Fair Value of Financial Instruments |
3 Months Ended | ||||||||||||||||||||
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Mar. 31, 2026 | |||||||||||||||||||||
| Fair Value of Financial Instruments [Abstract] | |||||||||||||||||||||
| Fair Value of Financial Instruments |
7. 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.
Fair values are measured as the present value of all expected future cash flows based on the 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 March 31, 2026.
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 March 31, 2026. The use of the Company’s credit quality resulted in a reduction in the swap liability
of $7 as of March 31, 2026.
The fair value of the swap reflecting the Company’s credit quality as of December 31, 2025 is shown in the table below.
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 $229,771 at March 31, 2026, and $224,660 at December 31, 2025, had an estimated fair value of approximately $206,000
and $207,000, 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 March 31, 2026 of $24,300 and $255, respectively. At December 31, 2025, customers’ advances
for construction and note receivable had carrying values of $22,357 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.
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