NOTE 14: REVENUES FROM CONTRACTS WITH CUSTOMERS

Nature of Goods and Services

Water Operations - We currently provide retail water and wastewater services to five primary customer classes. Our largest customer class consists of residential customers, which include single private dwellings and individual apartments. Our commercial class consists primarily of main street businesses, our industrial class consists primarily of manufacturing and processing businesses that turn raw materials into products, our public authority class represents services provided primarily to municipality or other government customers, and, finally, our fire protection class consists of services related to fire suppression systems and fire hydrants. Connecticut Water’s management has determined that tariff-based receipts; except for the WRA and other deferred revenue mechanisms, which are considered alternative revenue programs; are considered revenues from contracts with customers.

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The Company has performance obligations for the service of standing ready to deliver water to customers. The Company recognizes revenue at a fixed rate as it provides these services, as approved by regulators. These arrangements generally do not have fixed terms and remain in effect as long as the customer consumes the utility service. The rates are set by PURA and the MPUC through the rate-making process and represent the stand-alone selling price of Company’s service to stand ready to deliver.

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The Company has performance obligations for the service of delivering the commodity of water to customers. The Company recognizes revenue at a price per unit of water delivered (gallons, cubic feet, etc.), based on the tariffs established by our regulators. These arrangements generally do not have fixed terms and remain in effect as long as the customer consumes the utility service. The rates are set by PURA and the MPUC through the rate-making process and represent the stand-alone selling price of a bundled product comprising the commodity and the service of delivering such commodity.

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The Company has a performance obligation related to administrative services such as turn-on/turn-off services, assessment of late charges, etc. The Company views that these services are not distinct in the context of the contract because they are highly interdependent for the effective delivery of water service provided to consumers. Based on the above discussion, the Company believes that the Goods and Services provided under customer contracts constitute a single performance obligation. The Company believes that this performance obligation is satisfied over time.

Services and Rentals - We provide contracted services to water utilities and other clients and also lease certain of our properties to third parties. The types of services provided include contract operations of water; Linebacker, our service line protection plan for public drinking water customers; and providing bulk deliveries of emergency drinking water to businesses and residences via tanker truck. Our lease and rental income comes primarily from the renting of residential and commercial property. The goods and services provided by Linebacker have been determined to be based on the stand ready nature of the Company to provide the goods and services and, therefore, customers simultaneously receive and consume the benefits provided by the Company. The other revenue streams in the Services and Rentals segment, including contracted services to water utilities and other clients, have performance obligations that are satisfied at a point in time, and likewise will not have a shift in the timing or pattern of revenue recognition.

Disaggregation of Revenue

The following table disaggregates our revenue by major source and customer class (in thousands):



	2018		2017		2016
Water Operations
Residential	$	64,294	$	60,383	$	59,320
Commercial	14,131		13,176		12,144
Industrial	3,189		3,090		3,150
Public Authority	3,634		3,690		3,476
Fire Protection	20,349		19,532		18,334
Other (including non-metered accounts)	3,110		3,136		1,350
Water Operations Revenues from Contracts with Customers	108,707		103,007		97,774
Alternative Revenue Program	7,958		4,047		893
Other	1,639		1,471		1,334
Total Revenue from Water Operations	118,304		108,525		100,001
Services and Rentals
Contract Operations	2,478		2,505		2,709
Linebacker	2,532		2,481		2,516
Services and Rentals Revenues from Contracts with Customers	5,010		4,986		5,225
Other	172		126		82
Total Revenue from Services and Rentals	5,182		5,112		5,307
Total Revenue from Real Estate Transactions	1,350		212		8

Total Revenues from Contracts with Customers	113,717		107,993		102,999

Total Revenue	$	124,836	$	113,849	$	105,316

The following table shows the components of Accounts Receivable and Accrued Unbilled Revenues related to revenues from

contracts with customers, as of December 31:



	2018		2017
Accounts Receivable
Water Operations Segment	$	11,890	$	12,885
Services and Rentals Segment	238		107
Accounts Receivable from Contracts with Customers	12,128		12,992
Other accounts receivable	2,041		1,973
Total Accounts Receivable	$	14,169	$	14,965

Accrued Unbilled Revenues from Contracts with Customers	$	10,011	$	8,481

Accounts Receivable and Accrued Unbilled Revenues: Accounts receivable are comprised of trade receivables primarily from our regulated water customers. The Company records their accounts receivable at cost, which approximates fair value. Additionally, the Company establishes an allowance for uncollectible accounts based on historical losses, management’s assessment of existing economic conditions, customer payment trends, and other factors. The Company assesses late payment fees on trade receivables based on contractual past-due terms established with customers and approved by PURA or the MPUC. The provision for bad debts is charged to operating expense.

The Company’s customers are primarily billed quarterly in cycles having billing dates that do not generally coincide with the end of a fiscal quarter. This results in customers having received water or wastewater services that they have not been billed for as of a given period’s end. The Company estimates its unbilled revenues by applying an average billed rate to total unbilled deliveries for each customer class.