Essential Utilities Inc Stock

Essential Utilities, Inc., through its subsidiaries, provides water, wastewater, or natural gas services.

The company provides its services to an estimated 5.5 million people in Pennsylvania, Ohio, Texas, Illinois, North Carolina, New Jersey, Indiana, Virginia, and Kentucky under the Aqua and Peoples brands. One of the company's largest operating subsidiaries, Aqua Pennsylvania, Inc., or Aqua Pennsylvania, accounted for approximately 56% of operating revenues and approximately 68% of income for its Regulated Water segment in 2023. As of December 31, 2023, Aqua Pennsylvania provided water or wastewater services to approximately one-half of the total number of water and wastewater customers the company serves. Aqua Pennsylvania's service territory is located in the suburban areas in counties north and west of the City of Philadelphia and in 27 other counties in Pennsylvania. The company's other regulated water or wastewater utility subsidiaries provide similar services in seven additional states. The company's Peoples subsidiaries provide natural gas service to approximately 744,000 customers in western Pennsylvania and Kentucky. Approximately 95% of the total number of natural gas utility customers the company serves are in western Pennsylvania. The company also operates market-based activities, conducted through its non-regulated subsidiaries, that provide utility service line protection solutions and repair services to households and gas marketing and production activities.

The company seeks to acquire businesses in the U.S. regulated sector, focusing on water and wastewater utilities and to opportunistically pursue growth ventures in select market-based activities, such as infrastructure opportunities that are supplementary and complementary to its regulated water utility businesses.

In 2022, the company signed an agreement to sell its regulated natural gas utility assets in West Virginia, which represented approximately two percent of the company's regulated natural gas customers. The sale closed on October 1, 2023.

In 2023, the company entered into an agreement to sell its interest in three non-utility local microgrid and distributed energy projects. The sale was completed in January 2024.

Segments

The company operates through two segments, the Regulated Water and the Regulated Natural Gas.

The Regulated Water segment consists of eight operating segments for the company's water and wastewater regulated utility companies, aligned with the states where it provides these services. These operating segments are aggregated into one reportable segment since each of the company's operating segments has the following similarities: economic characteristics, nature of services, production processes, customers, water distribution or wastewater collection methods, and the nature of the regulatory environment.

The Regulated Natural Gas segment consists of one operating segment representing natural gas utility companies, for which the company provides natural gas distribution services. In addition to the company's two reportable segments, the company includes two of its operating segments in Other. These businesses represent its non-regulated water, wastewater, and natural gas operations, which are not quantitatively significant to be reportable and therefore are included as a component of Other.

Customers

The company's water utility customer base is diversified among residential water, commercial water, fire protection, industrial water, other water, wastewater customers, and other utility customers (consisting of contracted services that are associated with the utility operations). Residential water and wastewater customers make up the largest component of the company's water utility customer base, with these customers representing approximately 69% of its water and wastewater revenues for 2023. Substantially all of the company's water utility customers are metered, which allows it to measure and bill for its customers' water consumption. Water consumption per customer is affected by local weather conditions during the year, especially during late spring, summer, and early fall.

On occasion, abnormally dry weather in the company's service areas can result in governmental authorities declaring drought warnings and imposing water use restrictions in the affected areas, which could reduce water consumption. The geographic diversity of the company's water utility customer base reduces the effect of its exposure to extreme or unusual weather conditions in any one area of its service territories.

The company's natural gas utility customer base is diversified among residential gas, commercial gas, industrial gas, gas transportation, and other utility. Substantially all of the company's natural gas utility customers are metered, which allows it to measure and bill for its customers' natural gas usage. The company's regulated natural gas revenues and expenses are also affected by the cost of gas. The company is generally able to pass the cost of gas through to its customers using a purchased gas adjustment clause; therefore, fluctuations in the cost of purchased gas impact revenues on a dollar-for-dollar basis.

Regulation

The company's gathering system is regulated by the Pennsylvania Public Utility Commission, which includes various safety, environmental and, in various circumstances, anti-discrimination requirements, and in various instances complaint-based rate regulation. The company maintains safety policies and procedures to comply with the Occupational Safety and Health Administration's rules and regulations.

History

The company was founded in 1886. It was formerly known as Philadelphia Suburban Corporation and changed its name to Aqua America, Inc. in 2004 and then to Essential Utilities, Inc. in 2020.