UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐	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 001-34245

THE YORK WATER COMPANY

(Exact name of registrant as specified in its charter)

Pennsylvania	23-1242500
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

130 East Market Street, York, Pennsylvania	17401
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code (717) 845-3601

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, No par value	YORW	The NASDAQ Global Select Market
(Title of Class)	(Trading Symbol)	(Name of Each Exchange on Which Registered)

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 12b-2 of the Exchange Act:

Large accelerated filer ◻	Accelerated filer ◻		Non-accelerated filer ⌧

Small 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
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Common stock, No par value	13,093,427 Shares outstanding as of August 5, 2021

TABLE OF CONTENTS

PART I	Financial Information

Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26

PART II	Other Information

Item 6.	Exhibits	27

Signatures		28

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THE YORK WATER COMPANY

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements.

Balance Sheets (Unaudited)

(In thousands of dollars, except per share amounts)

	Jun. 30, 2021			Dec. 31, 2020
ASSETS
UTILITY PLANT, at original cost	$	457,196		$	438,670
Plant acquisition adjustments		(3,673	)		(3,707	)
Accumulated depreciation		(94,377	)		(91,340	)
Net utility plant		359,146			343,623

OTHER PHYSICAL PROPERTY, net of accumulated depreciation of $471 in 2021and $458 in 2020		729			742

CURRENT ASSETS:
Cash and cash equivalents		6			2
Restricted cash		–			5,000
Accounts receivable, net of reserves of $792 in 2021 and $655 in 2020		4,206			5,184
Unbilled revenues		3,179			2,847
Recoverable income taxes		653			721
Materials and supplies inventories, at cost		1,033			1,010
Prepaid expenses		1,808			1,526
Total current assets		10,885			16,290

OTHER LONG-TERM ASSETS:
Prepaid pension cost		3,802			2,209
Note receivable		255			255
Deferred regulatory assets		41,996			39,893
Other assets		4,163			3,945
Total other long-term assets		50,216			46,302

Total Assets	$	420,976		$	406,957

The accompanying notes are an integral part of these statements.

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THE YORK WATER COMPANY

Balance Sheets (Unaudited)

(In thousands of dollars, except per share amounts)

	Jun. 30, 2021		Dec. 31, 2020
STOCKHOLDERS' EQUITY AND LIABILITIES
COMMON STOCKHOLDERS' EQUITY:
Common stock, no par value, authorized 46,500,000 shares, issued and outstanding 13,090,055 shares in 2021 and 13,060,817 shares in 2020	$	87,100	$	85,935
Retained earnings		60,606		57,317
Total common stockholders' equity		147,706		143,252

PREFERRED STOCK, authorized 500,000 shares, no shares issued		–		–

LONG-TERM DEBT		126,996		123,573

COMMITMENTS		–		–

CURRENT LIABILITIES:
Accounts payable		8,359		6,540
Dividends payable		2,193		2,192
Accrued compensation and benefits		1,469		1,417
Accrued interest		958		959
Deferred regulatory liabilities		581		525
Other accrued expenses		358		360
Total current liabilities		13,918		11,993

DEFERRED CREDITS:
Customers' advances for construction		10,907		10,326
Deferred income taxes		45,787		43,538
Deferred employee benefits		4,821		4,793
Deferred regulatory liabilities		27,059		25,444
Other deferred credits		2,328		2,731
Total deferred credits		90,902		86,832

Contributions in aid of construction		41,454		41,307

Total Stockholders' Equity and Liabilities	$	420,976	$	406,957

The accompanying notes are an integral part of these statements.

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THE YORK WATER COMPANY

Statements of Income (Unaudited)

(In thousands of dollars, except per share amounts)

	Three Months Ended June 30						Six Months Ended June 30
	2021			2020			2021			2020

OPERATING REVENUES	$	13,801		$	13,320		$	26,882		$	26,197

OPERATING EXPENSES:
Operation and maintenance		2,949			2,618			5,755			5,281
Administrative and general		2,441			2,072			4,852			4,316
Depreciation and amortization		2,198			2,043			4,372			4,067
Taxes other than income taxes		311			294			647			624
		7,899			7,027			15,626			14,288

Operating income		5,902			6,293			11,256			11,909

OTHER INCOME (EXPENSES):
Interest on debt		(1,222	)		(1,156	)		(2,436	)		(2,351	)
Allowance for funds used during construction		311			114			573			215
Other pension costs		(303	)		(340	)		(607	)		(681	)
Gain on life insurance		–			–			–			515
Other income (expenses), net		(44	)		(121	)		(145	)		(246	)
		(1,258	)		(1,503	)		(2,615	)		(2,548	)

Income before income taxes		4,644			4,790			8,641			9,361

Income taxes		160			608			452			1,177

Net Income	$	4,484		$	4,182		$	8,189		$	8,184

Basic Earnings Per Share	$	0.35		$	0.32		$	0.63		$	0.63

Diluted Earnings Per Share	$	0.35		$	0.32		$	0.63		$	0.63

The accompanying notes are an integral part of these statements.

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THE YORK WATER COMPANY

Statements of Common Stockholders' Equity (Unaudited)

(In thousands of dollars, except per share amounts)

For the Periods Ended June 30, 2021 and 2020

	Common Stock Shares		Common Stock Amount		Retained Earnings			Total

Balance, March 31, 2021		13,071,733	$	86,436	$	58,574		$	145,010
Net income		–		–		4,484			4,484
Cash dividends declared, $0.1874 per share		–		–		(2,452	)		(2,452	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		12,152		571		–			571
Stock-based compensation		6,170		93		–			93
Balance, June 30, 2021		13,090,055	$	87,100	$	60,606		$	147,706

Balance, December 31, 2020		13,060,817	$	85,935	$	57,317		$	143,252
Net income		–		–		8,189			8,189
Cash dividends declared, $0.3748 per share		–		–		(4,900	)		(4,900	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		23,068		1,044		–			1,044
Stock-based compensation		6,170		121		–			121
Balance, June 30, 2021		13,090,055	$	87,100	$	60,606		$	147,706

	Common Stock Shares		Common Stock Amount		Retained Earnings			Total

Balance, March 31, 2020		13,024,187	$	84,424	$	51,865		$	136,289
Net income		–		–		4,182			4,182
Cash dividends declared, $0.1802 per share		–		–		(2,347	)		(2,347	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		9,812		433		–			433
Stock-based compensation		–		15		–			15
Balance, June 30, 2020		13,033,999	$	84,872	$	53,700		$	138,572

Balance, December 31, 2019		13,014,898	$	83,976	$	50,209		$	134,185
Net income		–		–		8,184			8,184
Cash dividends declared, $0.3604 per share		–		–		(4,693	)		(4,693	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		19,101		844		–			844
Stock-based compensation		–		52		–			52
Balance, June 30, 2020		13,033,999	$	84,872	$	53,700		$	138,572

The accompanying notes are an integral part of these statements.

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THE YORK WATER COMPANY

Statements of Cash Flows (Unaudited)

(In thousands of dollars, except per share amounts)

	Six Months Ended June 30
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	8,189		$	8,184
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on life insurance		–			(515	)
Depreciation and amortization		4,372			4,067
Stock-based compensation		121			52
Decrease in deferred income taxes		(72	)		(69	)
Other		38			206
Changes in assets and liabilities:
(Increase) decrease in accounts receivable and unbilled revenues		443			(1,176	)
Decrease in recoverable income taxes		68			547
Increase in materials and supplies, prepaid expenses, prepaid pension cost, regulatory and other assets		(4,471	)		(3,772	)
Increase in accounts payable, accrued compensation and benefits, accrued expenses, deferred employee benefits, regulatory liabilities, and other deferred credits		3,415			1,522
Increase (decrease) in accrued interest		(1	)		701
Net cash provided by operating activities		12,102			9,747

CASH FLOWS FROM INVESTING ACTIVITIES:
Utility plant additions, including debt portion of allowance for funds used during construction of $320 in 2021 and $120 in 2020		(16,043	)		(8,986	)
Cash received from surrender of life insurance policies		–			672
Net cash used in investing activities		(16,043	)		(8,314	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Customers' advances for construction and contributions in aid of construction		1,204			1,885
Repayments of customer advances		(476	)		(105	)
Proceeds of long-term debt issues		23,910			14,759
Repayments of long-term debt		(20,575	)		(12,805	)
Changes in cash overdraft position		(1,263	)		(1,331	)
Issuance of common stock		1,044			844
Dividends paid		(4,899	)		(4,680	)
Net cash used in financing activities		(1,055	)		(1,433	)

Net change in cash, cash equivalent, and restricted cash		(4,996	)		–
Cash, cash equivalents, and restricted cash at beginning of period		5,002			2
Cash and cash equivalents at end of period	$	6		$	2

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized	$	2,016		$	2,170
Income taxes		217			–

Supplemental disclosure of non-cash investing and financing activities: Accounts payable includes $5,166 in 2021 and $2,854 in 2020 for the construction of utility plant.

The accompanying notes are an integral part of these statements.

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THE YORK WATER COMPANY

Notes to Interim Financial Statements

(In thousands of dollars, except per share amounts)

1. Basis of Presentation

The interim financial statements are unaudited but, in the opinion of management, reflect all adjustments, consisting of only normal recurring accruals, necessary for a fair presentation of results for such periods. Because the financial statements cover an interim period, they do not include all disclosures and notes normally provided in annual financial statements, and therefore, should be read in conjunction with the financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. Additionally, based on the duration and severity of the novel coronavirus ("COVID-19") pandemic, the Company is uncertain of the ultimate impact it could have on the business.

2. Accounts Receivable and Contract Assets

Accounts receivable and contract assets are summarized in the following table:

	As of Jun. 30, 2021			As of Dec. 31, 2020			Change

Accounts receivable – customers	$	4,782		$	5,633		$	(851	)
Other receivables		216			206			10
		4,998			5,839			(841	)
Less: allowance for doubtful accounts		(792	)		(655	)		(137	)
Accounts receivable, net	$	4,206		$	5,184		$	(978	)

Unbilled revenue	$	3,179		$	2,847		$	332

Differences in timing of revenue recognition, billings, and cash collections result in receivables and contract assets. Generally, billing occurs subsequent to revenue recognition, resulting in a contract asset reported as unbilled revenue on the balance sheet. The Company does not receive advances or deposits from customers before revenue is recognized so no contract liabilities are reported. Accounts receivable are recorded when the right to consideration becomes unconditional and are presented separately on the balance sheet. The changes in accounts receivable – customers and in unbilled revenue were primarily due to normal timing difference between performance and the customer’s payments.

3. Common Stock and Earnings Per Share

Net income of $4,484 and $4,182 for the three months ended June 30, 2021 and 2020, respectively, and $8,189 and $8,184 for the six months ended June 30, 2021 and 2020, respectively, is used to calculate both basic and diluted earnings per share. Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding plus potentially dilutive shares. The dilutive effect of employee stock-based compensation is included in the computation of diluted earnings per share and is calculated using the treasury stock method and expected proceeds upon exercise or issuance of the stock-based compensation.

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

	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020

Weighted average common shares, basic		13,068,806		13,022,088		13,062,374		13,015,842
Effect of dilutive securities:
Employee stock-based compensation		1,435		882		1,088		579
Weighted average common shares, diluted		13,070,241		13,022,970		13,063,462		13,016,421

On March 11, 2013, the Board of Directors, or the Board, authorized a share repurchase program granting the Company authority to repurchase up to 1,200,000 shares of the Company's common stock from time to time. The stock repurchase program has no specific end date and the Company may repurchase shares in the open market or through privately negotiated transactions. The Company may suspend or discontinue the repurchase program at any time. No shares were repurchased during the three or six months ended June 30, 2021 and 2020. As of June 30, 2021, 618,004 shares remain authorized for repurchase.

4. Debt

For the six months ended June 30, 2021, the Company did not enter into any new long-term debt arrangements or modify its outstanding long-term debt, which is summarized in the table below.

	As of Jun. 30, 2021			As of Dec. 31, 2020

8.43% Senior Notes, Series D, due 2022	$	7,500		$	7,500
Variable Rate Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series 2008A, due 2029		12,000			12,000
3.00% Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series A of 2019, due 2036		10,500			10,500
3.10% Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series B of 2019, due 2038		14,870			14,870
3.23% Senior Notes, due 2040		15,000			15,000
4.00% - 4.50% York County Industrial Development Authority Exempt Facilities Revenue Bonds, Series 2015, due 2029 - 2045		10,000			10,000
4.54% Senior Notes, due 2049		20,000			20,000
3.24% Senior Notes, due 2050		30,000			30,000
Committed Line of Credit, due September 2023		10,035			6,700
Total long-term debt		129,905			126,570
Less discount on issuance of long-term debt		(175	)		(181	)
Less unamortized debt issuance costs		(2,734	)		(2,816	)
Long-term portion	$	126,996		$	123,573

Subsequent to June 30, 2021, the Company renewed its committed line of credit and extended the maturity date to September 2023.

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5. Interest Rate Swap Agreement

The Company is exposed to certain risks relating to its ongoing business operations. The primary risk managed by using derivative instruments is interest rate risk. The Company utilizes an interest rate swap agreement to effectively convert the Company's $12,000 variable-rate debt issue to a fixed rate. Interest rate swaps are contracts in which a series of interest rate cash flows are exchanged over a prescribed period. The notional amount on which the interest payments are based ($12,000) is not exchanged. The interest rate swap provides that the Company pays the counterparty a fixed interest rate of 3.16% on the notional amount of $12,000. In exchange, the counterparty pays the Company a variable interest rate based on 59% of the U.S. Dollar one-month LIBOR rate on the notional amount. The intent is for the variable rate received from the swap counterparty to approximate the variable rate the Company pays to bondholders on its variable rate debt issue, resulting in a fixed rate being paid to the swap counterparty and reducing the Company's interest rate risk. The Company’s net payment rate on the swap was 3.09% and 2.91% for the three months ended June 30, 2021 and 2020, respectively, and 3.02% and 2.59% for the six months ended June 30, 2021 and 2020, respectively.

The interest rate swap agreement is classified as a financial derivative used for non-trading activities. The accounting standards regarding accounting for derivatives and hedging activities require companies to recognize all derivative instruments as either assets or liabilities at fair value on the balance sheet. In accordance with the standards, the interest rate swap is recorded on the balance sheet in other deferred credits at fair value (see Note 6).

The Company uses regulatory accounting treatment rather than hedge accounting to defer the unrealized gains and losses on its interest rate swap. These unrealized gains and losses are recorded as a regulatory asset. Based on current ratemaking treatment, the Company expects the unrealized gains and losses to be recognized in rates as a component of interest expense as the swap settlements occur. Swap settlements are recorded in the income statement with the hedged item as interest expense. Swap settlements resulted in the reclassification from regulatory assets to interest expense of $93 and $87 for the three months ended June 30, 2021 and 2020, respectively, and $184 and $156 for the six months ended June 30, 2021 and 2020, respectively. The overall swap result was a (gain) loss of $212 and $189 for the three months ended June 30, 2021 and 2020, respectively, and $(219) and $901 for the six months ended June 30, 2021 and 2020, respectively. The Company expects to reclassify $369 from regulatory assets to interest expense as a result of swap settlements over the next 12 months.

The interest rate swap agreement contains provisions that require the Company to maintain a credit rating of at least BBB- with Standard & Poor's. If the Company's rating were to fall below this rating, it would be in violation of these provisions, and the counterparty to the derivative could request immediate payment if the derivative was in a liability position. On October 21, 2020, Standard & Poor's affirmed the Company's credit rating at A-, with a stable outlook and adequate liquidity. The Company's interest rate swap was in a liability position as of June 30, 2021. If a violation due to credit rating, or some other default provision, were triggered on June 30, 2021, the Company would have been required to pay the counterparty approximately $2,368.

The interest rate swap will expire on October 1, 2029. Other than the interest rate swap, the Company has no other derivative instruments.

6. Fair Value of Financial Instruments

The accounting standards regarding fair value measurements establish a fair value hierarchy which indicates the extent to which inputs used in measuring fair value are observable in the market. Level 1 inputs include quoted prices for identical instruments and are the most observable. Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, commodity rates and yield curves. Level 3 inputs are not observable in the market and include management’s own judgments about the assumptions market participants would use in pricing the asset or liability.

The Company has recorded its interest rate swap liability at fair value in accordance with the standards. The liability is recorded under the caption “Other deferred credits” on the balance sheet. The table below illustrates the fair value of the interest rate swap as of the end of the reporting period.

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Description		June 30, 2021		Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2)
Interest Rate Swap		$2,328		$2,328

Fair values are measured as the present value of all expected future cash flows based on the LIBOR-based swap yield curve as of the date of the valuation. These inputs to this calculation are deemed to be Level 2 inputs. The balance sheet carrying value reflects the Company's credit quality as of June 30, 2021. The rate used in discounting all prospective cash flows anticipated to be made under this swap reflects a representation of the yield to maturity for 30-year debt on utilities rated A- as of June 30, 2021. The use of the Company's credit rating resulted in a reduction in the fair value of the swap liability of $40 as of June 30, 2021. The fair value of the swap reflecting the Company's credit quality as of December 31, 2020 is shown in the table below.

Description		December 31, 2020		Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2)
Interest Rate Swap		$2,731		$2,731

The carrying amount of current assets and liabilities that are considered financial instruments approximates fair value as of the dates presented. The Company's total long-term debt, with a carrying value of $129,905 at June 30, 2021, and $126,570 at December 31, 2020, had an estimated fair value of approximately $147,000 and $151,000, respectively. The estimated fair value of debt was calculated using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration and risk profile. These inputs to this calculation are deemed to be Level 2 inputs. The Company recognized its credit rating in determining the yield curve, and did not factor in third party credit enhancements including the letter of credit on the 2008 Pennsylvania Economic Development Financing Authority Series A issue.

Customers' advances for construction and note receivable had carrying values at June 30, 2021 of $10,907 and $255, respectively. At December 31, 2020, customers' advances for construction and note receivable had carrying values of $10,326 and $255, respectively. The relative fair values of these amounts cannot be accurately estimated since the timing of future payment streams is dependent upon several factors, including new customer connections, customer consumption levels and future rate increases.

7. Commitments

The Company entered into a consent order agreement with the Pennsylvania Department of Environmental Protection in December 2016 after the Company determined it exceeded the action level for lead as established by the Lead and Copper Rule, or LCR, issued by the U.S. Environmental Protection Agency. The Company did not have an exceedance in any subsequent compliance test. Under the agreement, the Company successfully completed its commitment to exceed the LCR replacement schedule by replacing all the known company-owned lead service lines within four years from the agreement. Any additional company-owned lead service lines that are discovered will be replaced and included in utility plant but are not expected to have a material impact on the financial position of the Company.

The Company was granted approval by the Pennsylvania Public Utility Commission, or PPUC, to modify its tariff to include the cost of the annual replacement of up to 400 lead customer-owned service lines over nine years from the agreement. The tariff modification allows the Company to replace customer-owned service lines at its own initial cost. The Company will record the costs as a regulatory asset to be recovered in future base rates to customers, over a four-year period. The cost for the customer-owned lead service line replacements was approximately $1,258 and $1,204 through June 30, 2021 and December 31, 2020, respectively, and is included as a regulatory asset. Based on its experience, the Company estimates that lead customer-owned service lines replacements will cost $1,500. This estimate is subject to adjustment as more facts become available.

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8. Revenue

The following table shows the Company’s revenues disaggregated by service and customer type.

	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020
Water utility service
Residential	$	8,543	$	8,664	$	16,688	$	16,741
Commercial and industrial		3,629		3,216		6,939		6,557
Fire protection		795		783		1,601		1,584
Wastewater utility service
Residential		474		425		945		835
Commercial and industrial		79		75		158		151
Billing and revenue collection services		120		14		239		29
Collection services		11		–		11		14
Other revenue		10		5		20		10
Total Revenue from Contracts with Customers		13,661		13,182		26,601		25,921
Rents from regulated property		140		138		281		276
Total Operating Revenue	$	13,801	$	13,320	$	26,882	$	26,197

Utility Service

The Company provides utility service as a distinct and single performance obligation to each of its water and wastewater customers. The transaction price is detailed in the tariff pursuant to an order by the PPUC and made publicly available. There is no variable consideration and no free service, special rates, or subnormal charges to any customer. Due to the fact that the contract includes a single performance obligation, no judgment is required to allocate the transaction price. The performance obligation is satisfied over time through the continuous provision of utility service through a stand-ready obligation to perform and the transfer of water or the collection of wastewater through a series of distinct transactions that are identical in nature and have the same pattern of transfer to the customer. The Company uses an output method to recognize the utility service revenue over time. The stand-ready obligation is recognized through the passage of time in the form of a fixed charge and the transfer of water or the collection of wastewater is recognized at a per unit rate based on the actual or estimated flow through the meter. Each customer is invoiced every month and the invoice is due within twenty days. The utility service has no returns or warranties associated with it. No revenue is recognized from performance obligations satisfied in prior periods and no performance obligations remain unsatisfied as of the end of the reporting period. A contract asset for unbilled revenue is recognized for the passage of time and the actual or estimated usage from the latest meter reading to the end of the accounting period. The methodology is standardized and consistently applied to reduce bias and the need for judgment.

Billing and Revenue Collection Service

The Company provides billing and revenue collection service as distinct performance obligations to three municipalities within the service territory of the Company. The municipalities provide wastewater service to their residents and the Company acts as the billing and revenue collection agent for the municipalities. The transaction price is a fixed amount per bill prepared as established in the contract. There is no variable consideration. Due to the fact that both the billing performance obligation and the revenue collection performance obligation are materially complete by the end of the reporting period, the Company does not allocate the transaction price between the two performance obligations. The performance obligations are satisfied at a point in time when the bills are sent as the municipalities receive all the benefits and bears all of the risk of non-collection at that time. Each municipality is invoiced when the bills are complete and the invoice is due within thirty days. The billing and revenue collection service has no returns or warranties associated with it. No revenue is recognized from performance obligations satisfied in prior periods and no performance obligations remain unsatisfied as of the end of the reporting period.

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Collection Service

The Company provides collection service as a distinct and single performance obligation to several municipalities within the service territory of the Company. The municipalities provide wastewater service to their residents. If those residents are delinquent in paying for their wastewater service, the municipalities request that the Company post for and shut off the supply of water to the premises of those residents. When the resident is no longer delinquent, the Company will restore water service to the premises. The transaction price for each posting, each shut off, and each restoration is a fixed amount as established in the contract. There is no variable consideration. Due to the fact that the contract includes a single performance obligation, no judgment is required to allocate the transaction price. The performance obligation is satisfied at a point in time when the posting, shut off, or restoration is completed as the municipalities receive all the benefits in the form of payment or no longer providing wastewater service. Each municipality is invoiced periodically for the posting, shut offs, and restorations that have been completed since the last billing and the invoice is due within thirty days. The collection service has no returns or warranties associated with it. No revenue is recognized from performance obligations satisfied in prior periods and no performance obligations remain unsatisfied as of the end of the reporting period. A contract asset for unbilled revenue is recognized for postings, shut offs, and restorations that have been completed from the last billing to the end of the accounting period.

Service Line Protection Plan

The Company provides service line protection as a distinct and single performance obligation to current water customers that choose to participate. The transaction price is detailed in the plan’s terms and conditions and made publicly available. There is no variable consideration. Due to the fact that the contract includes a single performance obligation, no judgment is required to allocate the transaction price. The performance obligation is satisfied over time through the continuous provision of service line protection through a stand-ready obligation to perform. The Company uses an output method to recognize the service line protection revenue over time. The stand-ready obligation is recognized through the passage of time. A customer has a choice to prepay for an entire year or to pay in advance each month. The service line protection plan has no returns or extended warranties associated with it. No revenue is recognized from performance obligations satisfied in prior periods and no material performance obligations remain unsatisfied as of the end of the reporting period.

9. Rate Matters

From time to time, the Company files applications for rate increases with the PPUC and is granted rate relief as a result of such requests. Most recently, the PPUC authorized an increase in rates effective March 1, 2019.

The PPUC permits water utilities to collect a distribution system improvement charge, or DSIC. The DSIC allows the Company to add a charge to customers' bills for qualified replacement costs of certain infrastructure without submitting a rate filing. This surcharge mechanism typically adjusts periodically based on additional qualified capital expenditures completed or anticipated in a future period. The DSIC is capped at 5% of base rates, and is reset to zero when new base rates that reflect the costs of those additions become effective or when a utility's earnings exceed a regulatory benchmark. During its most recent quarterly reporting period, the Company's earnings were below the regulatory benchmark and the Company began recognizing DSIC in June 2021 for bills rendered after July 1, 2021 that included June consumption. The DSIC provided revenues of $25 for the three and six months ended June 30, 2021 and $0 for the three and six months ended June 30, 2020.

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10. Pensions

Components of Net Periodic Pension Cost

	Three Months Ended June 30						Six Months Ended June 30
	2021			2020			2021			2020

Service cost	$	272		$	235		$	543		$	469
Interest cost		302			364			604			728
Expected return on plan assets		(913	)		(800	)		(1,826	)		(1,599	)
Amortization of actuarial loss		121			93			242			185
Amortization of prior service cost		(3	)		(3	)		(6	)

SEC Form 10-Q filed by The York Water Company