Essential Utilities, Inc. (WTRG): PESTLE Analysis [Nov-2025 Updated]

You're looking at Essential Utilities, Inc. (WTRG) in 2025, and the investment thesis hinges on how they manage a massive infrastructure push against rising costs. While the company is projecting a stable 6% to 8% annual regulated rate base growth, the $1.3 billion capital program for the year faces a headwind from high interest rates and stricter EPA rules on contaminants like PFAS. This PESTLE analysis cuts through the noise, showing you precisely how state-level politics, new environmental laws, and the shift to smart water technology are shaping WTRG's future earnings and what actions you should take right now to price in these non-market risks.

Essential Utilities, Inc. (WTRG) - PESTLE Analysis: Political factors

State Public Utility Commissions (PUCs) control rate-setting and CapEx recovery.

The core of Essential Utilities' (WTRG) business model is completely reliant on state-level political and regulatory bodies, specifically the Public Utility Commissions (PUCs). These commissions hold the power to approve the rates the company can charge and, critically, how quickly it can recover its capital expenditures (CapEx). Simply put, the PUCs determine if the company can earn a fair return on its investments. For 2025, Essential Utilities is on track to invest $1.4 billion to $1.5 billion in regulated infrastructure, a massive sum that must be converted into rate base through PUC-approved mechanisms like Distribution System Improvement Charges (DSICs) or base rate cases.

As of early November 2025, Essential Utilities has successfully secured $101.5 million in approved rate awards and infrastructure surcharges across its operating states, which is a key driver of its reported revenue growth. Still, the political process is ongoing, with base rate cases currently pending in key states like North Carolina, Texas, Ohio, and Virginia. These pending cases alone represent an estimated $99.4 million in incremental annual revenues that are subject to political and regulatory approval. The stability of this regulatory framework is defintely the single biggest political opportunity for the company.

Infrastructure Investment and Jobs Act (IIJA) funds require state-level political coordination.

The federal Infrastructure Investment and Jobs Act (IIJA) provides a significant political tailwind, but accessing the funds requires complex coordination at the state level. The IIJA earmarked a total of $15 billion specifically for lead service line replacement (LSLR) nationwide. This money is not handed directly to Essential Utilities; it is distributed through the Environmental Protection Agency's Drinking Water State Revolving Fund (DWSRF), which is managed by state environmental and health agencies. This means the company must politically align its capital plans with state-level priorities to secure low-interest loans or principal forgiveness grants from the DWSRF.

Here's the quick math: the estimated national cost to replace all lead service lines is between $50 billion and $80 billion, meaning the federal funding is a major head start, but it doesn't cover the full cost. Essential Utilities must work with state politicians and regulators to ensure its large-scale replacement projects are prioritized for these funds, effectively reducing the cost burden on its ratepayers and shareholders.

Bipartisan support for federal and state programs to replace lead service lines.

The political support for replacing lead service lines (LSLs) is one of the few truly bipartisan issues in the infrastructure space, which is a clear positive for Essential Utilities. This consensus stems from the public health urgency, which is hard for any politician to oppose. The federal IIJA funding is a direct result of this bipartisan push.

The political focus is now shifting to the state level to implement the EPA's updated Lead and Copper Rule Revisions (LCRR). This creates a predictable regulatory environment for Essential Utilities' infrastructure spending, which is vital for long-term planning. The company's ability to execute these projects quickly and efficiently strengthens its political standing with state governments, making future rate case approvals smoother. It's a classic win-win: public health improves, and the utility gets to grow its rate base.

Political pressure to freeze or delay rate increases due to affordability concerns.

While infrastructure investment is popular, the resulting rate increases are a growing political flashpoint, especially in 2025. The cost-of-living crisis has made utility affordability a central political issue. A recent poll showed that 31 percent of Americans cite utility bills as one of the most challenging costs to afford. This political pressure translates directly to PUC scrutiny on Essential Utilities' rate cases.

The real-world impact is clear: past-due utility balances across the U.S. jumped 9.7% annually to an average of $789 per household between April and June 2025. This has spurred political action, such as a gubernatorial candidate in New Jersey campaigning successfully on a promise to freeze utility increases. This political climate means Essential Utilities must be extremely empathetic and strategic in its rate filings, often having to increase its customer assistance programs to mitigate political backlash and ensure PUC approval.

State-level mandates for utility-owned water system consolidation.

The political trend of encouraging consolidation of small, often failing, municipal water systems into larger, better-resourced utility operations is a primary growth driver for Essential Utilities. Many states have enacted legislation, such as fair market value (FMV) laws, that politically incentivize municipalities to sell their systems to companies like Essential Utilities. The company's year-to-date 2025 acquisitions have already added approximately 10,300 customers for an investment of approximately $58 million.

The ultimate political factor in late 2025 is the announced all-stock merger with American Water Works Company, Inc. (American Water). This creates a combined entity with a pro forma market capitalization of approximately $40 billion and an enterprise value of approximately $63 billion. This massive consolidation requires regulatory approval from multiple state PUCs, making the political factor paramount. The merger's success hinges on convincing state regulators that the enhanced scale and operational efficiency will ultimately benefit customers, not just shareholders. The combined company will serve 4.7 million connections across 17 states.

Essential Utilities, Inc. (WTRG) - PESTLE Analysis: Economic factors

High interest rates increase the cost of debt for the $1.4 to $1.5 billion capital program projected for 2025.

You're facing a capital-intensive environment, and the current interest rate structure makes financing your massive infrastructure plans more expensive. Essential Utilities is on track to invest between $1.4 billion and $1.5 billion in regulated infrastructure in 2025 alone, part of a larger $7.8 billion plan through 2029. This spending is crucial for system upgrades, but the cost of debt (the interest paid on borrowed money) is a clear headwind.

The company's weighted average cost of fixed-rate long-term debt stood at 4.12% as of September 30, 2025. While the Federal Reserve has recently reduced the benchmark rate to a 3.75%-4.00% range, which is a positive sign, increases in interest expense still partially offset revenue gains in the second and third quarters of 2025. You have to keep a close watch on the financing mix-too much debt at these levels eats into net income.

Inflation drives up costs for labor, pipe materials, and construction services.

Inflation is not just an abstract economic term; it directly impacts your operations and maintenance (O&M) expenses. For the first nine months of 2025, Essential Utilities' O&M expenses totaled $439.4 million, an increase of 3.7% compared to the same period in 2024. This isn't a surprise.

Here's the quick math: that 3.7% increase is driven by real-world costs. Specifically, the company cited rising employee-related costs (labor), production costs for water and wastewater operations, and materials as key drivers. It means pipe materials, chemicals for water treatment, and the skilled labor needed for construction services all cost more, which puts pressure on your operating margins until new rate cases are approved.

Regulated rate base growth is forecast at 6% to 8% annually, providing earnings stability.

The core strength of a regulated utility like Essential Utilities is the predictable growth in its rate base, which is the asset value on which you are permitted to earn a regulated return. This is your defintely most stable lever. The combined regulated utility rate base is projected to grow at a compounded annual growth rate of over 8% through 2029.

This growth is fueled by the significant capital investment program, as regulators typically allow you to earn a return on new infrastructure. Breaking that down, the regulated water segment rate base is forecast to grow at approximately 6%, while the regulated natural gas segment is projected to grow at a stronger rate of approximately 11% through 2029.

Slowing population growth in some service areas limits organic customer expansion.

While the rate base grows through capital spending, organic customer growth-new customers from new housing developments-is relatively modest. The regulated natural gas customer base is expected to be stable for 2025. The regulated water customer base is projected to grow at an average annual rate of between 2% and 3% over the long term, but this includes both organic growth and acquisitions.

What this estimate hides is the reliance on acquisitions to move the needle. The company is actively pursuing municipal utility acquisitions to expand its footprint, such as the finalized purchase of the City of Beaver Falls Wastewater System in July 2025. Organic growth alone would be much slower, which is typical for a mature utility sector.

Recessionary fears could increase customer bad debt expense, a minor but real risk.

Economic uncertainty and potential recessionary pressures translate directly into customers struggling to pay their bills, which increases your bad debt expense (accounts receivable that are unlikely to be collected). This is a minor risk in the context of overall revenue, but it's a real operational cost. In the third quarter of 2025, Essential Utilities reported an increase in bad debt expense, with a rise of $4.2 million compared to the prior year's period, partially offsetting revenue gains.

The increase in bad debt expense was a driver for higher O&M expenses in both the second and third quarters of 2025. This indicates that while the regulated revenue stream is strong, you need to manage customer assistance programs effectively to mitigate this specific risk.

• Monitor customer payment trends closely.
• Increase focus on customer assistance programs.
• Factor higher bad debt into future rate case filings.

Finance: Re-run the 2026 capital program model using a 4.5% cost of debt assumption by the end of the week.

Essential Utilities, Inc. (WTRG) - PESTLE Analysis: Social factors

You're looking at Essential Utilities, Inc. (WTRG) and trying to map the social landscape, which is critical because public perception and community needs directly translate into regulatory pressure and capital expenditure requirements. The core takeaway here is that rising social expectations for water quality and affordability are forcing significant, but rate-base-accretive, infrastructure investments, while labor costs are a persistent operational headwind.

Growing public demand for high-quality, lead-free drinking water.

The public's tolerance for lead and emerging contaminants like Per- and Polyfluoroalkyl Substances (PFAS) has dropped to zero, making infrastructure renewal a social mandate, not just a maintenance item. Essential Utilities is responding with a massive capital program, planning to invest between $1.4 billion and $1.5 billion in regulated infrastructure in the 2025 fiscal year alone. This commitment is largely driven by the need to address aging systems and meet evolving public health standards.

The company is actively working to eliminate lead service lines, a key public concern. While the total number of lines replaced in 2025 is a moving target, the company has already invested $23 million in lead service line remediation in 2024, replacing over 1,600 lines. Furthermore, the long-term plan includes at least $450 million in capital projects from 2025 through 2029 specifically for PFAS mitigation to comply with new federal standards. This is a clear, defensive investment against future public scrutiny and regulatory fines.

Increased scrutiny on water affordability, especially in low-income communities.

Water affordability is a growing social and political issue, particularly as infrastructure investments drive up the rate base and, consequently, customer bills. The company mitigates this risk through its Customer Assistance Program (CAP) under its Aqua brand, which provides monthly bill discounts to eligible low-income customers. This proactive approach helps manage public relations and reduces the risk of high bad debt expense.

Here's the quick math on eligibility for the Customer Assistance Program (CAP) in 2025, based on a percentage of the Federal Poverty Level (FPL):

The company also participates in the federally administered Low Income Household Water Assistance Program (LIHWAP) across multiple states, including Pennsylvania, New Jersey, and Ohio, providing an additional resource for customers struggling with their water bills.

Customer conservation efforts, while positive, reduce water sales volume and revenue.

It's a fundamental tension in the utility business: you encourage conservation for environmental and social good, but every gallon saved is a gallon of lost revenue. This long-term structural trend of declining water usage per customer is a defintely a headwind.

In 2025, this risk materialized due to weather. The company noted that a 'wet summer affecting water usage' was a headwind. This resulted in an estimated $2.6 million offset from lower water volumes in the second quarter of 2025. However, the regulated nature of the business helps stabilize revenue. The regulated water segment's Q2 2025 revenue still increased by 9.9% to $332.3 million, primarily due to rate increases and surcharges that decouple revenue from volume volatility.

Demographic shifts in service territory-aging infrastructure meets new housing developments.

Essential Utilities operates in a nine-state footprint with diverse demographics, and the dual challenge is clear: maintaining century-old pipes in established areas while building new capacity for growth. The company is tackling the aging infrastructure problem with its $7.8 billion capital plan through 2029.

The growth side is strong, with the regulated water customer base (or equivalent dwelling units) expected to grow at an average annual growth rate of between 2% and 3% from acquisitions and organic customer growth over the long term. This organic and acquisitive growth-including a pipeline of potential water and wastewater acquisitions representing approximately 400,000 total customers-provides a steady stream of new assets to include in the rate base, which is the engine of utility earnings growth.

Strong union presence in utility operations impacts labor costs and service reliability.

A significant portion of Essential Utilities' workforce, particularly in its Aqua Pennsylvania subsidiary, is unionized, with entities like the 32BJ SEIU and the Operating Engineers 542 representing employees. This strong union presence is a factor in labor costs and requires careful management of contract negotiations to ensure service reliability.

The impact of this is visible in the 2025 financial results:

• Operations and Maintenance (O&M) expenses for the combined entity increased to $148.5 million in Q2 2025, up from $142.5 million in Q2 2024, driven primarily by increases in employee-related costs.
• The regulated water segment's O&M expenses for Q3 2025 were $105.7 million, up from $96.4 million in Q3 2024, with employee-related costs being a key driver.
• Specifically, the Q2 2025 earnings call noted a $6.1 million year-over-year increase in employee-related costs, which included a $650,000 increase in insurance reserves for the Peoples (gas) employees' health plan.

Labor is a significant, non-discretionary cost component that regulators generally allow to be recovered through rates, but it still requires constant cost discipline to maintain the company's operational efficiency.

Essential Utilities, Inc. (WTRG) - PESTLE Analysis: Technological factors

The technological landscape for Essential Utilities, Inc. (WTRG) is defined by massive capital investment aimed at system modernization, regulatory compliance, and efficiency gains. You should see this as a strategic shift where the company is using technology-not just as a cost center-but as a core driver for regulated rate base growth and operational stability.

The company is on track to invest between $1.4 and $1.5 billion in infrastructure in 2025, with a five-year plan (2025-2029) totaling approximately $7.8 billion, which explicitly includes funds for improved information technology. That's a huge commitment, and a lot of it is going into the ground and into the cloud.

Smart water meters (Advanced Metering Infrastructure or AMI) adoption for real-time leak detection.

Deploying smart meters, or Advanced Metering Infrastructure (AMI), is a critical step for reducing non-revenue water and optimizing the network. For Essential Utilities, this technology allows for real-time data collection, which is the only way to quickly detect leaks or tampering, saving millions in lost water and energy costs.

AMI deployment is already well underway, particularly in the gas segment, which signals a clear technological path for water. The company has already reached its 2025 goal of installing over 60,000 Intelis smart gas meters in Pennsylvania, plus an additional 3,500 meters in Kentucky, bringing the total installed base of new meters to roughly 93,000. This massive rollout is defintely a precursor for a similar, large-scale deployment across the water utility footprint, which will dramatically improve asset management and customer billing accuracy.

Increased reliance on data analytics and AI to optimize capital planning and maintenance.

Essential Utilities is actively moving beyond simple data collection, making a strategic pivot toward Artificial Intelligence (AI) and advanced analytics to optimize its capital spending and maintenance schedules. They are already using algorithmic analysis to enhance operational efficiency and the customer experience.

A concrete example of this commitment is the company's recently announced investment of $26 million in a major data center facility in Western Pennsylvania. This project, which includes designing, building, and operating an 18 million gallons per day (MGD) water treatment plant to service the AI-driven data center, positions Essential Utilities to directly leverage its expertise in the growing digital infrastructure market. Here's the quick math on the strategic value:

Cybersecurity spending is rising to protect operational technology (OT) from sophisticated attacks.

The move to AMI and centralized data platforms means the Operational Technology (OT) systems-the hardware and software that control physical assets like pumps and valves-are now more exposed to cyber threats. The utility sector is a prime target, so cybersecurity spending is rising dramatically across the industry.

While Essential Utilities does not break out a specific cybersecurity budget, the multi-year capital plan of approximately $7.8 billion through 2029 includes significant funds for 'improved information technology'. This is where the necessary investment for protecting critical infrastructure lies. It's an essential, non-negotiable cost of doing business in a digital environment, and it's a key component of their overall Operations and Maintenance (O&M) expenses, which totaled $439.4 million for the first nine months of 2025.

New filtration technologies are defintely needed for emerging contaminants like PFAS.

The regulatory pressure from the U.S. Environmental Protection Agency (EPA) on Per- and Polyfluoroalkyl Substances (PFAS) is a major technological driver. Compliance requires the rapid deployment of advanced filtration technologies, such as Granular Activated Carbon (GAC) or Ion Exchange (IX), which are expensive but necessary.

Essential Utilities has made a clear, quantifiable commitment to this challenge. They plan to invest at least $450 million between 2025 and 2029 specifically to address PFAS contamination. This is a massive, rate-base-driving capital expenditure, covering over 300 associated projects across their service footprint. This investment highlights a critical technological opportunity: the ability to deploy and scale advanced treatment solutions faster than smaller, municipal systems.

Digitalization of customer service to handle billing and outage communications.

Technology is also reshaping the customer experience, moving from paper-based systems to digital self-service and proactive communication. This digitalization is essential for managing customer expectations and reducing operational costs.

Key technological initiatives in this area include:

• Using data analytics to identify customers at risk of defaulting on bills.
• Proactively enrolling at-risk customers in assistance programs using algorithmic analysis.
• Enhancing customer service through a portion of the long-term $7.8 billion capital investment plan.

This focus on digital customer engagement, coupled with the AMI rollout, means fewer manual processes and better, faster outage and billing communications. It's a direct way to reduce bad debt expense and improve customer satisfaction, which keeps regulators happy.

Essential Utilities, Inc. (WTRG) - PESTLE Analysis: Legal factors

New, stricter EPA regulations on Per- and Polyfluoroalkyl Substances (PFAS) require significant capital investment.

The legal landscape around Per- and Polyfluoroalkyl Substances (PFAS), often called forever chemicals, is the single largest regulatory cost driver for Essential Utilities' water segment right now. The U.S. Environmental Protection Agency (EPA) finalized its National Primary Drinking Water Regulation (NPDWR) in 2024, setting legally enforceable Maximum Contaminant Levels (MCLs) for PFOA and PFOS at 4 parts per trillion (ppt) individually.

While the EPA announced in May 2025 that it intends to extend the compliance deadline for these two chemicals from 2029 to 2031, this simply shifts the capital expenditure timeline, it doesn't eliminate it. Essential Utilities is already ahead of the curve, planning to invest at least $450 million in capital projects specifically to address PFAS mitigation and treatment from 2025 through 2029. This massive investment is a key part of the total $1.4 to $1.5 billion in regulated infrastructure spending planned for the 2025 fiscal year. The good news is that these compliance costs are generally recoverable through the rate-setting process, which is a core benefit of being a regulated utility.

State-mandated deadlines for the complete replacement of all lead service lines.

The EPA's Lead and Copper Rule Improvements (LCRI), which became final in late 2024, sets a clear, national 10-year deadline for the replacement of all lead service lines (LSLs), requiring a minimum average annual replacement rate of 10% of the LSL inventory. This is a huge, defintely non-negotiable legal mandate that impacts public health and, therefore, the company's reputation and financial structure.

Essential Utilities is actively managing this risk. In 2024, the company allocated $23 million to LSL remediation and replaced more than 1,600 lead or galvanized service lines. For investors, the risk is not if the work will be done, but the speed of cost recovery. Nationally, the cost to replace a single line is estimated between $5,000 and $10,000, so the total cost across Essential Utilities' footprint will be substantial. The company's ability to secure federal grants and state revolving fund (SRF) loans, plus timely regulatory approval for cost recovery mechanisms like surcharges, is critical to maintaining a healthy balance sheet.

Ongoing legal challenges to rate case decisions by consumer advocacy groups.

Rate cases are the lifeblood of a regulated utility, and legal challenges from consumer advocacy groups are a constant, expected part of the process. You're seeing this play out in real-time across the company's service area. These groups scrutinize every line item, from the proposed Return on Equity (ROE) to the inclusion of infrastructure costs in the rate base.

As of May 2025, Essential Utilities is actively pursuing several base rate cases to recover its substantial infrastructure investments. Here's the quick math on the pending cases and recent wins:

The legal battles here are less about stopping the investment and more about controlling the pace and magnitude of the rate increase for the customer. Consumer groups are getting more sophisticated, even challenging the very business models of natural gas utilities in key states like Pennsylvania.

Compliance costs for natural gas pipeline safety regulations remain high.

Essential Utilities' natural gas segment, Peoples, operates under strict federal and state pipeline safety regulations, which require continuous, large-scale capital spending. The primary legal risk is non-compliance, which could lead to significant fines and catastrophic safety incidents. That's why you see such a heavy focus on infrastructure replacement.

The company is addressing this through its Long-Term Infrastructure Improvement Plan (LTIIP), a regulatory mechanism that allows for accelerated replacement of aging pipe. Peoples allocated $1.5 billion for this program between 2021 and 2025 to replace over 3,000 miles of critical pipelines. The cost of compliance is evident in the operating expenses; the regulated natural gas segment's operations and maintenance expenses rose to $55.7 million in the first quarter of 2025, up from $45.9 million in Q1 2024, partially due to increased legal expenses. This high-level of spending is simply the cost of doing business safely and legally in the gas distribution sector.

Eminent domain laws govern the acquisition of land for new utility infrastructure.

As Essential Utilities executes its $7.8 billion five-year capital plan through 2029, a core legal factor is the power of eminent domain-the right of a government or its delegate (like a public utility) to take private property for public use, provided just compensation is paid. This power is essential for laying new water mains, gas pipelines, and building treatment facilities.

In a key state like Pennsylvania, public utilities are authorized to use eminent domain upon a finding by the Public Utility Commission (PUC) that the project is 'necessary or proper for the service... and the public,' which is a lower bar than proving 'absolute necessity.' The risk here is not the lack of power, but the litigation cost and delay from property owner challenges. These challenges typically focus on two areas:

• Challenging the necessity of the project itself.
• Disputing the 'just compensation' amount offered for the land or easement.

The company must manage a complex legal process of negotiation, formal valuation, and potential court proceedings for hundreds of land parcels across its service territory to keep its massive capital projects, which are part of the $1.4 to $1.5 billion 2025 spend, on schedule. This is a constant, low-level legal headwind that can inflate project costs and extend timelines.

Essential Utilities, Inc. (WTRG) - PESTLE Analysis: Environmental factors

You need to see the environmental factors not just as compliance costs, but as the next generation of capital expenditure (CapEx) drivers. The biggest near-term risk for Essential Utilities, Inc. (WTRG) isn't a sudden regulatory fine; it's the long-term, compounding cost of climate change adaptation and the massive investment required to meet new federal water quality standards. This is a multi-billion-dollar opportunity, but it demands precise execution.

Climate change impacts (droughts, floods) increase stress on water supply and treatment systems.

Climate volatility, ranging from severe droughts to intense flooding, directly impacts WTRG's water and wastewater operations across its nine-state footprint. We see this stress manifest in higher energy costs for pumping during dry periods and increased treatment complexity following major storm events. The company manages this risk through a dual strategy of mitigation and adaptation, which is embedded in its infrastructure spending plan.

The core of the adaptation strategy is the $7.8 billion multi-year infrastructure investment planned from 2025 through 2029. This funding modernizes systems to handle greater flow variability and improves water-use efficiency. For instance, in 2024, the water segment recycled over 720 million gallons of treated wastewater, which is a concrete example of managing water scarcity by giving water a second life and protecting freshwater sources.

Focus on reducing methane emissions from the natural gas distribution network.

The natural gas segment, People's Gas, is the primary source of Essential Utilities' Scope 1 emissions, mainly through methane leaks from aging infrastructure. The company has a clear, science-based commitment to reduce its combined Scope 1 and 2 greenhouse gas (GHG) emissions by 60% by 2035 from a 2019 baseline of 670,923 metric tons of CO2e. This isn't just a paper goal; it's tied to a massive pipeline replacement program.

Through the end of 2024, Essential Utilities had already achieved a 28% reduction in Scope 1 and 2 emissions from its 2019 baseline. This reduction is driven by replacing old, leak-prone cast iron and bare steel gas mains. Since 2020, the company has modernized approximately 2,100 miles of aging water mains and natural gas pipelines. The investment is a win-win: it reduces environmental risk (methane is a potent GHG) and improves system safety and reliability for customers.

Increased regulatory pressure to manage and dispose of water treatment residuals safely.

The recent finalization of the Environmental Protection Agency (EPA) rule on Per- and Polyfluoroalkyl Substances (PFAS), or forever chemicals, is the single largest regulatory driver of CapEx in the water segment. WTRG is proactively investing to meet the federal maximum contaminant level (MCL) for the six regulated PFAS chemicals across all states it serves.

This is a costly, but necessary, undertaking. Essential Utilities plans to invest at least $450 million in capital projects specifically for PFAS remediation between 2025 and 2029. This includes over 320 associated projects across its footprint. The company is also actively securing state funding to offset some of this burden; for example, Aqua Pennsylvania was awarded $35 million in principal forgiveness and low-interest loans through the Pennsylvania Infrastructure Investment Authority (PENNVEST) for PFAS treatment.

Here's the quick math: If WTRG executes its $1.4 billion to $1.5 billion CapEx plan in 2025, but the average allowed return on equity (ROE) drops by 50 basis points due to regulatory pressure, that's a direct hit to future earnings. What this estimate hides is the lag-the true impact of high interest rates on the cost of new debt won't fully hit until the next round of rate cases. Finance: Track the weighted average cost of capital (WACC) movement against the new debt issuances by Friday.

Water withdrawal permits are becoming harder to secure in water-stressed regions.

The difficulty in securing new water withdrawal permits, especially in the more arid or rapidly developing regions WTRG serves, fundamentally limits organic growth. This is a quiet, defintely structural headwind. Securing a new source of water is a multi-year, politically charged process, so the company's strategy pivots to acquisition.

Instead of building new infrastructure to tap new sources, Essential Utilities focuses on acquiring existing water and wastewater systems from municipalities. This allows them to expand their customer base and rate base without the same level of environmental permitting risk associated with new water rights. The pipeline of potential water and wastewater acquisitions the company is actively pursuing represents approximately 400,000 total customers.

Company-wide goal to reduce Scope 1 and 2 greenhouse gas emissions.

This commitment is a strategic pillar, not just a sustainability report footnote. The goal is a 60% reduction in Scope 1 and 2 emissions by 2035 from the 2019 baseline. This target is consistent with the rate of reduction needed to align with the Paris Agreement's goal of limiting global temperature increase to well below 2 degrees Celsius.

The execution of this goal involves two main levers:

• Gas Operations: Replacing aged gas pipes to mitigate methane leaks.
• Water/Wastewater Operations: Procuring renewable energy to reduce Scope 2 emissions.

The water and wastewater segment has made significant progress on the Scope 2 front, procuring nearly 100% renewable electricity for its operations in key states like Pennsylvania, New Jersey, Ohio, and Illinois. This is a material change to their operational carbon footprint.