Essential Utilities, Inc. WTRG

The business

Essential runs two regulated franchises. Aqua is regulated water and wastewater serving roughly 5.5 million people across the Mid-Atlantic and Midwest, and Peoples is regulated natural-gas distribution centered on western Pennsylvania. The split is close to even on revenue, water/wastewater at about 54% and gas at about 45% of consolidated revenue in FY2025, but water carries the larger and faster-growing rate base and the more durable earnings, because gas distribution faces a longer-run demand-and-decarbonization question that water does not. Pennsylvania is the dominant jurisdiction for both segments, with secondary water operations in New Jersey, Ohio, Illinois, Texas, Virginia, North Carolina, Indiana and beyond. The earnings engine is the regulated rate base itself: management's roughly $8.7B of planned capital investment from 2026 through 2030 is what converts into allowed return, and water is the segment that compounds that base fastest.

The qualitative fact the financials do not show is that the entire equation changed in October 2025, when American Water agreed to acquire Essential in an all-stock merger that creates the largest regulated U.S. water and wastewater utility, with a pro forma equity value near $40B and combined enterprise value near $63B. WTRG holders approved the deal with 94.8% support at the February 2026 special meeting and would own about 31% of the combined company. The standalone regulatory story still matters as the break-case floor: Pennsylvania remains a constructive jurisdiction, the rate-case cycle is active with a $163.2 million Pennsylvania gas case and roughly $102 million of pending water and wastewater cases supporting the capital plan, and the fair-market-value municipal-acquisition lever that drove a decade of water M&A is still live. But for now the share price tracks AWK's stock and the probability the combination clears its state-by-state and antitrust approvals, not WTRG's own rate base.