REGULATORY ASSETS

9 Months Ended

Sep. 30, 2011

Regulatory Assets and Liabilities Disclosure [Abstract]

NOTE 4 - REGULATORY ASSETS

FASB ASC Topic 980 stipulates generally accepted accounting principles for companies whose rates are established or subject to approvals by a third-party regulatory agency. Certain expenses are recoverable through rates charged to our customers, without a return on investment, and are deferred and amortized during future periods using various methods as permitted by the Delaware Public Service Commission, or DEPSC, the MDPSC and the PAPUC. Depreciation and salary study expenses are amortized on a straight-line basis over a period of five years and two years for all other expenses related to Delaware rate proceedings and applications to increase rates. Other expenses related to Maryland rate proceedings and applications to increase rates are amortized on a straight line basis over a period of five years or until the next rate increase application. The postretirement benefit obligation, which is being amortized over twenty years, is adjusted for the difference between the net periodic postretirement benefit costs and the cash payments. The amount recognized in the consolidated financial statements is determined on an actuarial basis, which uses assumptions about inflation, mortality, medical trend rates and discount rates. The deferred income taxes will be amortized over future years as the tax effects of temporary differences previously flowed through to the customers reverse. Goodwill was recognized as a result of the acquisition of Mountain Hill in August 2008 and is currently being amortized on a straight-line basis over a period of fifty years. Deferred acquisition and franchise costs are the result of due diligence costs related to the proposed purchase and franchise agreements for water facilities in Cecil County, Maryland and the November 2010 purchase of the Port Deposit, Maryland water assets. Amortization of these deferred acquisition costs begin once the acquired assets are placed into service. The amortization of the Port Deposit acquisition began in November 2010 and will be amortized over a period of twenty years. The termination of the Asset Purchase Agreements discussed in Note 1 - General - Maryland Regulated Subsidiaries resulted in an approximately $349,000 reclassification of deferred acquisition costs from regulatory assets on our Condensed Consolidated Balance Sheet to miscellaneous other expense on our Condensed Consolidated Statement of Income.

Regulatory assets, net of amortization, comprise:
	Unaudited
	(in thousands)
	September 30, 2011			December 31, 2010

Postretirement benefit obligation		$	477		$	637
Deferred income taxes recoverable in future rates			510			521
Goodwill			350			355
Deferred acquisition and franchise costs			672			1,009
Expense of rate and regulatory proceedings			243			88
		$	2,252		$	2,610

Expenses related to the Net Periodic Pension Cost for the postretirement benefit obligation are as follows:

	Unaudited
	(in thousands)
For the Nine Months Ended September 30,
	2011		2010
Net Periodic Pension Cost
Interest cost	$	26	$	33
Amortization of net loss (gain)		11		(2	)
Amortization of transition obligation		6		6

Total Net Periodic Benefit Cost	$	43	$	37

Contributions

Artesian Water contributed $83,000 to its postretirement benefit plan in the first nine months of 2011. These contributions consist of insurance premium payments for medical, dental and life insurance benefits made on behalf of the Company’s eligible retired employees.