10.	Rate Matters

From time to time, the Company files applications for rate increases with the PPUC and is granted rate relief as a result of such requests. The most recent rate request was filed by the Company on May 30, 2018 and seeks an annual increase in water rates of $6,399, which would represent a 13.1% increase, and an annual increase in wastewater rates of $289, which would represent a 25% increase. The request is currently under review by the PPUC and other interested parties. Any rate increase approved by the PPUC will be effective no later than March 1, 2019. There can be no assurance that the PPUC will grant the Company's rate increase in the amount requested, if at all.

The PPUC permits water utilities to collect a distribution system improvement charge, or DSIC. The DSIC allows the Company to add a charge to customers' bills for qualified replacement costs of certain infrastructure without submitting a rate filing. This surcharge mechanism typically adjusts periodically based on additional qualified capital expenditures completed or anticipated in a future period. The DSIC is capped at 5% of base rates, and is reset to zero when new base rates that reflect the costs of those additions become effective or when a utility's earnings exceed a regulatory benchmark. The Company's earnings are currently below the regulatory benchmark allowing the Company to collect DSIC. The DSIC provided revenues of $436 and $916 for the three and six months ended June 30, 2018, respectively, and revenues of $62 for the three and six months ended June 30, 2017.

On May 17, 2018, the PPUC, in conjunction with its review of the effects of the Tax Cuts and Jobs Act of 2017, or the 2017 Tax Act, issued an order which directs utilities with pending rate cases, including the Company, to address the issues related to the 2017 Tax Act in the context of an overall review of the Company's rates and rate structure in lieu of any immediate action. The PPUC expects the Company and the other interested parties to address the effect of the federal tax rate reduction on the rates charged during the rate case review, including whether a retroactive surcharge or other measure is necessary to account for the tax rate change that became effective January 1, 2018. The Company expects to be required to give the benefit back to customers. On this basis, the Company has reduced revenue for 2018 by $983 by recording a regulatory liability for the difference in calculated current federal income taxes and deferred federal income taxes on accelerated depreciation from 34% to 21%. The regulatory liability is a temporary tax difference so a deferred tax asset is recorded including the gross-up of revenue necessary to return, in rates, the effect of the temporary difference. This treatment and amounts may change in future periods upon completion of the pending rate case.