Good morning, everyone, and thank you for joining us for today's conference call. I am Brian Dingerdissen, Vice President, Investor Relations and Treasurer at Essential. If you did not receive a copy of the press release, you can find it by visiting the Investor Relations section of our website at essential.co. The slides that we will be referencing and the webcast of this event can also be found on their website. Here is our forward-looking statement. As a reminder, some of the matters discussed during this call may include forward-looking statements that involve risks, uncertainties, and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward-looking statements. Please refer to our most recent 10-Q, 10-K, and other SEC filings for a description of such risks and uncertainties. During the course of this call, reference may be made to certain non-GAAP financial measures. A reconciliation of these non-GAAP to GAAP financial measures is included in the presentation and also posted in the Investor Relations section of the company's website. Here is our agenda for today. We'll start with Chris Franklin, our Chairman and CEO, who will discuss the highlights from the quarter and provide a company update. Next, Dan Schuller, our CFO, will discuss our financial results. Following Dan, Matt Rhodes, our EVP of Strategy and Corporate Development, will provide an update on our acquisition program. Lastly, Chris will conclude the presentation with a summary of our guidance before opening the call up for questions. With that, I would like to turn the call over to Chris Franklin.

Thanks, everyone, for joining us this morning. Let's begin with some highlights from the quarter. We achieved a year-to-date net income growth of 6.5%, and our quarterly earnings per share met expectations, which Dan will elaborate on shortly. We are pleased to report that the Board approved a 7% increase in the quarterly dividend this week, marking our 31st consecutive year of dividend increases. We have signed asset purchase agreements for seven municipal acquisitions, totaling over $418 million, and we are progressing toward regulatory approval and closing for each. Recently, we were selected by the Bucks County Water and Sewer Authority for exclusive negotiations to purchase their significant wastewater assets, which Matt will discuss in more detail soon. As part of our commitment to renewing critical infrastructure, we invested approximately $424.6 million in our water, wastewater, and natural gas systems in the first half of the year, compared to $404.6 million during the same period last year. I'll provide details on the projects we undertook this quarter shortly. Lastly, we are on track to meet our ESG targets and commitments. More information on our progress can be found in our 2021 ESG reporting update posted this week on our ESG microsite. It's important to recognize that our annual $1 billion investment in infrastructure requires meticulous planning and execution of thousands of projects each year, setting us apart from many large utilities that typically have a few significant projects. I want to highlight some of the work our operations team has achieved this year. Our ability to execute a multitude of projects within a large capital plan has become one of our core strengths. Investing in our infrastructure is crucial not only for our growth but also for protecting our environment and ensuring reliable service. Now starting on the water side. In Pennsylvania, we're working on the Valley Forge National Park transmission main replacement project. This consists of installing a large 9,100 linear feet, 30-inch transmission main to replace an existing 98-year old cast iron main. This main helps convey water from one of our largest plants, the Pickering water treatment plant to roughly 670,000 people and is being completed in coordination with all of the services, you might imagine, the National Park Service, the Pennsylvania Department of Transportation, local townships, and other utilities, all to ensure that we have minimal disturbance to this really historic area for our country. This $4.4 million project is expected to be completed in 2023. Now in Ohio, we completed the Ashtabula water treatment plant upgrades, which includes the first plate settler water treatment plant process in our Ohio fleet. This allows us to use a smaller footprint to process even more water, obviously, making it much more efficient. We also added new flocculation and renovation improvements to our existing conventional filters. Our filter improvements include automation of valves, which is also much more efficient. This $14 million project has yielded improved settled water quality at the front end of the plant, which ultimately results in savings in power and chemicals, along with improved water quality, just bringing overall efficiency through a reduction in O&M costs, a really strong project. And finally, in Illinois, we're making significant upgrades to our Kankakee water treatment plant. These are largely compliance-driven updates to meet federal requirements, specifically the Cryptosporidium compliance. Ultraviolet disinfection was our selected method, and we believe that's the optimal treatment process for this situation. The design includes 3 parallel UV reactor trains with a capacity of 24 million gallons a day. We also made accommodations for future upgrades that could actually increase our plant to about 36 million gallons a day. The project includes 4 intermediate pumps to accommodate the hydraulic profile requirements of this new UV treatment process. Construction is already underway, and upgrades are planned to be online by December of this year. Additional water treatment plant improvements also include filter upgrades and some upgrades to our backlash pump. But this is also a really strong upgrade to our plant there in Illinois. Now these details might not necessarily be important to you, but this is really important work that our people are executing, and it continues to build the reputation that's so important as we talk to municipalities who are considering a sale of their assets because we know that our expertise, our compliance record, and our overall execution act as our resume as we continue to work to grow our company. On the gas side, I want to highlight a couple of projects in the Pittsburgh area. The Fern Hollow Bridge project in Squirrel Hill is a $5.5 million initiative that involves not only replacing the severed pipeline, which you might recall from the bridge collapse last January but also replacing an additional 3,800 feet of cast iron pipe from 1927 on both sides of the bridge. This incident gained national attention, especially with President Biden visiting shortly after it occurred. The project is expected to wrap up in the fourth quarter of this year, which is a quick turnaround given the circumstances. Another project is the Fort Pitt Boulevard project downtown in the Golden Triangle, with a budget of $3.5 million. This project entails installing approximately 2,210 feet of coated steel pipe to replace vintage bare steel pipe from 1936 and 1939. This project will also be completed this year. These initiatives enhance service reliability, mitigate risk, reduce environmental emissions, and clearly align with our ESG commitments. Now, regarding ESG, we understand the importance of transparent and detailed reporting to many of our stakeholders, including those on the call today. On August 1, we released our 2021 ESG reporting update on our microsite, which is esg.essential.co. Last summer, we updated the site and published an expanded 2020 ESG report along with supplemental reports summarizing key metrics. This year, we are updating only the supplemental reports, and next year we plan to release a new version of our full ESG report. This reporting schedule was established after discussions with many of our stakeholders. Now through June of this year, we're reporting strong progress on each of our major ESG announcements. These were initially announced in 2021, and that includes a large jump to 14% Scope 1 and Scope 2 emissions reduction. Now this is driven in large part by our January 1 switch to nearly 100% renewable electric power for our water segment operations in Pennsylvania, Ohio, Illinois, and New Jersey. We expect this figure to continue to rise in the right direction as the remaining 6 months of the year actualize. We also continue to replace aging gas main, as I just described, each year which is the greatest contributor toward our targeted 60% reduction by 2035. Now lastly, it's not on this slide, but I did want to briefly revisit what I'd call our industry-leading PFAS commitment given the recent federal proposed health advisory limit. We consider our 2020 commitment a great example of strong ESG in practice. We were the first and the only multistate utility to set its own company-wide PFAS standard, and I think we're uniquely positioned to address PFAS because of our experience and our capabilities with analytical testing and building and operating treatment systems, spending nearly $40 million to meet the company-wide standard of 13 parts per trillion. The EPA's recent announcement about its revised non-enforceable health advisory limit recommends that utilities consider addressing PFOA at a level over 0.004 parts per trillion, which is more than 1,000 times lower than the previous advisory limit set in 2016. It's also 1,000 times lower than the technical capability to detect this contaminant, which is currently at 4 parts per trillion. So largely, we see this as a political action by the federal EPA, and it's not necessarily based in science. So I think we all know at this point that the EPA will be proposing a true PFOS enforceable limit in the fall of this year, which is based on the legal process and requires a cost-benefit analysis. We believe that the MCL, or maximum contaminant level, that will be issued this fall will require a much higher concentration than the health advisory level they recently announced. We have our key people from the company who are involved in organizations that will be reviewing and discussing this proposal with the EPA up and through the fall. So I think we're well positioned to have adequate input into this decision that the EPA will make. And with that, Dan, let me turn it over to you for the financials.

Thanks, Chris, and good morning, everyone. Let's move to Slide 11. We ended the second quarter with revenues of $448.8 million, up about 13% from last year. Our regulated water segment contributed $269.4 million, and our regulated natural gas segment contributed $167.7 million, with the balance coming from our limited nonregulated operations. Purchased gas costs increased by $30.2 million due to higher natural gas commodity prices. Thus, gross margin increased year-over-year by $21.5 million. The largest contributors to the increase in gross margin for the quarter were additional revenues from rates and surcharges, customer growth, and increased volumes from both our water and natural gas segments. O&M expenses increased to $135 million for the quarter, up from $127.5 million in the second quarter of last year, recently added acquisitions, increased maintenance expenses, and higher water production costs primarily as a result of inflationary pressures were the main drivers for the quarter. Net income was up 1.7% year-over-year from $80.9 million to $82.3 million, and GAAP earnings per share decreased to $0.31 from $0.32 for the quarter, given the increase in shares due to the August 2021 settlement of our 6.7 million share forward sale that we did in 2020. Next, we'll walk through the waterfall slide, starting with revenue. In the second quarter of 2022, revenues increased $51.7 million or 13% on a GAAP basis. Similar to the first quarter of the year, you'll notice the primary driver was the recovery of higher purchased gas costs of $30.2 million due to the significant increase in natural gas commodity prices. Rates and surcharges, organic and acquisition growth and increased volumes from both our regulated water segment and our regulated natural gas segment provided an additional $23.7 million towards the revenue increase, which was then offset slightly by other. Next, let's look at the operations and maintenance expenses on Slide 13. Looking at the operations and maintenance waterfall, expenses for the second quarter increased to $135 million compared to $127.5 million for the same period in 2021. Other expenses contributed $3.5 million for the quarter. Other reflects higher outside services costs in the water segment, some of which will be capitalized in the third quarter, offset by higher capitalization in the gas segment aligned with the accelerated pace of capital projects this year. Growth, which reflects the O&M costs of acquired systems in Pennsylvania, Illinois, and Texas contributed $2.2 million, and increased production costs in our regulated water segment added an additional $1.5 million. In production costs, the largest inflation-related increases we are experiencing are for chemicals, many of which have seen significant increases year-on-year. Employee-related costs added $554,000 and the gas customer assistance program expenses, which are recoverable through a revenue surcharge, increased $524,000. These increased expenses were offset by decreased bad debt of $788,000. Next, we'll spend a minute on the earnings per share waterfall. Beginning on the left side of the slide, GAAP EPS for the second quarter of 2021 was $0.32. Rates and surcharges contributed $0.03, and growth and increased volume from our regulated water segment added another $0.021 combined. Continuing on, increased volume from our regulated natural gas segment contributed $0.006. These were offset by $0.044 of other items, including increased depreciation, interest, and taxes and $0.017 of expenses. The result is a GAAP EPS of $0.31 for the second quarter of 2022, which was in line with the street's expectations. As I noted earlier, the $0.31 also includes the impact of 6.7 million additional shares from the forward equity sale that we settled last August, August of 2021. We remain confident in our full year guidance and our ability to deliver on the 5% to 7% earnings growth per share expectations that we set at the beginning of the year. Moving on to rate activity and other regulatory matters on Slide 15. In 2022 so far, we completed rate cases or surcharge filings in our regulated water segment in Illinois, North Carolina, Ohio, and Pennsylvania, and we completed a rate case in a regulated natural gas segment in Kentucky. The combined total annualized revenue increase is $83.3 million. As many of you are aware, we received our final order in the litigated base rate case for our regulated water segment subsidiary in Pennsylvania. Just to recap, we filed the rate case for our Aqua Pennsylvania subsidiary in August of 2021, which included 6 acquisitions as well as a request for the first water-focused universal services program in Pennsylvania. The primary driver of the rate case filing was the $1.1 billion in capital investments since the last rate case. We were awarded an ROE of 10% by the Pennsylvania Public Utility Commission and additional authorized revenues of $69 million, with new rates effective on May 19, 2022.

Thanks, Dan. I appreciate it. I'll start on Slide 17. Many of you are familiar with the 7 signed asset purchase agreements pending that are shown here in the dark blue boxes, which together add nearly 224,000 customers or customer equivalents and total over $418 million in purchase price. We are pleased to report that last month, we received approval by the Pennsylvania Public Utility Commission for the East Whiteland and Willistown wastewater transactions, which is reflected on this slide. We anticipate closing both of those transactions over the next month. Regarding DELCORA, many of you are aware that we submitted a request to the Pennsylvania PUC earlier this year to restart the regulatory approval process after the Commonwealth Court decision on March 3, 2022, wherein the court acknowledged the enforceability of our asset purchase agreement with DELCORA. We are now currently awaiting an order from the Common Pleas Court that is consistent with the Commonwealth Court's decision. On July 14, the Pennsylvania PUC also remanded the approval proceeding back to the administrative law judge for review in a prompt manner. The order for this was then formally entered on July 26. Given these developments, we remain comfortable in the closing timeline we laid out earlier this year and continue to have DELCORA included in our long-term guidance starting in 2023. We expect to close the other four transactions on this slide by later this year or in the first half of 2023. Moving on to Slide 18. I would like to cover the exciting development with Bucks County Water and Sewer Authority. As Chris referenced earlier, last month, it was announced that we were selected as the sole company to move forward with discussions regarding the sale of the authority's wastewater assets. Aqua Pennsylvania was granted a 1-year exclusivity agreement based on the Authority Board's determination that our terms were the most beneficial to its customers, employees, and other constituents along with the residents and taxpayers of Bucks County. We have not yet signed an asset purchase agreement. Therefore, it is not included in our current pending acquisition numbers, but we did want to provide you with some of the details regarding the potential acquisition. Our bid is for $1.1 billion in total for the Bucks County Water and Sewer Authority wastewater system assets, with the majority of this paid upfront and the rest paid over time. The system serves approximately 75,000 customer connections and approximately 130,000 equivalent dwelling units, given the 14 other wholesale wastewater contracts. There are 15 plants with a combined total capacity of about 50 million gallons per day, approximately 115 pumping stations, and the system has approximately 900 miles of sewer pipe. In addition to Bucks County, the authority also has service areas and owns assets in both Montgomery County and Chester County. This is a very exciting opportunity for our company that will more than double our existing wastewater connections in Pennsylvania. We hope to have more news to share on this exciting development, including the potential signing of an asset purchase agreement in the near future. Moving on to Slide 19. In addition to the signed municipal transactions, and with the most recent announcements, our pipeline of opportunities for growth remains strong and healthy. The competitive amount of upfront capital we provide, along with our technical and operational expertise and long-term rate stability, continue to demonstrate our value proposition to municipal systems. We continue to focus on growth in all 8 of our water and wastewater states, given we have fair market value legislation in place in each. Currently, we are engaged in active discussions with municipalities and pursuing approximately 410,000 potential water and wastewater customers as illustrated in the table you see here. And I will note that this pipeline no longer includes the Bucks County Water and Sewer Authority wastewater customers.

Thanks, Matt. I mentioned earlier in the call that when the Board met this week, they declared a 7% increase to our quarterly dividend. This marks the 32nd increase in 31 years, and the 77th consecutive year of quarterly dividend payments, supporting our consistent record of delivering shareholder value. Now following the increase, the annualized dividend rate will be nearly $1.15 per share. And this slide demonstrates the annual dividend growth that we've consistently provided for shareholders over the years. Let me wrap up by reaffirming our 2022 guidance. We continue to expect to earn between $1.75 and $1.80 per share. We remain confident that our 3-year earnings per share growth will be 5% to 7% through 2024, and our capital plans remain on track as we anticipate investing approximately $1 billion a year to rehabilitate and strengthen water, wastewater, and natural gas systems through 2024. Rate base is expected to continue to grow between 6% to 7% for water and between 8% and 10% for natural gas. Customer growth is expected to be between 2% and 3% on average for water, and stable in natural gas. And finally, we remain committed, as we've discussed, to our ESG targets and we'll continue to report on our progress as things develop, including a year-end report for all of you. And this concludes our formal remarks. And why don't we open the line for questions at this point?

We will take the first question from Insoo Kim from Goldman Sachs.

First question about the discussions with Bucks County. In the near term, we'll find out if an APA is signed. Considering that, I'm curious about the distinction between the media payment and the payments over time, as well as the potential percentage of those that might affect the rate base. Do you have any general guidelines or initial insights on how we should approach this?

Yes. I can take that one. Thanks, Insoo. So really, the Bucks County Water and Sewer Authority Board wanted to ensure an ongoing revenue stream over time. And therefore, we entered into a retained capacity agreement for a portion of its wastewater treatment capacity. So basically, as development occurs in their service territory, we'll purchase that retained capacity. And then once we purchase it, we'll be included in our rate base going forward in order to service these new homes and businesses that come online. So the $195 million that we referenced on the slide will actually be paid out over a very long period of time. It could be in the range of 50 to 100 years, but it really all depends on the level of development in that service area.

Okay. Regarding the immediate $935 million, what percentage can we expect to go into the rate base if this closes?

Yes. That's going to be dependent upon, as you know, the fair market value process and the Public Utility Commission's view of things. But we feel good about our purchase price, and we think we'll make a strong case with our UBs for inclusion in rate base. But it's hard for us to predict exactly what that will be before we run through the process.

Got it. And then I guess somewhat related to that, and then from a balance sheet and financing perspective, given that this pretty large potential acquisitions out there. When we look over the next 12 months or beyond, is the larger potential equity issuance going to be tied to potentially this agreement and the acquisition? Or could we see something a little bit sooner?

Yes. Insoo, I think that's something we're still evaluating today. I mean, this is relatively new news in terms of Bucks County. And then, of course, we've got expectations around DELCORA. So we're really reevaluating how much equity need and what the timing is for that equity, and really the means of raising that equity.

Yes. And just to add to that, Dan. We know that upon signing of the asset purchase agreement, we probably have, call it, 9 to 12 months as you all know, of regulatory process. So given we're not quite at the signing of the APA, we have plenty of time to consider the timing of equity needs, as Dan said correctly.

Okay. And just one more question about the balance sheet. Regarding the trailing 12 months or your expectations for 2022 in terms of FFO to debt, considering the future potential equity from acquisitions, are you aiming to reach at least the 13% level?

I think when we look at our FFO to debt, and the conversations with both agencies have effectively had 12% is our downgrade threshold. But what that's been communicated is if we were consistently below 12%, we would be having conversations with respect to that. So it's our intent, as we finance transactions and as we finance our significant CapEx program to keep that FFO to debt above that 12% level on an ongoing basis. But I wouldn't say that 13% is a near-term target for us, Insoo.

I noticed the increased responsibility for Mr. Dingerdissen, so it seems he's going to be very busy now. Congratulations, Dan. Now, regarding the Bucks County deal, you've addressed all my questions. I just wanted to check in on the Inflation Reduction Act. Clearly, you won't qualify for the alternative minimum tax based on size, so that's not a concern. Is there anything that we and investors should be aware of that could affect your business concerning the Inflation Reduction Act?

No. I mean, I think that's the primary one that's sort of the quickest to identify and look at it and say, no, we're not hitting that $1 billion threshold yet, so we wouldn't be impacted by that minimum tax immediately. And then like everybody else, I think we're still waiting through it to understand what the real impact could be. But nothing at this point is hitting the radar screen as being significant.

Got it. I just wanted to check in. And then just on pension, can you remind us what your accounting policy is as we think about 2023, some of your electric and water utility peers use this mark-to-market accounting where they could have a significant headwind next year. Maybe just any color there? And can you remind us what your accounting policy is?

Yes. I'll provide some insights regarding the pension. The Aqua pension, which most employees are familiar with, has been frozen for new entrants since 2003. Therefore, only those who joined before that year are in it. Recently, we started adjusting our investment allocation as part of a glide path. As a result, we have significantly reduced our exposure to equities and other high-risk assets, and we are currently nearly 100% funded for the majority of our obligations. We continue to include pension contributions in our rate structure. While we manage the pension, it is not a major concern for us.

I wanted to discuss the M&A pipeline from a different angle and would like your thoughts on the public narratives surrounding it. As larger deals are added to the pipeline, particularly in a significant press market like Philadelphia, we see an increase in media coverage that often has a local focus. This also leads to a greater presence from groups like Food and Water Watch, which has been reflected in some recent local coverage. My question is what strategy do you have for managing this narrative to ensure your side of the story is communicated effectively? While you made some excellent points on this call, it's clear that this isn't the best platform to reach a wider audience. I'm interested in how you plan to ensure that you receive equal attention compared to some of the opposing voices.

Yes. I have a few observations, and Matt may have some as well. First, we have a well-defined communication strategy that includes microsites and websites with comprehensive information. For the hearings we held in Bucks County, we organized them like an expo so that interested parties could get a complete view of the company's expertise, its personnel, and our performance. It wasn’t just a row of chairs where individuals could argue; it was much more collaborative. I understand that our opponents prefer a more confrontational setting. Additionally, I’ve noticed that organizations like Food and Water Watch, along with other local activists who have become quite adept at this, are often perceived as outsiders in our work in Bucks County. It's important to remember that we live and work here; we are part of this community, not outsiders from Washington, D.C. trying to stir things up. While there are certainly local stakeholders involved, the most significant agitation is being driven by outsiders, and I believe this is being recognized.

Yes. Look, I think we have a very compelling value proposition for municipalities. And I think municipalities see it, right? They understand everything we bring to the table but we're not always going to be able to convince these outsiders that don't really know the whole story, right? They have a set agenda. And we're less concerned with those folks and more worried about making sure the value proposition gets to the people that need it in our communities.

And those outsiders are largely anti-privatization. So it's not how I operate my wastewater or my water plant. It's really about I don't want my assets privatized. So it's a philosophy rather than an economic or commonsense approach. So I hope, Brian, over time, that those win the day but we have to take these one at a time. And as you know, we take them very seriously.

Yes, that's great insight. I wanted to ask about the water quality accountability legislation in Pennsylvania. Mark and Chris did a great job discussing it. Chris, do you have any updated thoughts on whether that might become law and what the potential impact could be for Aqua?

Yes. We're very proud of the team we testified up there, and we try to be very thoughtful in our comments. Listen, you know Ryan, you studied this stuff. This is simply leveling the playing field. We can make this a cost item or however the opposition wants to portray it. But the reality is we're just asking all utilities to provide the same level of service and replacement cycles and everything else that we do under the guidance of the Public Utility Commission. And so we think it's very reasonable. It's hard to read legislators in terms of how they'll react. But I think they're probably at this point in the process of digesting all of that information and testimony, and I think we'll get a much better read on the options for proceeding through the committee and then to the floor of the house as we did in the Senate in the coming weeks when the legislature comes back into session in September. But listen, I think it's important legislation, and we're going to continue to press hard. But ultimately, it will be up to the committee Chairman and legislators.

Yes. Okay. And then lastly, this is more of a housekeeping item. But Dan, and I apologize if you mentioned this earlier, I may have missed it. The tax rate has increased significantly and is one of the highest we've seen in a few years. Is there any forward guidance on what we should expect now regarding the tax line?

Yes, Ryan, I expect the full year 2022 to be just below zero, resulting in a slight tax benefit. Currently, we are seeing a tax benefit related to our workforce due to our position in the repair cycle. On the water side, we have a typical provision, and when you combine these factors, the tax situation is quite interesting this quarter. Overall, if we consider the year-to-date figures, I anticipate a slightly negative effective tax rate, or think of it as a benefit for the full year 2022.

The next question is from Travis Miller from Morningstar.

First question, I was thinking about customer bills. I think you have a unique perspective in that you have the gas side and the water side. How are you seeing the trajectory, especially on the commodity side, between the gas bills and water bills, obviously, gas prices being high? How is that going to affect the winter? And then what are you seeing in terms of water bills relative to what we've been seeing on gas bills?

Let's start with water. Clearly, we don't have the same kind of commodity or fuel charge that we have in natural gas. So the commodity is relatively inexpensive. The cost really associated with that is the pipe to get there in our replacement projects along with the enhancements of our plants as we talked about with PFOS, PFOA. So clearly, the trajectory is going higher. What we've tried to do in this inflationary period is contain costs as best we can, right? So we're continuing to focus on capital projects that reduce operating expense. And so on the water side, the cost increases or rate increases, if you will, are largely based on capital investment, and some now on inflation, but we're working very hard to mitigate some of those. On gas, obviously, the commodity cost is up. Now there's been some moderation as we put about 49% of our gas in the ground during the summer that we'll ultimately use in the wintertime. So we try to take advantage of that as best we can. But clearly, when we look at it on a year-over-year basis, natural gas is much higher this year than it was last. And so therefore, the winter bills our customers will see in the winter coming up will be higher based on that commodity cost than they were last year. Dan, do you want to put more color on that?

Yes, Chris. Our customers typically use around 90 to 100 Mcf a year. In simple terms, for every $1 increase in commodity cost, the bill would rise by approximately $90 to $100. So if gas costs $2 more this year, you can expect the annual bill to be around $200 higher during the 2022-2023 heating season compared to last year.

Yes. Now Travis, we have significant safety nets in place, right? Not only the federal LIHEAP dollars for natural gas and LIURP dollars on the water side, but we also have CAP programs, or customer assistance programs. And on the gas side, call that in the range of $35 million a year. And on the water side, it's growing because we just put the universal service program in with the last rate case that was finalized in May of this year. So it's not as significant as natural gas, but we are working hard to make sure that the safety net is there for folks who really have a hard time paying their bills.

Okay. Got it. Makes sense. And then if we go back to the comments you made earlier on the EPA federal regulations, would you classify that more as a capital investment opportunity? Or is there some risk there that could increase O&M costs that you might not get recovery of?

We anticipate a full recovery of all investments to align with federal law, and we believe there is no exposure in that regard. When we initially committed to the 13 parts per trillion standard, which is significantly below the health advisory level of 70 parts per trillion, we did assume some risk that not all would be recoverable due to exceeding federal law. However, discussions with regulators have been very encouraging, and no regulator has indicated that we should not recover those operating or capital expenses. We will see what the maximum contaminant level regulation brings this fall. If it changes our standard from 13 to 10 or less, we will promptly comply with that federal law, just as others will. We also believe this could create opportunities for us to assist other municipalities that may struggle to meet compliance due to budget constraints or lack of expertise.

Brian, congratulations on the new role. Maybe just a follow-up on the equity. So I think you guys have talked about the potential for a $500 million ATM. Is that still kind of in the cards in the near term? Or is that on pause right now kind of pending firm or developments on Bucks and maybe some other moving pieces?

Yes. It's really the latter of those. I think given the recent progress on Bucks and as we think about DELCORA, the exact timing and format and quantum of the equity raise is still in flux.

Got it. And then any initial expectations on benefits that could accrue to you guys from the recent move by the governor to reduce the tax rate in Pennsylvania? And how that could kind of factor in any rate case dynamics here?

Yes. In Pennsylvania, there is a process known as STAS, which adjusts the rates our customers charge based on changes in the state tax rate. As the corporate tax rate decreases, we will be passing those benefits on to our customers.

Understood. And then any updated thoughts just in terms of Chester?

Yes. We are continuing to navigate through the legal process. The case is still pending at the Supreme Court, and they have not made a ruling yet. The receiver is still working and is expected to conclude his tasks next year. In the interim, there will be a change in a Board member every five years. The Chester Water Authority is due for renewal, and we anticipate that there will be at least three new members on that Board. They are expected to make changes around August 15 or so. We will see what the new Board is interested in pursuing, and we will monitor those developments. Other than that, we are just waiting for the court hearings.

So on DELCORA, besides the commission voting to restart the process and kicking it back at ALJ, have there been any other developments, like as a timeframe for getting a new proposed decision been outlined?

The ALJ has scheduled a preliminary hearing for next Tuesday. We anticipate that the schedule will result from that hearing, so we expect to know what the timeline looks like within the next week. We hope that the ALJ will follow the commission's request to proceed quickly.

Could you remind us about the assumptions you're making regarding DELCORA and the timing of the closing? I'm assuming you're referring to the current purchase price and similar factors. Please go over that information again.

Yes. Our guidance for the full year 2023 includes DELCORA in our numbers. If you perform some basic calculations based on the purchase price, you'll find that it aligns closely with our net income assumption.

Okay. So you're assuming the year-end 2022 close and then the $277 million purchase price. All right.

Correct.

Got you. And then, Dan, for you the last, in terms of like O&M expense, it looks like it kind of normalized a bit in Q2 after the Q1 abnormalities. Did you say some of the stuff in that kind of other bucket that had the $3.5 million increase this quarter will reverse or be capitalized in the back half of '22?

Yes, that's correct. We identified some things after the quarter closed that were outside services expenses, which should be capitalized. So we'll turn those around in the third quarter.

Okay. So I think it was around like close to 6% increase this quarter, we should actually be thinking it kind of lower than that if that reversal and...

Yes, take the 6% or 5.9% that you see, I'd remove the impact of the acquired systems from that and then the impact of the customer assistance program for gas because that just floats based on gas price, and there's a revenue offset to it. And you come down to an increase of about 3.7%. Then if you take into account these reversals, it would bring that number to a more moderate level.

Yes. Jonathan, just think about fuel, right? As 1 chemical goes another...

Yes, as we mentioned, certain chemicals like chlorine have effectively doubled in price. While volumes are a small part of our cost structure, there are some significant increases occurring.

Okay. Well, great. Good luck in the upcoming months in terms of DELCORA and getting Bucks signed, field and delivered.

We will take the next question from Gregg Orrill from UBS.

So on Bucks County, when would you see that being accretive to earnings? And how would that ramp up with fair value accounting?

Well, I think a couple of ways to think about that. One, we have an asset purchase agreement that we have signed, right, that they have not yet signed. So I think it could be tweaked, right, before it's signed. So we're not entirely clear. Secondly, it will be accretive certainly in rates. But I don't think we're ready to say what that accretion looks like before we put it in rates like so many of these. And then depending on the period of time it takes for us actually to get a signed APA, hopefully, that sooner than later. That time period between now and when we file our next case could also be longer or shorter. So I think there's a lot of considerations to that. But certainly, as we look at this, the long-term accretion is positive. It's a matter of getting it to rates initially.

We might ask this a little bit cautiously. I guess in the utility industry, I think over the past year, there have been maybe a couple of utilities that when they had the financing needs through equity, have sold at least just a portion of one of the jurisdictions or assets that may have. I know we've discussed the strategy of better water and gas and whatnot. And now that Bucks and potentially a couple of other chunkier acquisitions may be in the front window. Is there any consideration or thought that maybe a partial sale of the gas utility ownership may be on the table to finance the equity portion?

It's a good question. And I'll reiterate where we've been, and that is that we really like these gas assets. They're outperforming all of our expectations; earnings, safety, capital program, and everything else. So we're really comfortable. Having said that, you make an important point. And we think about all of our options. And so as we think about whether Bucks becomes real, whether we can get DELCORA closed in the next quarter here, there's a lot to think about. So I would say we're evaluating all of our thoughts on capital raise at this point. Matt, do you have any thoughts?

No. I think you've said it correctly, Chris.

Okay. So there are a lot of different offerings to consider.

And congratulations to Brian on the new role. Fantastic. I would just comment on your ESG report on which you have done a huge amount of work, which I've been powered through. This is a question for Chris, and you might not thank me for this, but just kind of blue sky. And how do you think the risks are changing? Or would you say the risks are changing more in gas rather than in water? And are they growing? How do you think about the environmental risk of the two businesses?

The question is about the future energy mix many years from now. I believe that natural gas will still play a significant role for 30 to 40 years. As technology progresses, advancements like carbon capture and hydrogen may have a larger impact. However, in colder regions, natural gas will remain essential in the energy mix. As I mentioned, technological advancements could help mitigate risks. Upgrading pipes and tightening our systems to reduce methane emissions are crucial efforts, and we are actively focused on that. When considering our approach to environmental, social, and governance issues and our two businesses, it’s clear that there is a heightened focus on natural gas.

That's all the time we have for questions. Mr. Chris, at this time, I will turn the conference back to you for any additional or closing remarks.

Thanks so much. Obviously, folks will be available for follow-up questions. Brian, Dan, myself, Matt, all available and at your disposal. Have a great day. Thanks for joining us.

This concludes today's call. Thank you for your participation. You may now disconnect.