy.  In addition, the Trust shall reimburse Artesian Water for past capital and operating costs, totaling approximately $10.0 million, with approximately $2.5 million due by August 18, 2022, within 30 days after the Court’s July 19, 2022 approval of the Consent Decree.  The remaining $7.5 million will be payable in three equal installments annually on the anniversary date of the Court’s approval of the Consent Decree.  In addition, the Trust shall reimburse Artesian Water for documented reasonable and necessary capital and operating costs after July 1, 2021 that Artesian Water incurs to treat Site-related COC’s. Any reimbursements Artesian Water receives from the Trust shall be subject to final determination by the DEPSC as to the appropriate regulatory rate-making treatment. The Trust’s reimbursement of such costs shall end if and when, based upon testing information from the Trust’s Remedy facilities and Artesian Water’s facilities, treatment of Site-related COC’s is no longer necessary for Artesian Water to meet the treatment levels that Artesian Water chooses to not exceed in water it distributes to the general public throughout its service territory to provide a margin of safety in complying with applicable drinking water standards.

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REVENUE RECOGNITION (Tables)

6 Months Ended

Jun. 30, 2022

REVENUE RECOGNITION [Abstract]

Disaggregation of Revenues

The following table shows the Company’s revenues disaggregated by service type; all revenues are generated within a similar geographical location:

(in thousands)	Three months ended June 30, 2022		Three months ended June 30, 2021			Six months ended June 30, 2022		Six months ended June 30, 2021
Tariff Revenue
Consumption charges	$	12,182	$	12,660		$	22,749	$	23,078
Fixed fees		7,751		6,872			15,529		13,871
Service charges		137		119			293		320
DSIC		1,282		1,316			2,464		2,488
Metered wastewater services		129		—			269		—
Industrial wastewater services		422		(384	)		828		(379	)
Total Tariff Revenue	$	21,903	$	20,583		$	42,132	$	39,378
Non-Tariff Revenue
Service line protection plans	$	1,217	$	1,134		$	2,439	$	2,230
Contract operations		242		217			453		447
Design and installation		978		62			1,101		212
Inspection fees		66		52			106		136
Total Non-Tariff Revenue	$	2,503	$	1,465		$	4,099	$	3,025
Other Operating Revenue	$	605	$	421		$	967	$	710
Total Operating Revenue	$	25,011	$	22,469		$	47,198	$	43,113

Contract Assets and Contract Liabilities

Our contract assets and liabilities consist of the following:

(in thousands)	June 30, 2022		December 31, 2021
Contract Assets – Tariff	$	3,156	$	2,144
Deferred Revenue
Deferred Revenue – Tariff	$	1,179	$	1,227
Deferred Revenue – Non-Tariff		404		287
Total Deferred Revenue	$	1,583	$	1,514

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LEASES (Tables)

6 Months Ended

Jun. 30, 2022

LEASES [Abstract]

Rent Expense for All Operating Leases Except Those with Terms of 12 Months or Less

Rent expense for all operating leases except those with terms of 12 months or less comprises:

	(in thousands)
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Minimum rentals	$	2	$	7	$	9	$	14
Contingent rentals		—		—		—		—
	$	2	$	7	$	9	$	14

Supplemental Cash Flow Information Related to Leases

Supplemental cash flow information related to leases is as follows:

	(in thousands)
	Six Months Ended		Six Months Ended
	June 30, 2022		June 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9	$	14
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	445	$	450

Supplemental Balance Sheet Information Related to Leases

Supplemental balance sheet information related to leases is as follows:

	(in thousands, except lease term and discount rate)
	June 30, 2022			December 31, 2021
Operating Leases:
Operating lease right-of-use assets	$	445		$	451
Other current liabilities	$	2			6
Operating lease liabilities		440			440
Total operating lease liabilities	$	442		$	446
Weighted Average Remaining Lease Term
Operating leases	61 years			61 years
Weighted Average Discount Rate
Operating leases		5.0	%		5.0	%

Maturities of Operating Lease Liabilities

Maturities of operating lease liabilities that have initial or remaining non-cancelable lease terms in excess of one year as of June 30, 2022 are as follows:

	(in thousands)
	Operating Leases
Year
2023	$	24
2024		24
2025		24
2026		24
2027		25
Thereafter		1,330
Total undiscounted lease payments	$	1,451
Less effects of discounting		(1,009	)
Total lease liabilities recognized	$	442

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STOCK COMPENSATION PLANS (Tables)

6 Months Ended

Jun. 30, 2022

STOCK COMPENSATION PLANS [Abstract]

Changes in Shares of Class A Common Stock Underlying Options and Restricted Stock Awards

The following summary reflects changes in the shares of Class A Stock underlying options and restricted stock awards for the six months ended June 30, 2022:

	Options									Restricted Awards
	Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (Yrs.)		Aggregate Intrinsic Value (in thousands)		Outstanding Restricted Stock Awards			Weighted Average Grant Date FairValue
Plan options/restricted stock awards
Outstanding at January 1, 2022		83,000		$	21.65			$	2,048		5,000		$	40.11
Granted		—			—				—		5,000			45.58
Exercised/vested and released		(35,750	)		20.93				905		(5,000	)		40.11
Expired/cancelled		—			—				—		—			—
Outstanding at June 30, 2022		47,250		$	22.20		1.425	$	1,274		5,000		$	40.11
Exercisable/vested at June 30, 2022		47,250		$	22.20		1.425	$	1,274		—			—

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OTHER DEFERRED ASSETS (Tables)

6 Months Ended

Jun. 30, 2022

OTHER DEFERRED ASSETS [Abstract]

Other Deferred Assets

The investment in CoBank, which is a cooperative bank, is related to certain outstanding First Mortgage Bonds and is a required investment in the bank based on the underlying long-term debt agreements.  Other deferred assets is primarily associated with the acquisition of TESI in January 2022 based on the preliminary purchase price allocation.  The purchase price allocation will be finalized once the valuation of assets acquired has been completed, no later than one year after the acquisition date.  In addition, other deferred assets includes the Mountain Hill Water Company acquisition.

In thousands	June 30, 2022	December 31, 2021
Investment in CoBank	$5,351	$4,850
Other deferred assets	1,765	247
	$7,116	$5,097

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REGULATORY ASSETS (Tables)

6 Months Ended

Jun. 30, 2022

REGULATORY ASSETS [Abstract]

Amortization Period of Other Regulatory Expense

Regulatory expenses amortized on a straight-line basis are noted below:

Expense	Years Amortized
Deferred contract costs and other	5
Rate case studies	5
Delaware rate proceedings	2.5
Maryland rate proceedings	5
Debt related costs	15 to 30 (based on term of related debt)
Goodwill (resulting from acquisition of Mountain Hill Water Company in 2008)	50
Deferred acquisition costs (resulting from purchase of water assets in Cecil County, Maryland in 2011 and Port Deposit, Maryland in 2010)	20
Franchise Costs (resulting from purchase of water assets in Cecil County, Maryland in 2011)	80

Regulatory Assets, Net of Amortization, Comprise

Regulatory assets, net of amortization, comprise:
	(in thousands)
	June 30, 2022		December 31, 2021
Deferred income taxes	$	475	$	355
Deferred contract costs and other		258		288
Debt related costs		4,829		4,902
Goodwill		269		273
Deferred acquisition and franchise costs		483		503
	$	6,314	$	6,321

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REGULATORY LIABILITIES (Tables)

6 Months Ended

Jun. 30, 2022

REGULATORY LIABILITIES [Abstract]

Regulatory Liabilities

Regulatory liabilities comprise:
	(in thousands)
	June 30, 2022		December 31, 2021
Utility plant retirement cost obligation	$	169	$	149
Deferred income taxes (related to TCJA)		21,463		21,111
	$	21,632	$	21,260

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NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE (Tables)

6 Months Ended

Jun. 30, 2022

NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE [Abstract]

Shares Used in Computing Basic and Diluted Net Income Per Share

The following table summarizes the shares used in computing basic and diluted net income per share:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Weighted average common shares outstanding during the period for Basic computation		9,452		9,395		9,438		9,381
Dilutive effect of employee stock options and awards		18		30		26		35
Weighted average common shares outstanding during the period for Diluted computation		9,470		9,425		9,464		9,416

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REGULATORY PROCEEDINGS (Tables)

6 Months Ended

Jun. 30, 2022

REGULATORY PROCEEDINGS [Abstract]

Eligible Plant Improvements

The following table summarizes (1) Artesian Water’s applications with the DEPSC to collect DSIC rates and (2) the rates upon which eligible plant improvements are based:

Application Date	11/20/20
DEPSC Approval Date	12/14/20
Effective Date	01/01/21
Cumulative DSIC Rate	7.50%
Net Eligible Plant Improvements – Cumulative Dollars (in millions)	$43.1
Eligible Plant Improvements – Installed Beginning Date	10/01/2014
Eligible Plant Improvements – Installed Ending Date	04/30/2019

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2022

FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

Carrying Amount and Fair Value of Long-Term Debt

All of Artesian Resources’ outstanding long-term debt as of June 30, 2022 and December 31, 2021 was fixed-rate.  The fair value of the Company’s long-term debt is determined by discounting their future cash flows using current market interest rates on similar instruments with comparable maturities consistent with FASB ASC 825.  Under the fair value hierarchy, the fair value of the long-term debt in the table below is classified as Level 2 measurements.  Level 2 is valued using observable inputs other than quoted prices.  The fair values for long-term debt differ from the carrying values primarily due to interest rates that differ from the current market interest rates.  The carrying amount and fair value of Artesian Resources' long-term debt (including current portion) are shown below:

In thousands
	June 30, 2022		December 31, 2021
Carrying amount	$	175,593	$	144,850
Estimated fair value	$	168,490	$	163,182

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BUSINESS COMBINATIONS (Tables)

6 Months Ended

Jun. 30, 2022

BUSINESS COMBINATIONS [Abstract]

Preliminary Purchase Price Allocation

The preliminary purchase price allocation is provisional and there could be material changes to the estimates below.

(In thousands)
		TESI
	Utility plant	$	19,455
	Cash		280
	Other assets		3,580
	Total assets		23,315
	Less: Liabilities and contributions in aid of construction (CIAC)
	Liabilities		3,536
	CIAC		16,657
	Net cash purchase price	$	3,122

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GENERAL (Details) $ in Thousands, gal / d in Millions		3 Months Ended	6 Months Ended
	Jan. 14, 2022 USD ($)	Jun. 30, 2022 USD ($) Facility Plan	Jun. 30, 2022 USD ($) gal / d Squarefeet Subsidiary	Jun. 30, 2021 USD ($)	May 26, 2022 USD ($)
Business Operations [Abstract]
Consideration transferred			$ 6,341	$ 0
Number of subsidiaries not regulated | Subsidiary			3
Artesian Development purchased area of office space (in square feet) | Squarefeet			10,000
Artesian Development purchased area of warehouse space (in square feet) | Squarefeet			10,000
Tidewater Environmental Services Inc [Member]
Business Operations [Abstract]
Purchase price		$ 3,122	$ 3,122
Consideration transferred	$ 6,400
Note forgiven	$ 2,100
Clayton [Member]
Business Operations [Abstract]
Purchase price					$ 5,000
Artesian Utility [Member]
Business Operations [Abstract]
Initial contract period of operating wastewater treatment facilities in Middletown		20 years
Number of wastewater treatment systems facility operations in Middletown | Facility		3
Capacity of wastewater treatment facilities | gal / d			3.8
Number of protection plans offered to customers | Plan		3

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REVENUE RECOGNITION, Disaggregated Revenues (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
REVENUE RECOGNITION [Abstract]
Minimum number of days for accounts receivable from tariff contract customers			25 days
Adjustment in reserve for bad debt		$ (300)		$ (300)	$ 500
Minimum number of days due for accounts receivable from SLP Plan customer			25 days
Minimum number of days customers services invoiced in advance			30 days
Disaggregation of Revenue [Abstract]
Other Operating Revenue not in scope of ASC 606	$ 605	421	$ 967	710
Total Operating Revenues	25,011	22,469	47,198	43,113
Tariff Revenue [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	21,903	20,583	42,132	39,378
Tariff Revenue [Member] | Consumption Charges [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	12,182	12,660	22,749	23,078
Tariff Revenue [Member] | Fixed Fees [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	7,751	6,872	15,529	13,871
Tariff Revenue [Member] | Service Charges [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	137	119	293	320
Tariff Revenue [Member] | DSIC [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	1,282	1,316	2,464	2,488
Tariff Revenue [Member] | Metered Wastewater Services [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	129	0	269	0
Tariff Revenue [Member] | Industrial Wastewater Services [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	422	(384)	828	(379)
Non-Tariff Revenue [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	2,503	1,465	4,099	3,025
Non-Tariff Revenue [Member] | Service Line Protection Plans [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	1,217	1,134	2,439	2,230
Non-Tariff Revenue [Member] | Contract Operations [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	242	217	453	447
Non-Tariff Revenue [Member] | Design and Installation [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	978	62	1,101	212
Non-Tariff Revenue [Member] | Inspection Fees [Member]
Disaggregation of Revenue [Abstract]
Total Operating Revenues	$ 66	$ 52	$ 106	$ 136

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REVENUE RECOGNITION, Contract Assets and Contract Liabilities (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Contract with Customer, Asset and Liability [Abstract]
Total Deferred Revenue	$ 1,583	$ 1,514
Tariff Revenue [Member]
Contract with Customer, Asset and Liability [Abstract]
Contract Assets	3,156	2,144
Total Deferred Revenue	1,179	1,227
Tariff Deferred Revenue	1,200
Non-Tariff Revenue [Member]
Contract with Customer, Asset and Liability [Abstract]
Total Deferred Revenue	404	$ 287
Tariff Deferred Revenue	$ 300

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LEASES (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Operating Lease, Description [Abstract]
Percentage of increase in annual lease payments			3.00%
Rent Expense [Abstract]
Minimum rentals	$ 2	$ 7	$ 9	$ 14
Contingent rentals	0	0	0	0
Rent expenses	2	$ 7	9	14
Cash paid for amounts included in the measurement of lease liabilities [Abstract]
Operating cash flows from operating leases			9	14
Right-of-use assets obtained in exchange for lease obligations [Abstract]
Operating leases			445	$ 450
Operating leases [Abstract]
Operating lease right-of-use assets	445		445		$ 451
Operating lease, liability [Abstract]
Other current liabilities	2		2		6
Operating lease liabilities	440		440		440
Total operating lease liabilities	$ 442		$ 442		$ 446
Weighted Average Remaining Lease Term [Abstract]
Operating leases	61 years		61 years		61 years
Weighted Average Discount Rate [Abstract]
Operating leases	5.00%		5.00%		5.00%
Maturities of Operating Lease Liabilities [Abstract]
2023	$ 24		$ 24
2024	24		24
2025	24		24
2026	24		24
2027	25		25
Thereafter	1,330		1,330
Total undiscounted lease payments	1,451		1,451
Less effects of discounting	(1,009)		(1,009)
Total lease liabilities recognized	$ 442		$ 442		$ 446
Minimum [Member]
Operating Lease, Description [Abstract]
Remaining lease term	20 years		20 years
Maximum [Member]
Operating Lease, Description [Abstract]
Remaining lease term	74 years		74 years
Option to extend lease term	66 years		66 years

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STOCK COMPENSATION PLANS (Details)			3 Months Ended		6 Months Ended
	May 03, 2022 $ / shares shares	May 04, 2021 $ / shares shares	Jun. 30, 2022 USD ($) $ / shares shares	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($) Director $ / shares shares	Jun. 30, 2021 USD ($)
Stock Compensation Plans [Abstract]
Compensation expense					$ 104,000	$ 92,000
Number of directors in committee | Director					3
Total intrinsic value of options exercised			$ 905,000
Shares of Class A Non-Voting Common Stock under option [Abstract]
Exercised/vested and released, aggregate intrinsic value			$ 905,000
Class A Stock [Member] | Stock Options [Member]
Stock Compensation Plans [Abstract]
Total intrinsic value of options exercised					$ 905,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding at beginning of period, option shares (in shares) | shares					83,000
Granted, option shares (in shares) | shares					0
Exercised/vested and released, option shares (in shares) | shares					(35,750)
Expired/cancelled, option shares (in shares) | shares					0
Outstanding at end of period, option shares (in shares) | shares			47,250		47,250
Exercisable/vested at end of period, option share (in shares) | shares			47,250		47,250
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
Outstanding at beginning of period, weighted average exercise price (in dollars per shares) | $ / shares					$ 21.65
Granted, weighted average exercise price (in dollars per share) | $ / shares					0
Exercised/vested and released, weighted average exercise price (in dollars per shares) | $ / shares					20.93
Expired/cancelled, weighted average exercise price (in dollars per share) | $ / shares					0
Outstanding at end of period, weighted average exercise price (in dollars per shares) | $ / shares			$ 22.20		22.20
Options exercisable at year end (in dollars per shares) | $ / shares			$ 22.20		$ 22.20
Shares of Class A Non-Voting Common Stock under option [Abstract]
Outstanding at end of period, weighted average remaining life					1 year 5 months 3 days
Exercisable/vested at end of period, weighted average remaining life					1 year 5 months 3 days
Outstanding at beginning of period, aggregate intrinsic value					$ 2,048,000
Granted, aggregate intrinsic value					0
Exercised/vested and released, aggregate intrinsic value					905,000
Expired/cancelled, aggregate intrinsic value					0
Outstanding at end of period, aggregate intrinsic value			$ 1,274,000		1,274,000
Exercisable/vested at end of period, aggregate intrinsic value			1,274,000		1,274,000
Class A Stock [Member] | Stock Options [Member] | 2015 Equity Compensation Plan [Member]
Stock Compensation Plans [Abstract]
Unrecognized expense related to non-vested option shares			0		0
Class A Stock [Member] | Restricted Stock [Member]
Stock Compensation Plans [Abstract]
Compensation expense			$ 55,000	$ 49,000	$ 104,000	$ 91,000
Fair value per share (in dollars per share) | $ / shares	$ 45.58	$ 40.11
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Granted, option shares (in shares) | shares	5,000	5,000
Shares [Roll Forward]
Outstanding at beginning of year (in shares) | shares					5,000
Granted (in shares) | shares					5,000
Exercised/vested and released, restricted stock awards (in shares) | shares					(5,000)
Cancelled (in shares) | shares					0
Unvested Outstanding at end of year (in shares) | shares			5,000		5,000
Weighted Average Grant Date Fair Value [Abstract]
Outstanding at beginning of year (in dollars per shares) | $ / shares					$ 40.11
Granted, weighted average grant date fair value (in dollars per share) | $ / shares					45.58
Vested and released, weighted average grant date fair value (in dollars per shares) | $ / shares					40.11
Cancelled, weighted average grant date fair value (in dollars per share) | $ / shares					0
Unvested Outstanding at end of year (in dollars per shares) | $ / shares			$ 40.11		$ 40.11
Class A Stock [Member] | Restricted Stock [Member] | 2015 Equity Compensation Plan [Member]
Stock Compensation Plans [Abstract]
Unrecognized expense related to non-vested option shares			$ 191,000		$ 191,000
Period over which unvested options cost will recognized					10 months 2 days

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OTHER DEFERRED ASSETS (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Other Deferred Assets [Abstract]
Investment in CoBank	$ 5,351	$ 4,850
Other deferred assets	1,765	247
Other deferred assets	$ 7,116	$ 5,097

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REGULATORY ASSETS (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Amortization period of other regulatory expense [Abstract]
Deferred contract costs and other		5 years
Rate case studies		5 years
Goodwill		50 years
Deferred acquisition costs		20 years
Franchise costs		80 years
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	$ 6,314	$ 6,314	$ 6,321
Maximum [Member]
Amortization period of other regulatory expense [Abstract]
Debt related cost		30 years
Minimum [Member]
Amortization period of other regulatory expense [Abstract]
Debt related cost		15 years
Delaware [Member]
Amortization period of other regulatory expense [Abstract]
Regulatory rate proceedings	2 years 6 months
Maryland [Member]
Amortization period of other regulatory expense [Abstract]
Regulatory rate proceedings	5 years
Deferred Income Taxes [Member]
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	$ 475	$ 475	355
Deferred Contract Costs and Other [Member]
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	258	258	288
Debt Related Costs [Member]
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	4,829	4,829	4,902
Goodwill [Member]
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	269	269	273
Deferred Acquisition and Franchise Costs [Member]
Regulatory assets net of amortization, comprise [Abstract]
Regulatory assets, net	$ 483	$ 483	$ 503

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REGULATORY LIABILITIES (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2022	Dec. 31, 2020	Dec. 31, 2021	Jan. 31, 2019	Dec. 31, 2017
REGULATORY LIABILITIES [Abstract]
Federal corporate tax rate	21.00%	34.00%
Decrease in the net deferred income tax liability					$ 24,300
Regulatory Liabilities [Abstract]
Regulatory liabilities	$ 21,632	$ 22,800	$ 21,260
DEPSC [Member]
Regulatory Liabilities [Abstract]
Regulatory liabilities				$ 22,200
Regulatory liabilities, amortization period	49 years 6 months
MDPSC [Member]
Regulatory Liabilities [Abstract]
Regulatory liabilities	$ 600
Utility Plant Retirement Cost Obligation [Member]
Regulatory Liabilities [Abstract]
Regulatory liabilities	169		149
Deferred Income Taxes [Member]
Regulatory Liabilities [Abstract]
Regulatory liabilities	$ 21,463		$ 21,111

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NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE (Details) - $ / shares	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Shares used in computing basic and diluted net income per share [Abstract]
Weighted average common shares outstanding during the period for Basic computation (in shares)	9,452,000	9,395,000	9,438,000	9,381,000
Dilutive effect of employee stock options and awards (in shares)	18,000	30,000	26,000	35,000
Weighted average common shares outstanding during the period for Diluted computation (in shares)	9,470,000	9,425,000	9,464,000	9,416,000
Earnings Per Share [Abstract]
Equity per common share (in dollars per share)	$ 0.53	$ 0.48	$ 1.01	$ 0.93
Class A Stock [Member]
Common Stock [Abstract]
Common stock, shares authorized (in shares)	15,000,000		15,000,000
Common stock, shares issued (in shares)	8,577,620	8,519,129	8,577,620	8,519,129
Common stock, shares outstanding (in shares)	8,577,620	8,519,129	8,577,620	8,519,129
Common stock, par value (in dollars per share)	$ 1.00		$ 1.00
Earnings Per Share [Abstract]
Equity per common share (in dollars per share)			$ 19.17		$ 18.94
Class B Stock [Member]
Common Stock [Abstract]
Common stock, shares authorized (in shares)	1,040,000		1,040,000
Common stock, shares issued (in shares)	881,452	881,452	881,452	881,452
Common stock, shares outstanding (in shares)	881,452	881,452	881,452	881,452
Common stock, par value (in dollars per share)	$ 1.00		$ 1.00
Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Abstract]
Shares excluded from calculations of diluted net income per share (in shares)	0	0	0	0

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REGULATORY PROCEEDINGS (Details) - USD ($) $ in Millions		3 Months Ended		6 Months Ended
	Nov. 20, 2020	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Other Proceedings [Abstract]
Cumulative DSIC Rate	7.50%
Net Eligible Plant Improvements - Cumulative Dollars	$ 43.1
Delaware [Member]
Rate Proceedings [Abstract]
Percentage of gross water sales				15.00%
Period to complete rate case by law				7 months
Delaware [Member] | Maximum [Member]
Rate Proceedings [Abstract]
Temporary annual rate increase subject to 15% gross water sales limitation				$ 2.5
Percentage of rate relief allowed should a rate case not complete				15.00%
Other Proceedings [Abstract]
Distribution System Improvement Charge rate increase applied between base rate filings				7.50%
Distribution System Improvement Charge rate increase within a 12-month period				5.00%
Artesian Water [Member]
Other Proceedings [Abstract]
Revenue earned in DSIC rate increases		$ 1.3	$ 1.3	$ 2.5	$ 2.5

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INCOME TAXES (Details)	6 Months Ended
	Jun. 30, 2022 USD ($)
Income Taxes [Abstract]
Reversal of reserve related to uncertain tax positions	$ 26,000
Income tax penalties and interest accrued for unrecognized tax position	$ 10,000
State Authorities [Member]
Income Taxes [Abstract]
Tax year open to examination	2018 2019 2020 2021
Federal Authorities [Member]
Income Taxes [Abstract]
Tax year open to examination	2018 2019 2020 2021

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Carrying Amount [Member]
Long-term Financial Liabilities [Abstract]
Long-term debt	$ 175,593	$ 144,850
Estimated Fair Value [Member]
Long-term Financial Liabilities [Abstract]
Long-term debt	$ 168,490	$ 163,182

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RELATED PARTY TRANSACTIONS (Details) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2021	Jun. 30, 2022
Related Party Transactions [Abstract]
Stock ownership required to be disclosed, minimum			5.00%
Morris Nichols Arsht & Tunnell LLP [Member]
Related Party Transactions [Abstract]
Amount paid for legal services	$ 58,000	$ 71,000

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BUSINESS COMBINATIONS (Details) $ in Thousands			3 Months Ended		6 Months Ended
	May 26, 2022 USD ($) Installment	Jan. 14, 2022 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)
Business Combinations [Abstract]
Consideration transferred					$ 6,341	$ 0
Amount of purchase price paid					6,621	0
Revenue from acquisition			$ 25,011	$ 22,469	47,198	43,113
Remaining purchase price			1,569	0	1,569	0
Preliminary purchase price allocation [Abstract]
Utility plant			28,335	0	28,335	0
Cash			280	0	280	0
Other assets			3,580	0	3,580	0
Total assets			32,195	0	32,195	0
Less: Liabilities and contributions in aid of construction (CIAC) [Abstract]
Liabilities			3,536	0	3,536	0
CIAC			20,469	$ 0	20,469	$ 0
Utility Plant [Member]
Less: Liabilities and contributions in aid of construction (CIAC) [Abstract]
CIAC	$ 3,800
Net cash paid for acquisitions	8,900
Tidewater Environmental Services Inc [Member]
Business Combinations [Abstract]
Consideration transferred		$ 6,400
Note forgiven		2,100
Amount of purchase price paid		$ 3,100
Revenue from acquisition			700		1,400
Pro forma revenue			700		1,400
Preliminary purchase price allocation [Abstract]
Utility plant			19,455		19,455
Cash			280		280
Other assets			3,580		3,580
Total assets			23,315		23,315
Less: Liabilities and contributions in aid of construction (CIAC) [Abstract]
Liabilities			3,536		3,536
CIAC			16,657		16,657
Net cash paid for acquisitions			$ 3,122		$ 3,122
Clayton [Member]
Business Combinations [Abstract]
Amount of purchase price paid	3,400
Remaining purchase price	$ 1,600
Number of installments | Installment	5
Interest rate	2.00%
Less: Liabilities and contributions in aid of construction (CIAC) [Abstract]
Net cash paid for acquisitions	$ 5,000

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GEOGRAPHIC CONCENTRATION OF CUSTOMERS (Details)	6 Months Ended
	Jun. 30, 2022 Customer County
Concentration Risks [Abstract]
Number of counties in which water utility service provided | County	3
Large Industrial Customer [Member]
Concentration Risks [Abstract]
Number of customers	1
Artesian Water [Member]
Concentration Risks [Abstract]
Number of customers	94,000
Artesian Water Maryland [Member]
Concentration Risks [Abstract]
Number of customers	2,600
Artesian Water Pennsylvania [Member]
Concentration Risks [Abstract]
Number of customers	40
Artesian Wastewater [Member]
Concentration Risks [Abstract]
Number of customers	7,300

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SUBSEQUENT EVENT (Details) $ in Millions	Aug. 18, 2022 USD ($)	Jul. 19, 2022 USD ($) Installment
Forecast [Member]
Subsequent Events [Abstract]
Litigation settlement amount to be received	$ 2.5
Subsequent Event [Member]
Subsequent Events [Abstract]
Litigation settlement amount		$ 10.0
Litigation settlement period		30 days
Litigation settlement, remaining amount		$ 7.5
Number of installments | Installment		3