Artesian Resources Corporation reported higher earnings for the first quarter as rate increases and growth in the number of customers offset lower water consumption.
Net income for the first quarter of 2016 was $2.8 million, an 11.5 percent increase compared to net income in the first quarter of 2015. Artesian is based near Newark.
Artesian stock, on Friday, was trading at around $29 a share, slightly below its all-time high of about $30, reached in late January of this year.
Revenues for the first quarter of 2016 were $18.4 million, a 2.7 percent increase from the $18 million in revenues recorded for the same three-month period of 2015. Water sales revenue increased by $400,000 or 2.5 percent, for the first quarter of 2016.
The growth in water sales revenue was due to an increase in the number of customers, the Distribution System Improvement Charge applied to customer bills, as well as the effect of the final rate adjustment as approved by the Delaware Public Service Commission.
This increase was slightly offset by a decrease in water consumption.
The charge allows Delaware water utilities to place into effect interim rate increases. “The Distribution System Improvement Charge has allowed Artesian to invest $7 million in the course of a year to replace and repair aging infrastructure to ensure proper water quality and service reliability for our customers,” said Dian C. Taylor, CEO.
Artesian’s rates are among the highest in the state, due, in part to its use of wells, rather than surface supplies of water. Also, municipally owned systems usually have lower rates, due to lower borrowing costs, higher population densities and lower returns (profits).
Non-utility operating revenues for the first quarter of 2016 were $1.1 million, an 8.1 percent increase from the same period in 2015, reflecting an increase in the number of customers enrolled in Service Line Protection Plans.
“Late in 2015 we introduced a third service line protection plan that covers a customer’s internal plumbing. This new plan offering along with an increase in participation in our existing water and sewer service line protection plan offerings accounted for the increase in non-utility operating revenue. Our customers can now obtain protection against the costs for repair or replacement of pipe within the home as well as for the service lines from the house to the street,” said Taylor.
The protection plans from the utility provide a degree of assurance for customers worried about pipe breaks and other problems. The Better Business Bureau says property owners should check out costs and see whether their pipes are covered under insurance policies. If not, costs of adding a rider to the policy or using a protection service should be weighed. In some cases, keeping money in savings that would cover such problems may be the cheapest solution.
Depreciation and amortization expense increased by $100,000 or 4.8 percent, to $2.3 million as a result of continued investment in utility plant providing supply, treatment, storage and distribution of water to customers.
“In the past 12 months, Artesian has invested about $21 million in supply, treatment, storage and distribution infrastructure to continue to ensure a reliable and safe water supply for our customers,” said Taylor.
Artesian serves all three counties in Delaware and Cecil County, MD, although the bulk of its system is in northern New Castle County.
Artesian is one of three investor-owned utilities in Delaware, the others being Tidewater Utilities, part of a New Jersey-based water company, and a French company, Suez, formerly United Water.
