MIDDLESEX WATER CO (MSEX) FY 2024 MD&A

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read in conjunction
with the consolidated financial statements and related notes.

Operations

Middlesex Water Company (Middlesex or the Company)
has operated as a water utility in New Jersey since 1897 and in Delaware through our wholly-owned subsidiary, Tidewater Utilities, Inc.
(Tidewater), since 1992. We are in the business of providing an essential water utility service for domestic, commercial, municipal, industrial
and fire protection purposes. We operate water and wastewater systems under contract for governmental entities and private entities primarily
in New Jersey and Delaware and also provide regulated wastewater services in New Jersey. We are regulated by state public utility commissions
as to rates charged to customers for water and wastewater services, as to the quality of water and wastewater services we provide and
as to certain other matters in the states in which our regulated subsidiaries operate. Only our Utility Service Affiliates, Inc. (USA),
Utility Service Affiliates (Perth Amboy), Inc. (USA-PA) and White Marsh Environmental Services, Inc. (White Marsh) subsidiaries are not
regulated public utilities as related to rates and services quality. All municipal or commercial entities whose utility operations are
managed by these entities however, are subject to environmental regulation at the federal and state levels.

Our principal New Jersey water utility system
(the Middlesex System) provides water services to approximately 61,000 retail customers, primarily in central New Jersey. The Middlesex
System also provides water sales under contract to municipalities in central New Jersey with a total population of over 0.2 million. Our
other New Jersey subsidiaries, Pinelands Water Company (Pinelands Water) and Pinelands Wastewater Company (Pinelands Wastewater) (collectively,
Pinelands), provide water and wastewater services to approximately 2,500 customers in Southampton Township, New Jersey.

Our Delaware subsidiaries, Tidewater and Southern
Shores Water Company, LLC (Southern Shores), provide water services to approximately 61,000 retail customers in New Castle, Kent and Sussex
Counties, Delaware. Tidewater’s subsidiary, White Marsh, services approximately 4,300 customers in Kent and Sussex Counties through
various operations and maintenance contracts.

USA-PA operates the water
and wastewater systems for the City of Perth Amboy, New Jersey (Perth Amboy) under a 10-year operations and maintenance contract expiring
in 2028. In addition to performing day-to day operations, USA-PA is also responsible for emergency response and management of capital
projects funded by Perth Amboy.

USA operates the Borough
of Avalon, New Jersey’s (Avalon) water utility, sewer utility and storm water system under a 10-year operations and maintenance
contract expiring in 2032. USA also operates the Borough of Highland Park, New Jersey’s (Highland Park) water and wastewater
systems under a 10-year operations and maintenance contract expiring in 2030. In addition to performing day-to-day service operations,
USA is responsible for emergency response and management of capital projects funded by Avalon and Highland Park.

Under a marketing agreement
with HomeServe USA Corp. (HomeServe) expiring in 2031, USA offers residential customers in New Jersey and Delaware water and wastewater
related services and home maintenance programs. HomeServe is a leading national provider of such home maintenance service programs. USA
receives a service fee for the billing, cash collection and other administrative matters associated with HomeServe’s service contracts.

Management Update

Upon the retirements of President and Chief Executive
Officer Dennis W. Doll, and Senior Vice President, Treasurer and Chief Financial Officer A. Bruce O’Connor, the Company
named Nadine Leslie its new President and Chief Executive Officer effective March 1, 2024 and Mohammed G. Zerhouni its
new Senior Vice President,

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Treasurer and Chief Financial Officer effective June 24, 2024.  Ms. Leslie was also appointed to
the Board of Directors effective March 1, 2024.

In December 2024, the Company named Gregory Sorensen
its new Vice President and Chief Operating Officer. His responsibilities include water and wastewater operations, capital program planning
and delivery, safety and security, sustainability, and growth initiatives.

Tidewater Acquisition of the Water Utility
Assets of the Town of Ocean View, Delaware

In February 2025, Tidewater and the Town of Ocean
View, Delaware’s (Ocean View) joint application for Tidewater’s purchase of all of the rights, title, and interest in the
water utility assets of Ocean View for $4.6 million was approved by the Delaware Public Service Commission (DEPSC). Ocean View serves
approximately 900 customers in Sussex County, Delaware. Tidewater currently provides water service to most residents of Ocean View other
that the 900 customers currently served by Ocean View. Closing on this purchase is expected by April 2025.

United States Environmental Protection Agency
(USEPA) Issues Final Perfluoroalkyl (PFAS) Regulations

In April 2024, the USEPA finalized drinking water
regulations for PFAS, establishing maximum contaminant levels (MCLs) for three PFAS compounds (Regulated PFAS) that are lower than the
current New Jersey Department of Environmental Protection MCLs adhered to by the Company. Under the new USEPA regulations effective April
2024, water systems must monitor for Regulated PFAS and have three years to complete initial monitoring (by April 2027), followed by ongoing
compliance monitoring. Water systems must also provide the public with information on the levels of Regulated PFAS in their drinking water
beginning in 2027. Water systems have five years (by April 2029) to implement solutions that reduce Regulated PFAS if monitoring shows
that drinking water levels exceed these MCLs.

Beginning in April 2029, water systems that have
Regulated PFAS in drinking water which exceeds one or more of these MCLs must take action to reduce levels of these PFAS compounds in
their drinking water and must provide notification to the public of the violation.

In anticipation of these new USEPA standards,
in 2023, the Company began implementing its strategy to meet these lower MCLs for Regulated PFAS and is currently performing preliminary
engineering studies to ensure that effective PFAS treatment approaches are implemented.

Capital Construction Program

The Company’s multi-year
capital construction program encompasses numerous projects designed to upgrade and replace utility infrastructure as well as enhance the
integrity and reliability of assets to better serve the current and future generations of water and wastewater customers. The Company
plans to invest approximately $93 million in 2025 in connection with this plan for projects that include, but are not limited to:

Strategy for Growth

Our strategy for selective and sustainable growth is focused on the
following key areas:

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Rates

Middlesex - The approval by the NJBPU in
February 2024 of the negotiated settlement of the Middlesex 2023 base rate case is expected to increase annual operating revenues by $15.4
million, effective March 1, 2024. The approved tariff rates were designed to recover increased operating costs as well as a return on
invested capital of $563.1 million, based on an authorized return on common equity of 9.6%. Middlesex has made capital infrastructure
investments to ensure prudent upgrade and replacement of its utility assets to support continued regulatory compliance, resilience and
overall quality of service. In August 2023, Middlesex and 3M Company (3M) executed a settlement agreement (Settlement Agreement) to resolve
a lawsuit Middlesex previously initiated claiming 3M introduced Perfluoroalkyl Substances (PFAS) into the Company’s water supply
for its Park Avenue Wellfield Treatment Plant (Park Avenue Plant). The rate case settlement provided that the net proceeds from
the 3M Settlement Agreement were to be used to mitigate the increase in customer rates and reimburse Middlesex for previously incurred
costs for the construction of the Park Avenue Plant PFAS treatment upgrades, including depreciation and carrying costs. This resulted
in the reclassification of $48.3 million from Regulatory Liabilities to Contributions in Aid of Construction from the December 31, 2023
balance sheet. In 2024, the Company also recognized the recovery of $0.9 million for depreciation and $4.1 million for carrying costs
associated with the Park Avenue Plant PFAS treatment upgrades, as well as the recovery of $2.6 million of previously incurred operating
treatment costs while the Park Avenue Plant PFAS treatment upgrades were in process.

The Middlesex Lead Service Line Replacement (LSLR)
Plan, which was approved by the NJBPU in January 2024, has commenced and Middlesex is currently recovering $1.2 million of costs for replacing
customer-owned lead service lines incurred through June 2024, which are being recovered between September 2024 and February 2025. Costs
of $0.6 million for replacing customer-owned lead service lines incurred between July 2024 through December 2024 will be recovered beginning
in March 2025 through August 2025. The LSLR surcharge is required to be reset every six months over the life of the LSLR Plan. Cost recovery
for replacing Company-owned lead service lines are recoverable through traditional rate making in connection with general rate case filings.

In October 2023, the NJBPU approved Middlesex’s
petition for a Distribution System Improvement Charge (DSIC) Foundation Filing, which is a prerequisite to implementing a DSIC rate that
allows water utilities to recover investments in, and generate a return on, qualifying capital improvements to their water distribution
system made between base rate proceedings. Middlesex is authorized to recover DSIC revenues up to five percent (5%) of total revenues
established in Middlesex’s 2021 base rate proceeding, or approximately $5.5 million. Semi-annually, beginning in April 2024, the
Company must file for a change in its DSIC rate seeking recovery for DSIC-eligible investments made during the period. DSIC rates remain
in effect until Middlesex’s next base rate case increase subsequent to the March 1, 2024 increase. Under the terms of the Foundational
Filing, the Company is required to file a base rate petition before November 2026.

In May 2024, the NJBPU approved a DSIC rate, effective
May 26, 2024, that is expected to result in $0.5 million of annual revenue. In November 2024, the NJBPU approved a DSIC rate, effective
November 26, 2024, that is expected to result in an additional $0.6 million of annual revenue. Middlesex expects to file for an additional
DSIC rate increase in April 2025.

In February 2025, the NJBPU approved Middlesex’s
petition to reset its Purchased Water Adjustment Clause (PWAC) tariff rate to recover additional annual costs of $0.5 million, primarily
for the purchase of treated water from a non-affiliated water utility regulated by the NJBPU. A PWAC is a rate mechanism that allows for
the recovery of increased purchased water costs between base rate case filings. The PWAC is reset to zero once those increased costs are
included in base rates. The new PWAC rate will be effective March 1, 2025.

Tidewater - In September 2024, the DEPSC
approved Tidewater’s petition to recover up to $2.1 million of costs associated with Tidewater’s obligation to identify and
inventory lead service lines throughout Tidewater’s service area, as required by federal law and Delaware regulations. Recovery
of these costs began February 1, 2025 and is expected to continue through January 2028. Through December 31, 2024, Tidewater has spent
$1.8 million, which is included in Regulatory Assets.

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In August 2024, Tidewater filed an application
with the DEPSC to increase its general rates for water service. In the application, Tidewater seeks an overall increase in annual operating
revenue of $10.3 million or 25.66% over current revenue. The request for rate increases will allow Tidewater to recover prudently incurred
investments made in the last ten years to support continued regulatory compliance, enhanced water quality, service reliability, security
and resiliency of the water utility infrastructure assets. Effective October 30, 2024, Tidewater received approval of the DEPSC to suspend
its DSIC rate and implement an interim rate increase, which is expected to result in approximately $2.5 million of annual revenues, subject
to refund pending the outcome of the rate case application.

Southern Shores - Southern Shores
provides water service to a 2,200 unit condominium community in Sussex County, Delaware under a DEPSC-approved agreement expiring December
31, 2029.  Under the agreement, rates are increased when there are unanticipated capital expenditures or regulatory related changes
in operating expenses exceed certain thresholds. In 2024, capital expenditures did exceed the established threshold. In addition, rates
are increased annually by the lesser of the regional Consumer Price Index or 3%. Effective January 1, 2025, Southern Shores rates were
increased $0.1 million or 6.51%.

Outlook

Our ability to increase operating income and net
income is based significantly on four factors: weather, adequate and timely rate relief, effective cost management and customer growth
(which are evident in comparison discussions in the Results of Operations section below). Weather patterns which can result in
lower customer demand for water may occur in 2025. As operating costs are anticipated to increase in 2025 in a variety of categories,
we continue to implement plans to further streamline operations and further reduce and mitigate increases in operating costs. Changes
in customer water usage habits, as well as increases in capital expenditures and operating costs, are significant factors in determining
the timing and extent of rate increase requests.

Our investments in system infrastructure continue
to grow significantly and our operating costs are anticipated to increase in 2025 and 2026 in a variety of categories. These factors,
among others, may require a base rate increase request by Middlesex in mid 2025.

Overall, organic residential customer growth continues
in our Tidewater system (approximately 3.5% in 2024).

The Company has projected to spend approximately
$387 million for the 2025-2027 capital investment program, including approximately $105 million for upgrading our Carl J. Olson Surface
Water Treatment Plant (CJO Plant) to integrate PFAS removal from source water, $34 million on the RENEW Program, which is our ongoing
initiative to replace water mains in the Middlesex System, $15 million for replacement of a transmission main in Metuchen in our Middlesex
System and $12 million for elevated storage tanks in our Tidewater System.

Operating Results by Segment

The Company has two operating segments, Regulated
and Non-Regulated. Our Regulated segment contributed approximately 93% of total revenues for the years ended December 31, 2024, 2023 and
2022, respectively, and approximately 94%, 92% and 93% of net income for the years ended December 31, 2024, 2023 and 2022, respectively.
The discussion of the Company’s results of operations is on a consolidated basis and includes significant factors by subsidiary.
The segments in the tables included below are comprised of the following companies: Regulated- Middlesex, Tidewater, Pinelands and Southern
Shores; Non-Regulated- USA, USA-PA, and White Marsh.

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Results of Operations for 2024 as Compared to 2023

Operating Revenues

Operating revenues for the year ended December
31, 2024 increased $25.6 million from the same period in 2023 due to the following factors:

Operation and Maintenance Expense

Operation and maintenance expenses for the year
ended December 31, 2024 increased $9.2 million from the same period in 2023 due to increased legal, financial and regulatory matter costs,
increased labor costs due to annual wage increases, an enhanced water treatment process at Middlesex’s Park Avenue Plant, and higher
energy costs due to increased water demand.

Depreciation

Depreciation expense for the year ended December 31, 2024 decreased
$0.8 million from the same period in 2023 due to recovery of prior year depreciation related to upgrades at the Park Avenue Plant partially
offset by a higher level of utility plant in service. The conclusion of Middlesex’s base rate increase request allowed proceeds
from the 3M Settlement Agreement to reimburse Middlesex for previously incurred costs for the construction of the Park Avenue Plant PFAS
treatment upgrades (for further discussion of the 3M Settlement Agreement, see Rates, Middlesex above).

Other Taxes

Other taxes for the year ended December 31, 2024
increased $3.1 million from the same period in 2023 primarily due to higher gross receipts taxes on higher revenue in Middlesex and higher
payroll related taxes on increased labor costs.

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Other Income, net

Other Income, net for the year ended December
31, 2024 increased $5.6 million from the same period in 2023 primarily due to the recovery of carrying costs on the PFAS treatment upgrades
at the Park Avenue Plant and higher actuarially-determined retirement benefit plans non-service benefit offset by lower allowance for
funds used during construction on capital projects in construction.

Interest Charges

Interest charges for the year ended December 31,
2024 increased $0.9 million from the same period in 2023 due to higher average debt outstanding and higher average interest rates.

Income Taxes

Income taxes for the year ended December 31, 2024
increased by $5.9 million from the same period in 2023, primarily due to higher pre-tax income and
lower income tax benefits associated with decreased repair expenditures on tangible property in the Middlesex System offset by the recovery
of income taxes on the taxable portion of the proceeds from the 3M Settlement Agreement.

Results of Operations for 2023 as Compared to 2022

Operating Revenues

Operating revenues for the year ended December
31, 2023 increased $3.8 million from the same period in 2022 due to the following factors:

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Operation and Maintenance Expense

Operation and maintenance expenses for the year
ended December 31, 2023 increased $4.0 million from the same period in 2022 due to increased variable production costs due to weather-driven
changes in water quality and higher chemical prices, higher outside service costs due to production instrumentation calibration activities,
increases in labor costs due to wage increases and higher bad debt expense due to higher anticipated customer receivable write-offs. Partially
offsetting these increases was lower weather-related main break activity in our Middlesex System during the winter months.

Depreciation

Depreciation expense for the year ended December
31, 2023 increased $2.2 million from the same period in 2022 due to a higher level of utility plant in service.

Other Taxes

Other taxes for the year ended December 31, 2023
increased $0.5 million from the same period in 2022 primarily due to higher revenue related taxes on increased revenues in our Middlesex
system.

Gain on Sale of Subsidiary

Middlesex recognized a $5.2 million gain on the
sale of its regulated Delaware wastewater subsidiary in January 2022.

Other Income, net

Other Income, net for the year ended December
31, 2023 decreased $1.2 million from the same period in 2022 primarily due to lower actuarially-determined retirement benefit plans non-service
benefit.

Interest Charges

Interest charges for the year ended December 31,
2023 increased $3.8 million from the same period in 2022 due to higher average debt outstanding and higher average interest rates in 2023
as compared to 2022.

Income Taxes

Income taxes for the year ended December 31, 2023
decreased by $2.2 million from the same period in 2022, primarily due to greater income tax benefits associated
with increased repair expenditures on tangible property in the Middlesex System and lower pretax income due to gain on the sale of a subsidiary
in 2022.

Liquidity and Capital Resources

Cash Flows from Operating Activities

Cash flows from operating activities are largely
influenced by four factors: weather, adequate and timely rate increases, effective cost management and customer growth. The effect of
those factors on net income is discussed in the Results of Operations section above.

For the year ended December 31, 2024, cash flows
from operating activities increased $5.9 million to $58.7 million. The increase in cash flows from operating activities primarily resulted
from the impact of higher weather-driven customer demand and Middlesex’s approved base rate increase effective March 1, 2024.

Increases in certain operating costs impact our
liquidity and capital resources. We continually monitor the need for timely rate filing to minimize the lag between the time we experience
increased operating costs and capital expenditures and the time we receive appropriate rate relief. .

Cash Flows from Investing Activities

For the year ended December 31, 2024, cash flows
used in investing activities decreased $15.6 million to $74.6 million due to decreased utility plant expenditures in 2024. In 2023, the
Company had significant utility plant

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expenditures for the construction of a facility to provide an enhanced treatment process at the
Company’s Park Avenue Plant to comply with new state water quality regulations relative to PFAS.

For further discussion on the Company’s
future capital expenditures and expected funding sources, see “Capital Expenditures and Commitments” below.

Cash Flows from Financing Activities

For the year ended December 31, 2024, cash flows
from financing activities decreased $18.2 million to $17.7 million. The decrease in cash flows provided by financing activities is due
to lower proceeds from the issuance of common stock under the Middlesex Water Company Investment Plan (Investment Plan) and long-term
debt offset by proceeds received from a litigation settlement.

For further discussion on the Company’s
short-term and long-term debt, see “Sources of Liquidity” below.

Capital Expenditures and Commitments

To fund our capital program, we use internally
generated funds, short-term and long-term debt borrowings, proceeds from sales of common stock under the Investment Plan and, when market
conditions are favorable, proceeds from sales to the public of our common stock.

The table below summarizes our estimated capital expenditures for the
years 2025-2027.

Our estimated capital expenditures for the items
listed above are primarily comprised of the following:

The actual amount and timing of capital expenditures
is dependent on the need for replacement of existing infrastructure, customer growth, residential new home construction and sales, project
scheduling and continued refinement of project scope and costs.

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To fund our capital program in 2025, we estimate we will utilize some
or all of the following:

Sources of Liquidity

Short-term
Debt - The Company has available lines of credit of $140 million. The outstanding borrowings under the credit lines at December 31,
2024 were $23.0 million, at a weighted average interest rate of 5.63%.

The weighted average daily amounts of borrowings
outstanding under the credit lines and the weighted average interest rates on those amounts were $38.7 million and $35.7 million at 6.33%
and 6.13% for the years ended December 31, 2024 and 2023, respectively.

Long-term Debt - Subject to regulatory
approval, the Company periodically issues long-term debt to fund investments in utility plant. To the extent possible and fiscally prudent,
the Company finances qualifying capital projects under SRF loan programs in New Jersey and Delaware. These government programs provide
financing at interest rates typically below rates available in the broader financial markets.

Middlesex has received approval from the NJBPU
to borrow up to $300.0 million from the New Jersey SRF Program, the New Jersey Economic Development Authority, private placement and other
financial institutions as needed through December 31, 2025. The Company expects to issue debt securities in a series of one or more transaction
offerings to help fund Middlesex’s multi -year capital construction program.

In September 2024, Tidewater closed on a $2.2
million Delaware SRF loan with a 0.0% interest rate with an expected maturity date in 2044. This loan is for costs associated with Tidewater’s
obligation, as required by federal law and Delaware regulations, to identify and inventory lead service lines throughout Tidewater’s
service area. Tidewater has drawn down $1.7 million as of December 31, 2024.

In May 2024, Tidewater closed on four DEPSC-approved
Delaware SRF loans totaling $5.6 million, all at interest rates of 2.0% with expected maturity dates in 2044. These loans are for the
construction, relocation, improvement, and/or interconnection of transmission mains and construction of a water treatment facility. Tidewater
has drawn down less than $0.1 million on these loans as of December 31, 2024. Each project has its own construction timetable with the
last spending set to occur in 2026.

Tidewater also has two active construction projects
funded by Delaware SRF loans totaling $8.3 million with remaining availability of funds for borrowing. These loans are for the construction
of a one-million gallon elevated storage tank and construction, relocation, improvement, and interconnection of transmission mains. Tidewater
has drawn a total of $4.9 million through December 31, 2024 and expects that the requisitions will continue through the second quarter
of 2025.

In July 2023, Pinelands Water and Pinelands Wastewater
closed on $3.9 million and $3.6 million CoBank, ACB (CoBank) amortizing mortgage type loans, respectively, with an interest rate of 6.17%
and a final maturity date of 2043 for each loan. Proceeds were used to pay off outstanding intercompany loans with Middlesex and for ongoing
capital projects.

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In May 2023, Tidewater closed on a $20.0 million
loan from CoBank with an interest rate of 5.71% and a 2033 maturity date and fully drew all funds by June 30, 2023. Proceeds from the
loan were used to pay off Tidewater’s outstanding balances under its bank lines of credit and for other general corporate purposes.

In April 2023, Tidewater closed on two DEPSC-approved
Delaware SRF loans totaling $6.9 million, all at interest rates of 2.0% with maturity dates in 2043 and 2044. These loans are for the
construction, relocation, improvement, and/or interconnection of transmission mains. Tidewater has fully drawn on these loans.

In March 2023, Middlesex closed on a $40.0 million,
5.24% private placement of First Mortgage Bonds (FMBs) with a 2043 maturity date designated as Series 2023A. Proceeds were used to reduce
the Company’s outstanding balances under its bank lines of credit.

In May 2022, Middlesex repaid its two outstanding
New Jersey Infrastructure Bank (NJIB) construction loans by issuing FMBs to the NJIB under two loan agreements. The total amount of FMBs
issued is $52.2 million and designated as Series 2022A ($16.2 million) and Series 2022B ($36.0 million). The interest rate on the Series
2022A bond is zero and the interest rate on the Series 2022B bond ranges between 2.7% and 3.0%. The final maturity date for both FMBs
is August 1, 2056, with scheduled debt service payments over the life of these loans.

Substantially all of the utility plant of the
Company is subject to the lien of its mortgage, which includes debt service and capital ratio covenants. The Company is in compliance
with all of its mortgage covenants.

Common Stock - The Company issues shares
of its common stock in connection with the Investment Plan, a direct share purchase and dividend reinvestment plan for the Company’s
common stock. The Company raised approximately $1.0 million through the issuance of shares under the Investment Plan during 2024. In May
2023, Middlesex received approval from the NJBPU to increase the number of authorized shares under the Investment Plan by 0.7 million
shares. Currently, 0.7 million shares remain registered with the United States Securities and Exchange Commission and available for issuance
to participants under the Investment Plan.

In order to fully fund the ongoing capital investment
program and maintain a balanced capital structure required for a regulated water utility, Middlesex may offer for sale additional shares
of its common stock. The amount, the timing and the sales method of the common stock is dependent on the timing of the construction expenditures,
the level of additional debt financing and financial market conditions. Common stock offerings will occur as needed to maintain a balanced
capital structure as we continue on a parallel path with future debt offerings.

In April 2023, Middlesex received approval from
the NJBPU to issue and sell up to 1.0 million shares of its common stock, without par value, through December 31, 2025. Sales of additional
shares of common stock are part of the Company’s comprehensive financing plan to fund its multi-year utility plant infrastructure
investment program. As described above in “Long-term Debt”, the NJBPU also approved the debt funding component of the financing
plan.

Contractual Obligations

In the course of normal business activities, the
Company enters into a variety of contractual obligations and commercial commitments. Some result in direct obligations on the Company’s
balance sheet while others are commitments, some firm and some based on uncertainties, which are disclosed in the Company’s consolidated
financial statements.

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The table below presents our known contractual obligations for the
periods specified as of December 31, 2024.

The table above does not reflect any anticipated
cash payments for retirement benefit plan obligations. The effect on the timing and amount of these payments resulting from potential
changes in actuarial assumptions and returns on plan assets cannot be estimated. In 2024, the Company contributed $3.7 million to its
retirement benefit plans and expects to contribute approximately $1.8 million in 2025.

We do not currently have, nor have we ever had,
any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or
special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements, or for other
contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts.

Critical Accounting Policies and Estimates

The application of accounting policies and standards
often requires the use of estimates, assumptions and judgments. The Company regularly evaluates these estimates, assumptions and judgments,
including those related to the calculation of pension and other retirement benefits, unbilled revenues, and the recoverability of certain
assets, including regulatory assets. The Company bases its estimates, assumptions and judgments on historical experience and current operating
environment. Changes in any of the variables that are used for the Company’s estimates, assumptions and judgments may lead to significantly
different financial statement results.

Our critical accounting policies and estimates are set forth below.

Regulatory Accounting

We maintain our books and records in accordance
with accounting principles generally accepted in the United States of America. Middlesex and certain of its subsidiaries are subject to
regulation in the states in which they operate. Those companies are required to maintain their accounts in accordance with regulatory
authorities’ rules and guidelines, which may differ from other authoritative accounting pronouncements. In those instances, the
Company follows the guidance in the Financial Accounting Standards Board Accounting Standards Codification Topic 980 Regulated Operations
(Regulatory Accounting).

In accordance with Regulatory Accounting, costs
and obligations are deferred if it is probable that these items will be recognized for rate-making purposes in future rates. Accordingly,
we have recorded costs and obligations, which will be amortized over various future periods. Any change in the assessment of the probability
of rate-making treatment would require us to change the accounting treatment of the deferred item. We have no reason to believe any of
the deferred items that are recorded will be treated differently by the regulators in the future.

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Revenues

Revenues from our regulated customers, which include
amounts billed quarterly to residential customers and monthly to industrial, commercial, fire-protection and wholesale customers, also
include unbilled amounts based upon estimated usage from the date of the last meter reading to the end of the accounting period. While
actual usage for customers may differ from the estimate, we believe the overall total estimate of consumption and revenue for the fiscal
period will not differ materially from actual consumption.

Retirement Benefit Plans

We maintain a noncontributory defined benefit
pension plan (Pension Plan) which covers all currently active employees hired prior to April 1, 2007. In addition, the Company maintains
an unfunded supplemental plan for certain executive officers.

The Company has a retirement benefit plan other
than pensions (Other Benefits Plan) for substantially all of its retired employees. Employees hired after March 31, 2007 are not eligible
to participate in the Other Benefits Plan. Coverage includes healthcare and life insurance.

The costs for providing retirement benefits are
dependent upon numerous factors, including actual plan experience and assumptions of future experience. Future retirement benefit plan
obligations and expense will depend on future investment performance, changes in future discount rates and various other demographic factors
related to the population participating in the Company’s retirement benefit plans, all of which can change significantly in future
years.

The primary assumptions used for determining future retirement benefit
plans’ obligations and costs, which are reviewed and revised as needed each year, are as follows:

The discount rate, compensation increase rate and long-term rate of
return used to determine future obligations of our retirement benefit plans as of December 31, 2024 are as follows:

For the 2024 valuation, costs and obligations
for our Other Benefits Plan assumed an 8.0% annual rate of increase in the per capita cost of covered healthcare benefits in 2025 with
the annual rate of increase declining 0.15% per year for 2026-2045, resulting in an annual rate of increase in the per capita cost of
covered healthcare benefits of 5.0% by year 2045.

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The following is a sensitivity analysis for certain actuarial assumptions
used in determining projected benefit obligations (PBO) and expenses for our retirement benefit plans:

Pension Plan

Other Benefits Plan

Recent Accounting Standards

See Note 1(q) of the Notes to Consolidated Financial
Statements for a discussion of recent accounting pronouncements.

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