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 September 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	13,104,609 Shares outstanding as of November 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)

	Sep. 30, 2021			Dec. 31, 2020
ASSETS
UTILITY PLANT, at original cost	$	467,343		$	438,670
Plant acquisition adjustments		(3,657	)		(3,707	)
Accumulated depreciation		(96,123	)		(91,340	)
Net utility plant		367,563			343,623

OTHER PHYSICAL PROPERTY, net of accumulated depreciation of $477 in 2021 and $458 in 2020		723			742

CURRENT ASSETS:
Cash and cash equivalents		1			2
Restricted cash		–			5,000
Accounts receivable, net of reserves of $856 in 2021 and $655 in 2020		3,935			5,184
Unbilled revenues		3,047			2,847
Recoverable income taxes		21			721
Materials and supplies inventories, at cost		1,379			1,010
Prepaid expenses		1,790			1,526
Total current assets		10,173			16,290

OTHER LONG-TERM ASSETS:
Prepaid pension cost		4,598			2,209
Note receivable		255			255
Deferred regulatory assets		43,151			39,893
Other assets		4,285			3,945
Total other long-term assets		52,289			46,302

Total Assets	$	430,748		$	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)

	Sep. 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 13,102,924 shares in 2021 and 13,060,817 shares in 2020	$	87,714	$	85,935
Retained earnings		62,946		57,317
Total common stockholders' equity		150,660		143,252

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

LONG-TERM DEBT		132,197		123,573

COMMITMENTS		–		–

CURRENT LIABILITIES:
Accounts payable		7,455		6,540
Dividends payable		2,202		2,192
Accrued compensation and benefits		1,519		1,417
Accrued interest		1,068		959
Deferred regulatory liabilities		607		525
Other accrued expenses		360		360
Total current liabilities		13,211		11,993

DEFERRED CREDITS:
Customers' advances for construction		11,358		10,326
Deferred income taxes		46,922		43,538
Deferred employee benefits		4,834		4,793
Deferred regulatory liabilities		27,905		25,444
Other deferred credits		2,203		2,731
Total deferred credits		93,222		86,832

Contributions in aid of construction		41,458		41,307

Total Stockholders' Equity and Liabilities	$	430,748	$	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 September 30						Nine Months Ended September 30
	2021			2020			2021			2020

OPERATING REVENUES	$	14,503		$	14,257		$	41,385		$	40,454

OPERATING EXPENSES:
Operation and maintenance		2,997			2,659			8,752			7,940
Administrative and general		2,292			2,257			7,144			6,573
Depreciation and amortization		2,223			2,046			6,595			6,113
Taxes other than income taxes		307			274			954			898
		7,819			7,236			23,445			21,524

Operating income		6,684			7,021			17,940			18,930

OTHER INCOME (EXPENSES):
Interest on debt		(1,237	)		(1,152	)		(3,673	)		(3,503	)
Allowance for funds used during construction		310			115			883			330
Other pension costs		(304	)		(341	)		(911	)		(1,022	)
Gain on life insurance		–			–			–			515
Other income (expenses), net		(34	)		(41	)		(179	)		(287	)
		(1,265	)		(1,419	)		(3,880	)		(3,967	)

Income before income taxes		5,419			5,602			14,060			14,963

Income taxes		625			898			1,077			2,075

Net Income	$	4,794		$	4,704		$	12,983		$	12,888

Basic Earnings Per Share	$	0.36		$	0.36		$	0.99		$	0.99

Diluted Earnings Per Share	$	0.36		$	0.36		$	0.99		$	0.99

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 September 30, 2021 and 2020

	Common Stock Shares		Common Stock Amount		Retained Earnings			Total

Balance, June 30, 2021		13,090,055	$	87,100	$	60,606		$	147,706
Net income		–		–		4,794			4,794
Cash dividends declared, $0.1874 per share		–		–		(2,454	)		(2,454	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		12,869		568		–			568
Stock-based compensation		–		46		–			46
Balance, September 30, 2021		13,102,924	$	87,714	$	62,946		$	150,660

Balance, December 31, 2020		13,060,817	$	85,935	$	57,317		$	143,252
Net income		–		–		12,983			12,983
Cash dividends declared, $0.5622 per share		–		–		(7,354	)		(7,354	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		35,937		1,612		–			1,612
Stock-based compensation		6,170		167		–			167
Balance, September 30, 2021		13,102,924	$	87,714	$	62,946		$	150,660

	Common Stock Shares		Common Stock Amount		Retained Earnings			Total

Balance, June 30, 2020		13,033,999	$	84,872	$	53,700		$	138,572
Net income		–		–		4,704			4,704
Cash dividends declared, $0.1802 per share		–		–		(2,351	)		(2,351	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		10,326		429		–			429
Stock-based compensation		4,912		74		–			74
Balance, September 30, 2020		13,049,237	$	85,375	$	56,053		$	141,428

Balance, December 31, 2019		13,014,898	$	83,976	$	50,209		$	134,185
Net income		–		–		12,888			12,888
Cash dividends declared, $0.5406 per share		–		–		(7,044	)		(7,044	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		29,427		1,273		–			1,273
Stock-based compensation		4,912		126		–			126
Balance, September 30, 2020		13,049,237	$	85,375	$	56,053		$	141,428

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)

	Nine Months Ended September 30
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	12,983		$	12,888
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on life insurance		–			(515	)
Depreciation and amortization		6,595			6,113
Stock-based compensation		167			126
Increase in deferred income taxes		53			93
Other		46			342
Changes in assets and liabilities:
(Increase) decrease in accounts receivable and unbilled revenues		745			(1,657	)
Decrease in recoverable income taxes		700			497
Increase in materials and supplies, prepaid expenses, prepaid pension cost, regulatory and other assets		(6,911	)		(6,184	)
Increase in accounts payable, accrued compensation and benefits, accrued expenses, deferred employee benefits, regulatory liabilities, and other deferred credits		3,989			4,449
Increase in accrued interest		109			154
Net cash provided by operating activities		18,476			16,306

CASH FLOWS FROM INVESTING ACTIVITIES:
Utility plant additions, including debt portion of allowance for funds used during construction of $493 in 2021 and $184 in 2020		(27,434	)		(15,973	)
Acquisitions of wastewater systems		–			(1,158	)
Cash received from surrender of life insurance policies		–			672
Net cash used in investing activities		(27,434	)		(16,459	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Customers' advances for construction and contributions in aid of construction		1,955			2,760
Repayments of customer advances		(772	)		(225	)
Proceeds of long-term debt issues		37,452			53,671
Debt issuance costs		–			(162	)
Repayments of long-term debt		(28,960	)		(37,843	)
Changes in cash overdraft position		14			(1,384	)
Issuance of common stock		1,612			1,273
Dividends paid		(7,344	)		(7,038	)
Net cash provided by financing activities		3,957			11,052

Net change in cash, cash equivalent, and restricted cash		(5,001	)		10,899
Cash, cash equivalents, and restricted cash at beginning of period		5,002			2
Cash and cash equivalents at end of period	$	1		$	10,901

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized	$	2,936		$	3,029
Income taxes		217			1,753

Supplemental disclosure of non-cash investing and financing activities: Accounts payable includes $3,562 in 2021 and $3,647 in 2020 for the construction of utility plant. Contributions in aid of construction includes $1,024 in 2020 recorded as part of the Felton Borough acquisition.

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 nine months ended September 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 Sep. 30, 2021			As of Dec. 31, 2020			Change

Accounts receivable – customers	$	4,716		$	5,633		$	(917	)
Other receivables		75			206			(131	)
		4,791			5,839			(1,048	)
Less: allowance for doubtful accounts		(856	)		(655	)		(201	)
Accounts receivable, net	$	3,935		$	5,184		$	(1,249	)

Unbilled revenue	$	3,047		$	2,847		$	200

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 $4,794 and $4,704 for the three months ended September 30, 2021 and 2020, respectively, and $12,983 and $12,888 for the nine months ended September 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 September 30				Nine Months Ended September 30
	2021		2020		2021		2020

Weighted average common shares, basic		13,083,762		13,032,389		13,069,582		13,021,398
Effect of dilutive securities:
Employee stock-based compensation		563		1,164		347		565
Weighted average common shares, diluted		13,084,325		13,033,553		13,069,929		13,021,963

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 nine months ended September 30, 2021 and 2020. As of September 30, 2021, 618,004 shares remain authorized for repurchase.

4. Debt

	As of Sep. 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		15,192			6,700
Total long-term debt		135,062			126,570
Less discount on issuance of long-term debt		(172	)		(181	)
Less unamortized debt issuance costs		(2,693	)		(2,816	)
Long-term portion	$	132,197		$	123,573

In the third quarter of 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 3.13% and 3.08% for the three months ended September 30, 2021 and 2020, respectively, and 3.06% and 2.76% for the nine months ended September 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 $94 and $93 for the three months ended September 30, 2021 and 2020, respectively, and $278 and $249 for the nine months ended September 30, 2021 and 2020, respectively. The overall swap result was a (gain) loss of $(31) and $10 for the three months ended September 30, 2021 and 2020, respectively, and $(250) and $911 for the nine months ended September 30, 2021 and 2020, respectively. The Company expects to reclassify $371 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 8, 2021, 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 September 30, 2021. If a violation due to credit rating, or some other default provision, were triggered on September 30, 2021, the Company would have been required to pay the counterparty approximately $2,232.

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		September 30, 2021		Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2)
Interest Rate Swap		$2,203		$2,203

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 September 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 September 30, 2021. The use of the Company's credit rating resulted in a reduction in the fair value of the swap liability of $29 as of September 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 $135,062 at September 30, 2021, and $126,570 at December 31, 2020, had an estimated fair value of approximately $150,000 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 September 30, 2021 of $11,358 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 $1,307 and $1,204 through September 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 September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Water utility service
Residential	$	8,872	$	8,902	$	25,560	$	25,643
Commercial and industrial		3,952		3,774		10,891		10,331
Fire protection		827		795		2,428		2,379
Wastewater utility service
Residential		481		446		1,426		1,281
Commercial and industrial		79		78		237		229
Billing and revenue collection services		121		118		360		147
Collection services		18		–		29		14
Other revenue		18		4		38		14
Total Revenue from Contracts with Customers		14,368		14,117		40,969		40,038
Rents from regulated property		135		140		416		416
Total Operating Revenue	$	14,503	$	14,257	$	41,385	$	40,454

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. The Company's earnings are currently below the regulatory benchmark allowing the Company to collect DSIC. The DSIC provided revenues of $255 and $280 for the three and nine months ended September 30, 2021, respectively, and revenues of $0 for the three and nine months ended September 30, 2020.

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10. Pensions

Components of Net Periodic Pension Cost

	Three Months Ended September 30						Nine Months Ended September 30
	2021			2020			2021			2020

Service cost	$	271		$	234		$	814		$	703
Interest cost		302			365			906			1,093
Expected return on plan assets		(913	)		(800	)		(2,739	)		(2,399	)
Amortization of actuarial loss		121			92			363			277
Amortization of prior service cost		(3	)		(3	)		(9	)		(9	)
Rate-regulated adjustment		797			687			2,390			2,060
Net periodic pension expense	$	575		$	575		$

SEC Form 10-Q filed by The York Water Company