**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      DC 20549**





**FORM
      10-Q**





(Mark
      One)


þ
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





**For
      the quarterly period ended September 30, 2007**





OR





 ̈
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
      the
      transition period from _________________ to______________________





Commission
      File Number     0-422





**MIDDLESEX
      WATER COMPANY**


(Exact
      name of registrant as specified in its charter)





**New
                Jersey**
              (State
                of incorporation)
            **22-1114430**
              (IRS
                employer identification no.)





**1500
      Ronson Road, Iselin, NJ  08830**


(Address
      of principal executive offices, including zip code)


**(732)
      634-1500**


(Registrant's
      telephone number, including area code)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.


Yes
þ    No
       ̈





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
                accelerated filer  ̈
            Accelerated
                filer þ
            Non-accelerated
                filer  ̈





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act).  Yes  ̈ No þ





The
      number of shares outstanding of each of the registrant's classes of common
      stock, as of October 31, 2007: Common Stock, No Par Value: 13,233,169 shares
      outstanding.























INDEX








**PART
                I.**
            **FINANCIAL
                INFORMATION**
            **PAGE**Item
                1.
            Financial
                Statements:Condensed
                Consolidated Statements of Income
            1Condensed
                Consolidated Balance Sheets
            2Condensed
                Consolidated Statements of Cash
                Flows
            3Condensed
                Consolidated Statements of Capital
                Stock  and Long-term Debt
            4Notes
                to Unaudited Condensed Consolidated Financial
                Statements
            5Item
                2.
            Management's
                Discussion and Analysis of Financial Condition and Results
                of
                Operations
            12Item
                3.
            Quantitative
                and Qualitative Disclosures of Market
                Risk
            17Item
                4.
            Controls
                and Procedures
            18**PART
                II.**
            **OTHER
                INFORMATION**Item
                1.
            Legal
                Proceedings
            18Item
                1A.
            Risk
                Factors
            18Item
                2.
            Changes
                in Securities
            18Item
                3.
            Defaults
                upon Senior Securities
            18Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            19Item
                5.
            Other
                Information
            19Item
                6.
            Exhibits
            19**SIGNATURES**
            20








**MIDDLESEX
                  WATER COMPANY****CONDENSED
                  CONSOLIDATED STATEMENTS OF
                  INCOME****(Unaudited)****(In
                  thousands except per share amounts)****Three
                  Months Ended September 30,**
              
              
              **Nine
                  Months Ended September 30,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**Operating
                  Revenues
              
              **$**
              **24,135**
              
              
              **$**
              **22,632**
              
              
              **$**
              **64,868**
              
              
              **$**
              **61,899**Operating
                  Expenses:Operations
              
              ****
              **10,915**
              
              
              ****
              **10,446**
              
              
              ****
              **31,250**
              
              
              ****
              **30,104**Maintenance
              
              ****
              **1,046**
              
              
              ****
              **907**
              
              
              ****
              **3,060**
              
              
              ****
              **2,440**Depreciation
              
              ****
              **1,887**
              
              
              ****
              **1,883**
              
              
              ****
              **5,607**
              
              
              ****
              **5,264**Other
                  Taxes
              
              ****
              **2,558**
              
              
              ****
              **2,537**
              
              
              ****
              **7,221**
              
              
              ****
              **7,110**Total
                  Operating Expenses
              
              ****
              **16,406**
              
              
              ****
              **15,773**
              
              
              ****
              **47,138**
              
              
              ****
              **44,918**Operating
                  Income
              
              ****
              **7,729**
              
              
              ****
              **6,859**
              
              
              ****
              **17,730**
              
              
              ****
              **16,981**Other
                  Income:Allowance
                  for Funds Used During Construction
              
              ****
              **168**
              
              
              ****
              **170**
              
              
              ****
              **421**
              
              
              ****
              **398**Other
                  Income
              
              ****
              **100**
              
              
              ****
              **41**
              
              
              ****
              **608**
              
              
              ****
              **140**Other
                  Expense
              
              ****
              **(9**
              **)**
              
              ****
              **(6**
              **)**
              
              ****
              **(21**
              **)**
              
              ****
              **(20**
              **)**Total
                  Other Income, net
              
              ****
              **259**
              
              
              ****
              **205**
              
              
              ****
              **1,008**
              
              
              ****
              **518**Interest
                  Charges
              
              ****
              **1,734**
              
              
              ****
              **1,890**
              
              
              ****
              **4,816**
              
              
              ****
              **5,213**Income
                  before Income Taxes
              
              ****
              **6,254**
              
              
              ****
              **5,174**
              
              
              ****
              **13,922**
              
              
              ****
              **12,286**Income
                  Taxes
              
              ****
              **2,096**
              
              
              ****
              **1,797**
              
              
              ****
              **4,680**
              
              
              ****
              **4,129**Net
                  Income
              
              ****
              **4,158**
              
              
              ****
              **3,377**
              
              
              ****
              **9,242**
              
              
              ****
              **8,157**Preferred
                  Stock Dividend Requirements
              
              ****
              **62**
              
              
              ****
              **62**
              
              
              ****
              **186**
              
              
              ****
              **186**Earnings
                  Applicable to Common Stock
              
              **$**
              **4,096**
              
              
              **$**
              **3,315**
              
              
              **$**
              **9,056**
              
              
              **$**
              **7,971**Earnings
                  per share of Common Stock:Basic
              
              **$**
              **0.31**
              
              
              **$**
              **0.29**
              
              
              **$**
              **0.69**
              
              
              **$**
              **0.69**Diluted
              
              **$**
              **0.31**
              
              
              **$**
              **0.28**
              
              
              **$**
              **0.68**
              
              
              **$**
              **0.68**Average
                  Number ofCommon
                  Shares Outstanding :Basic
              
              ****
              **13,206**
              
              
              ****
              **11,630**
              
              
              ****
              **13,191**
              
              
              ****
              **11,611**Diluted
              
              ****
              **13,537**
              
              
              ****
              **11,961**
              
              
              ****
              **13,522**
              
              
              ****
              **11,943**Cash
                  Dividends Paid per Common Share
              
              **$**
              **0.1725**
              
              
              **$**
              **0.1700**
              
              
              **$**
              **0.5175**
              
              
              **$**
              **0.5100**
 
 See
                  Notes to Condensed Consolidated Financial Statements.  1


**MIDDLESEX
                  WATER COMPANY****CONDENSED
                  CONSOLIDATED  BALANCE SHEETS****(Unaudited)****(In
                  thousands)****September
                  30,**
              
              
              **December
                  31,****ASSETS**
              
              **2007**
              
              
              **2006****UTILITY
                  PLANT:**
              Water
                  Production
              **$**
              **98,399**
              
              
              $
              95,324Transmission
                  and Distribution
              ****
              **258,478**
              
              
              
              243,959General
              ****
              **24,867**
              
              
              
              25,153Construction
                  Work in Progress
              ****
              **6,826**
              
              
              
              6,131TOTAL
              ****
              **388,570**
              
              
              
              370,567Less
                  Accumulated Depreciation
              ****
              **63,535**
              
              
              
              59,694UTILITY
                  PLANT - NET
              ****
              **325,035**
              
              
              
              310,873**CURRENT
                  ASSETS:**
              Cash
                  and Cash Equivalents
              ****
              **2,666**
              
              
              
              5,826Accounts
                  Receivable, net
              ****
              **11,854**
              
              
              
              8,538Unbilled
                  Revenues
              ****
              **5,632**
              
              
              
              4,013Materials
                  and Supplies (at average cost)
              ****
              **1,338**
              
              
              
              1,306Prepayments
              ****
              **1,645**
              
              
              
              1,229TOTAL
                  CURRENT ASSETS
              ****
              **23,135**
              
              
              
              20,912**DEFERRED
                  CHARGES**
              Unamortized
                  Debt Expense
              ****
              **2,909**
              
              
              
              3,014**AND
                  OTHER ASSETS:**
              Preliminary
                  Survey and Investigation Charges
              ****
              **5,274**
              
              
              
              3,436Regulatory
                  Assets
              ****
              **20,210**
              
              
              
              18,342Restricted
                  Cash
              ****
              **4,441**
              
              
              
              6,850Non-utility
                  Assets - Net
              ****
              **6,776**
              
              
              
              6,255Other
              ****
              **536**
              
              
              
              585TOTAL
                  DEFERRED CHARGES AND OTHER ASSETS
              ****
              **40,146**
              
              
              
              38,482TOTAL
                  ASSETS
              **$**
              **388,316**
              
              
              $
              370,267**CAPITALIZATION
                  AND LIABILITIES****CAPITALIZATION:**
              Common
                  Stock, No Par Value
              **$**
              **105,308**
              
              
              $
              104,248Retained
                  Earnings
              ****
              **27,218**
              
              
              
              25,001Accumulated
                  Other Comprehensive Income, net of tax
              ****
              **73**
              
              
              
              94TOTAL
                  COMMON EQUITY
              ****
              **132,599**
              
              
              
              129,343Preferred
                  Stock
              ****
              **3,958**
              
              
              
              3,958Long-term
                  Debt
              ****
              **128,446**
              
              
              
              130,706TOTAL
                  CAPITALIZATION
              ****
              **265,003**
              
              
              
              264,007**CURRENT**
              Current
                  Portion of Long-term Debt
              ****
              **2,678**
              
              
              
              2,501**LIABILITIES:**
              Notes
                  Payable
              ****
              **6,550**
              
              
              
              -Accounts
                  Payable
              ****
              **6,674**
              
              
              
              5,491Accrued
                  Taxes
              ****
              **8,041**
              
              
              
              6,684Accrued
                  Interest
              ****
              **904**
              
              
              
              1,880Unearned
                  Revenues and Advanced Service Fees
              ****
              **758**
              
              
              
              601Other
              ****
              **1,332**
              
              
              
              984TOTAL
                  CURRENT LIABILITIES
              ****
              **26,937**
              
              
              
              18,141**COMMITMENTS
                  AND CONTINGENT LIABILITIES (Note 7)****DEFERRED
                  CREDITS**
              Customer
                  Advances for Construction
              ****
              **21,343**
              
              
              
              19,246**AND
                  OTHER LIABILITIES:**
              Accumulated
                  Deferred Investment Tax Credits
              ****
              **1,754**
              
              
              
              1,813Accumulated
                  Deferred Income Taxes
              ****
              **18,376**
              
              
              
              15,779Employee
                  Benefit Plans
              ****
              **16,658**
              
              
              
              16,388Regulatory
                  Liability - Cost of Utility Plant Removal
              ****
              **6,682**
              
              
              
              6,200Other
              ****
              **443**
              
              
              
              527TOTAL
                  DEFERRED CREDITS AND OTHER LIABILITIES
              ****
              **65,256**
              
              
              
              59,953**CONTRIBUTIONS
                  IN AID OF CONSTRUCTION**
              ****
              **31,120**
              
              
              
              28,166TOTAL
                  CAPITALIZATION AND LIABILITIES
              **$**
              **388,316**
              
              
              $
              370,267
 
 See
                  Notes to Condensed Consolidated Financial Statements.


2


**MIDDLESEX
                  WATER COMPANY****CONDENSED
                  CONSOLIDATED STATEMENTS OF CASH
                  FLOWS****(Unaudited)****(In
                  thousands)****Nine
                  Months Ended September 30,****2007**
              
              
              **2006**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  Income
              
              **$**
              **9,242**
              
              
              $
              8,157Adjustments
                  to Reconcile Net Income toNet
                  Cash Provided by Operating Activities:Depreciation
                  and Amortization
              
              ****
              **6,149**
              
              
              
              5,817Provision
                  for Deferred Income Taxes and ITC
              
              ****
              **628**
              
              
              
              241Equity
                  Portion of AFUDC
              
              ****
              **(201**
              **)**
              
              
              (167
              )Cash
                  Surrender Value of Life Insurance
              
              ****
              **(275**
              **)**
              
              
              (155
              )Gain
                  on Sale of Real Estate
              
              ****
              **(212**
              **)**
              
              
              -Changes
                  in Assets and Liabilities:Accounts
                  Receivable
              
              ****
              **(2,939**
              **)**
              
              
              (1,496
              )Unbilled
                  Revenues
              
              ****
              **(1,619**
              **)**
              
              
              (1,373
              )Materials
                  & Supplies
              
              ****
              **(32**
              **)**
              
              
              (370
              )Prepayments
              
              ****
              **(416**
              **)**
              
              
              (777
              )Other
                  Assets
              
              ****
              **(447**
              **)**
              
              
              (383
              )Accounts
                  Payable
              
              ****
              **1,183**
              
              
              
              1,006Accrued
                  Taxes
              
              ****
              **1,368**
              
              
              
              1,535Accrued
                  Interest
              
              ****
              **(976**
              **)**
              
              
              (960
              )Employee
                  Benefit Plans
              
              ****
              **270**
              
              
              
              301Unearned
                  Revenue & Advanced Service Fees
              
              ****
              **157**
              
              
              
              94Other
                  Liabilities
              
              ****
              **266**
              
              
              
              80NET
                  CASH PROVIDED BY OPERATING ACTIVITIES
              
              ****
              **12,146**
              
              
              
              11,550CASH
                  FLOWS FROM INVESTING ACTIVITIES:Utility
                  Plant Expenditures, Including AFUDC of $220 in 2007 and $231 in
                  2006
              
              ****
              **(15,579**
              **)**
              
              
              (20,932
              )Restricted
                  Cash
              
              ****
              **2,420**
              
              
              
              745Proceeds
                  from Real Estate Dispositions
              
              ****
              **273**
              
              
              
              -Preliminary
                  Survey & Investigation Charges
              
              ****
              **(1,838**
              **)**
              
              
              (1,338
              )NET
                  CASH USED IN INVESTING ACTIVITIES
              
              ****
              **(14,724**
              **)**
              
              
              (21,525
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Redemption
                  of Long-term Debt
              
              ****
              **(2,214**
              **)**
              
              
              (1,647
              )Proceeds
                  from Issuance of Long-term Debt
              
              ****
              **132**
              
              
              
              321Net
                  Short-term Bank Borrowings
              
              ****
              **6,550**
              
              
              
              14,200Deferred
                  Debt Issuance Expenses
              
              ****
              **(30**
              **)**
              
              
              (1
              )Common
                  Stock Issuance Expense
              
              ****
              **(15**
              **)**
              
              
              (10
              )Restricted
                  Cash
              
              ****
              **(11**
              **)**
              
              
              (16
              )Proceeds
                  from Issuance of Common Stock
              
              ****
              **1,060**
              
              
              
              1,182Payment
                  of Common Dividends
              
              ****
              **(6,825**
              **)**
              
              
              (5,920
              )Payment
                  of Preferred Dividends
              
              ****
              **(186**
              **)**
              
              
              (186
              )Construction
                  Advances and Contributions-Net
              
              ****
              **957**
              
              
              
              478NET
                  CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
              
              ****
              **(582**
              **)**
              
              
              8,401NET
                  CHANGES IN CASH AND CASH EQUIVALENTS
              
              ****
              **(3,160**
              **)**
              
              
              (1,574
              )CASH
                  AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
              
              ****
              **5,826**
              
              
              
              2,984CASH
                  AND CASH EQUIVALENTS AT END OF PERIOD
              
              **$**
              **2,666**
              
              
              $
              1,410SUPPLEMENTAL
                  DISCLOSURE OF NON-CASH ACTIVITY:Utility
                  Plant received as Construction Advances and Contributions
              
              **$**
              **3,717**
              
              
              $
              2,995SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOWS INFORMATION:Cash
                  Paid During the Year for:Interest
              
              **$**
              **5,795**
              
              
              $
              6,153Interest
                  Capitalized
              
              **$**
              **(220**
              **)**
              
              $
              (231
              )Income
                  Taxes
              
              **$**
              **2,882**
              
              
              $
              3,111See
                  Notes to Condensed Consolidated Financial Statements.


3


**MIDDLESEX
                      WATER COMPANY****CONDENSED
                      CONSOLIDATED STATEMENTS OF CAPITAL STOCK****AND
                      LONG-TERM DEBT****(Unaudited)****(In
                      thousands)****September
                      30,**
                  
                  
                  **December
                      31,****2007**
                  
                  
                  **2006**Common
                      Stock, No Par ValueShares
                      Authorized -   40,000Shares
                      Outstanding - 2007 - 13,214
                  
                  
                  **$**
                  **105,308**
                  
                  
                  $
                  104,2482006 - 13,168Retained
                      Earnings
                  
                  
                  ****
                  **27,218**
                  
                  
                  
                  25,001Accumulated
                      Other Comprehensive Income, net of tax
                  
                  
                  ****
                  **73**
                  
                  
                  
                  94TOTAL
                      COMMON EQUITY
                  
                  
                  **$**
                  **132,599**
                  
                  
                  $
                  129,343Cumulative
                      Preference Stock, No Par Value:Shares
                      Authorized - 100Shares
                      Outstanding - NoneCumulative
                      Preferred Stock, No Par Value:Shares
                      Authorized - 139Shares
                      Outstanding - 37Convertible:Shares
                      Outstanding, $7.00 Series - 14
                  
                  
                  ****
                  **1,457**
                  
                  
                  
                  1,457Shares
                      Outstanding, $8.00 Series - 12
                  
                  
                  ****
                  **1,399**
                  
                  
                  
                  1,399Nonredeemable:Shares
                      Outstanding, $7.00 Series - 1
                  
                  
                  ****
                  **102**
                  
                  
                  
                  102Shares
                      Outstanding, $4.75 Series - 10
                  
                  
                  ****
                  **1,000**
                  
                  
                  
                  1,000TOTAL
                      PREFERRED STOCK
                  
                  
                  **$**
                  **3,958**
                  
                  
                  $
                  3,958Long-term
                      Debt:8.05%,
                      Amortizing Secured Note, due December 20, 2021
                  
                  
                  **$**
                  **2,825**
                  
                  
                  $
                  2,8966.25%,
                      Amortizing Secured Note, due May 22, 2028
                  
                  
                  ****
                  **8,680**
                  
                  
                  
                  8,9956.44%,
                      Amortizing Secured Note, due August 25, 2030
                  
                  
                  ****
                  **6,417**
                  
                  
                  
                  6,6276.46%,
                      Amortizing Secured Note, due September 19, 2031
                  
                  
                  ****
                  **6,696**
                  
                  
                  
                  6,9074.22%,
                      State Revolving Trust Note, due December 31, 2022
                  
                  
                  ****
                  **707**
                  
                  
                  
                  7393.30%
                      to 3.60%, State Revolving Trust Note, due May 1, 2025
                  
                  
                  ****
                  **3,168**
                  
                  
                  
                  3,1003.49%,
                      State Revolving Trust Note, due January 25, 2027
                  
                  
                  ****
                  **603**
                  
                  
                  
                  5984.03%,
                      State Revolving Trust Note, due December 1, 2026
                  
                  
                  ****
                  **974**
                  
                  
                  
                  9144.00%
                      to 5.00%, State Revolving Trust Bond, due September 1,
                      2021
                  
                  
                  ****
                  **695**
                  
                  
                  
                  7300.00%,
                      State Revolving Fund Bond, due September 1, 2021
                  
                  
                  ****
                  **537**
                  
                  
                  
                  577First
                      Mortgage Bonds:5.20%,
                      Series S, due October 1, 2022
                  
                  
                  ****
                  **12,000**
                  
                  
                  
                  12,0005.25%,
                      Series T, due October 1, 2023
                  
                  
                  ****
                  **6,500**
                  
                  
                  
                  6,5006.40%,
                      Series U, due February 1, 2009
                  
                  
                  ****
                  **15,000**
                  
                  
                  
                  15,0005.25%,
                      Series V, due February 1, 2029
                  
                  
                  ****
                  **10,000**
                  
                  
                  
                  10,0005.35%,
                      Series W, due February 1, 2038
                  
                  
                  ****
                  **23,000**
                  
                  
                  
                  23,0000.00%,
                      Series X, due September 1, 2018
                  
                  
                  ****
                  **592**
                  
                  
                  
                  6474.25%
                      to 4.63%, Series Y, due September 1, 2018
                  
                  
                  ****
                  **765**
                  
                  
                  
                  8200.00%,
                      Series Z, due September 1, 2019
                  
                  
                  ****
                  **1,342**
                  
                  
                  
                  1,4555.25%
                      to 5.75%, Series AA, due September 1, 2019
                  
                  
                  ****
                  **1,785**
                  
                  
                  
                  1,8900.00%,
                      Series BB, due September 1, 2021
                  
                  
                  ****
                  **1,686**
                  
                  
                  
                  1,8054.00%
                      to 5.00%, Series CC, due September 1, 2021
                  
                  
                  ****
                  **1,995**
                  
                  
                  
                  2,0905.10%,
                      Series DD, due January 1, 2032
                  
                  
                  ****
                  **6,000**
                  
                  
                  
                  6,0000.00%,
                      Series EE, due September 1, 2024
                  
                  
                  ****
                  **7,112**
                  
                  
                  
                  7,4823.00%
                      to 5.50%, Series FF, due September 1, 2024
                  
                  
                  ****
                  **8,385**
                  
                  
                  
                  8,7350.00%,
                      Series GG, due September 1, 2026
                  
                  
                  ****
                  **1,710**
                  
                  
                  
                  1,7504.00%
                      to 5.00%, Series HH, due September 1, 2026
                  
                  
                  ****
                  **1,950**
                  
                  
                  
                  1,950SUBTOTAL
                      LONG-TERM DEBT
                  
                  
                  ****
                  **131,124**
                  
                  
                  
                  133,207Less:
                      Current Portion of Long-term Debt
                  
                  
                  ****
                  **(2,678**
                  **)**
                  
                  
                  (2,501
                  )TOTAL
                      LONG-TERM DEBT
                  
                  
                  **$**
                  **128,446**
                  
                  
                  $
                  130,706





See
        Notes
        to Condensed Consolidated Financial Statements.


4











**MIDDLESEX
      WATER COMPANY**


**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1 – Summary of Significant Accounting Policies**





Organization
      – Middlesex Water Company (Middlesex or the Company) is the parent company and
      sole shareholder of Tidewater Utilities, Inc. (Tidewater), Tidewater
      Environmental Services, Inc. (TESI), Pinelands Water Company (Pinelands Water)
      and Pinelands Wastewater Company (Pinelands Wastewater) (collectively,
      Pinelands), Utility Service Affiliates, Inc. (USA), and Utility Service
      Affiliates  (Perth Amboy) Inc. (USA-PA). Southern Shores Water
      Company, LLC (Southern Shores) and White Marsh Environmental Systems, Inc.
      (White Marsh) are wholly-owned subsidiaries of Tidewater. The financial
      statements for Middlesex and its wholly-owned subsidiaries (the Company) are
      reported on a consolidated basis.  All significant intercompany
      accounts and transactions have been eliminated.





The
      consolidated notes within the 2006 Form 10-K are applicable to these financial
      statements and, in the opinion of the Company, the accompanying unaudited
      condensed consolidated financial statements contain all adjustments necessary
      (including normal recurring accruals) to present fairly the financial position
      as of September 30, 2007, the results of operations for the three and nine
      month
      periods ended September 30, 2007 and 2006, and cash flows for the nine month
      periods ended September 30, 2007 and 2006. Information included in the Condensed
      Consolidated Balance Sheet as of December 31, 2006, has been derived from the
      Company’s audited financial statements for the year ended December 31,
      2006.





Certain
      reclassifications have been made to the prior year financial statements to
      conform with the current period presentation.





**Recent
      Accounting Pronouncements**–  In July 2006, the Financial
      Accounting Standards Board (FASB) issued FASB Interpretation No. 48 (FIN
      48) “Accounting for Uncertainty in Income Taxes – an interpretation of FASB
      Statement No. 109”, to clarify certain aspects of accounting for uncertain
      tax positions, including recognition and measurement of those tax positions.
      This interpretation was effective for fiscal years beginning after
      December 15, 2006 (January 1, 2007 for the Company). The adoption of this
      interpretation had no impact on the Company’s financial position, results of
      operations, or cash flows.





In
      September 2006, the FASB’s Emerging Issues Task Force reached a consensus on
      EITF Issue No. 06-5, “Accounting for Purchases of Life Insurance – Determining
      the Amount That Could Be Realized in Accordance with FASB Technical Bulletin
      No.
      85-4, Accounting for Purchases of Life Insurance” (“EITF 06-5”). EITF 06-5
      provides clarification for determining the amounts that could be realized by
      policyholders in accounting for life insurance contracts.  EITF 06-5
      is effective for fiscal years beginning after December 15, 2006 (January 1,
      2007
      for the Company).  Adoption of EITF 06-5 had no material impact on the
      Company’s consolidated financial statements.


5





**Note
      2**–**Rate Matters**




Effective
      October 26, 2007, Middlesex received approval from the New Jersey Board of
      Public Utilities (BPU) for a 9.1%, or $5.0 million increase in its base water
      rates on an interim basis subject to refund.  The rate increase,
      resulting from a settlement among the parties to the proceeding, has been
      categorized as interim until one of the intervening municipal utilities
      authorities in the matter formally acts on this settlement agreement at their
      next scheduled public meeting to be held on November 7, 2007.  BPU
      approval to make the increase permanent is expected on November 8, 2007. The
      increase was predicated on a rate base of $164.4 million and an authorized
      return of equity of 10.0%.  Middlesex had originally filed for an $8.9
      million or 16.5% base rate increase with the BPU on April 18,
      2007.  The rate increase is intended to recover increased costs of
      operations, maintenance, labor and benefits, purchased power, purchased water
      and taxes, as well as capital investment of approximately $23.0 million since
      June 2005.




In
      accordance with the tariff established for Southern Shores, an annual rate
      increase of 3% was implemented on January 1, 2007. The increase cannot exceed
      the lesser of the regional Consumer Price Index or 3%. The contracted rate
      schedule is set to expire on December 31, 2007. The Company is in the process
      of
      renegotiating the rate schedule.




**Note
      3 – Capitalization**




**Common
      Stock**–During the nine months ended September 30, 2007, there were
      46,810 common shares (approximately $0.9 million) issued under the Company’s
      Dividend Reinvestment and Common Stock Purchase Plan (DRP). Middlesex received
      approval from the BPU in June 2007 to increase the number of shares authorized
      under the DRP from 1.7 million to 2.3 million shares.




In
      May
      2007, the Company received shareholders approval to increase the number of
      authorized shares of common stock from 20 million shares to 40 million
      shares.




**Long-term
      Debt**– Middlesex received approval from the BPU to issue up to $4.0
      million of first mortgage bonds through the New Jersey Environmental
      Infrastructure Trust under the New Jersey State Revolving Fund (SRF) program.
      The Company expects to complete the transaction in November
      2007.  Proceeds from this financing will be used for the ongoing main
      cleaning and lining project in 2008.




On
      October 10, 2007, Tidewater filed an application with the Delaware Public
      Service Commission (PSC) seeking approval to finance up to $1.1 million in
      the
      form of long-term debt securities under the Delaware SRF program. The Delaware
      SRF program allows, but does not obligate, Tidewater to draw down against a
      General Obligation Note for specific projects over a period not to exceed two
      years from the date the Note is executed. The interest rate is set on the loan
      closing date and is based on 62.5% of the interest rate for a 10+ year high
      quality corporate bond.  If approved by the PSC, the Company expects
      to complete the transaction in November 2007.




**Note
      4 – Earnings Per Share**




Basic
      earnings per share (EPS) are
      computed on the basis of the weighted average number of shares outstanding
      during the period presented.  Diluted EPS assumes the conversion of
      both the Convertible Preferred Stock $7.00 Series and the Convertible Preferred
      Stock $8.00 Series.





(In
                Thousands Except per Share Amounts)
              Three
                Months Ended September 30,**Basic:**
            
            2007
            
            
            Shares
            
            
            2006
            
            
            SharesNet
                Income
            
            $
            4,158
            
            
            
            13,206
            
            
            $
            3,377
            
            
            
            11,630Preferred
                Dividend
            
            
            (62
            )
            
            
            
            
            
            (62
            )Earnings
                Applicable to Common Stock
            
            $
            4,096
            
            
            
            13,206
            
            
            $
            3,315
            
            
            
            11,630**Basic
                EPS**
            
            $
            0.31
            
            
            
            
            
            
            $
            0.29





6





**Diluted:**Earnings
                Applicable to Common Stock
            
            $
            4,096
            
            
            
            13,206
            
            
            $
            3,315
            
            
            
            11,630$7.00
                Series Preferred Dividend
            
            
            24
            
            
            
            167
            
            
            
            24
            
            
            
            167$8.00
                Series Preferred Dividend
            
            
            24
            
            
            
            164
            
            
            
            24
            
            
            
            164Adjusted
                Earnings Applicable to  Common Stock
            
            $
            4,144
            
            
            
            13,537
            
            
            $
            3,363
            
            
            
            11,961**Diluted
                EPS**
            
            $
            0.31
            
            
            
            
            
            
            $
            0.28




Nine
                Months Ended September 30,**Basic:**
            
            2007
            
            
            Shares
            
            
            2006
            
            
            SharesNet
                Income
            
            $
            9,242
            
            
            
            13,191
            
            
            $
            8,157
            
            
            
            11,611Preferred
                Dividend
            
            
            (186
            )
            
            
            
            
            
            (186
            )Earnings
                Applicable to Common Stock
            
            $
            9,056
            
            
            
            13,191
            
            
            $
            7,971
            
            
            
            11,611**Basic
                EPS**
            
            $
            0.69
            
            
            
            
            
            
            $
            0.69**Diluted:**Earnings
                Applicable to Common Stock
            
            $
            9,056
            
            
            
            13,191
            
            
            $
            7,971
            
            
            
            11,611$7.00
                Series Preferred Dividend
            
            
            73
            
            
            
            167
            
            
            
            73
            
            
            
            167$8.00
                Series Preferred Dividend
            
            
            72
            
            
            
            164
            
            
            
            72
            
            
            
            164Adjusted
                Earnings Applicable to  Common Stock
            
            $
            9,201
            
            
            
            13,522
            
            
            $
            8,116
            
            
            
            11,942**Diluted
                EPS**
            
            $
            0.68
            
            
            
            
            
            
            $
            0.68





**Note
      5 – Business Segment Data**





The
      Company has identified two reportable segments. One is the regulated business
      of
      collecting, treating and distributing water on a retail and wholesale basis
      to
      residential, commercial, industrial and fire protection customers in parts
      of
      New Jersey and Delaware. This segment also includes regulated wastewater systems
      in New Jersey and Delaware.  The Company is subject to regulations as
      to its rates, services and other matters by the States of New Jersey and
      Delaware with respect to utility services within these States. The other segment
      is primarily comprised of non-regulated contract services for the operation
      and
      maintenance of municipal and private water and wastewater systems in New Jersey
      and Delaware.  Inter-segment transactions relating to operational
      costs are treated as pass-through expenses. Finance charges on inter-segment
      loan activities are based on interest rates that are below what would normally
      be charged by a third party lender.




(In
                Thousands)Three
                Months Ended
            
            
            Nine
                Months EndedSeptember
                30,
            
            
            September
                30,Operations
                by Segments:
            2007
            
            
            2006
            
            
            2007
            
            
            2006Revenues:Regulated
            
            $
            21,906
            
            
            $
            20,388
            
            
            $
            58,239
            
            
            $
            55,051Non
                – Regulated
            
            
            2,399
            
            
            
            2,330
            
            
            
            6,956
            
            
            
            6,994Inter-segment
                Elimination
            
            
            (170
            )
            
            
            (86
            )
            
            
            (327
            )
            
            
            (146
            )Consolidated
                Revenues
            
            $
            24,135
            
            
            $
            22,632
            
            
            $
            64,868
            
            
            $
            61,899Operating
                Income:Regulated
            
            $
            7,384
            
            
            $
            6,596
            
            
            $
            16,806
            
            
            $
            16,046Non
                – Regulated
            
            
            345
            
            
            
            263
            
            
            
            924
            
            
            
            935Consolidated
                Operating Income
            
            $
            7,729
            
            
            $
            6,859
            
            
            $
            17,730
            
            
            $
            16,981





7





Net
                Income:Regulated
            
            $
            3,959
            
            
            $
            3,254
            
            
            $
            8,739
            
            
            $
            7,662Non
                – Regulated
            
            
            199
            
            
            
            123
            
            
            
            503
            
            
            
            495Consolidated
                Net Income
            
            $
            4,158
            
            
            $
            3,377
            
            
            $
            9,242
            
            
            $
            8,157Capital
                Expenditures:Regulated
            
            $
            6,724
            
            
            $
            8,906
            
            
            $
            15,273
            
            
            $
            20,707Non
                – Regulated
            
            
            81
            
            
            
            7
            
            
            
            306
            
            
            
            225Total
                Capital Expenditures
            
            $
            6,805
            
            
            $
            8,913
            
            
            $
            15,579
            
            
            $
            20,932As
                of
              September
                30,
              2007
            
            
            As
                of
              December
                31,
              2006Assets:Regulated
            
            $
            383,837
            
            
            $
            366,149Non
                – Regulated
            
            
            7,673
            
            
            
            6,808Inter-segment
                Elimination
            
            
            (3,194
            )
            
            
            (2,690
            )Consolidated
                Assets
            
            $
            388,316
            
            
            $
            370,267





**Note
      6 – Short-term Borrowings**





As
      of
      September 30, 2007, the Company has established lines of credit aggregating
      $40.0 million. At September 30, 2007, the outstanding borrowings under these
      credit lines were $6.6 million at a weighted average interest rate of
      6.35%.





The
      weighted average daily amounts of borrowings outstanding under the Company’s
      credit lines and the weighted average interest rates on those amounts were
      $3.7
      million and $15.4 million at 6.70% and 6.22% for the three months ended
      September 30, 2007 and 2006, respectively. The weighted average daily amounts
      of
      borrowings outstanding under the Company’s credit lines and the weighted average
      interest rates on those amounts were $1.3 million and $10.1 million at 6.69%
      and
      6.05% for the nine months ended September 30, 2007 and 2006,
      respectively.





Interest
      rates for short-term borrowings under the lines of credit are below the prime
      rate with no requirement for compensating balances.





**Note
      7 – Commitments and Contingent Liabilities**





Guarantees
      - USA-PA operates the City of Perth Amboy, New Jersey (Perth Amboy) water and
      wastewater systems under contract through June 30, 2018. The agreement was
      effected under New Jersey’s Water Supply Public/Private Contracting Act and the
      New Jersey Wastewater Public/Private Contracting Act. Under the agreement,
      USA-PA receives a fixed fee and in addition, a variable fee based on increased
      system billing. Scheduled fixed fee payments for 2007 are $7.8 million. The
      fixed fees will increase over the term of the contract to $10.2 million per
      year.





In
      connection with the agreement, Perth Amboy, through the Middlesex County
      Improvement Authority, issued approximately $68.0 million in three series of
      bonds. Middlesex guaranteed one of those series of bonds, designated the Series
      C Serial Bonds, in the principal amount of approximately $26.3 million. Perth
      Amboy guaranteed the two other series of bonds. The Series C Serial Bonds have
      various maturity dates with the final maturity date on September 1, 2015. As
      of
      September 30, 2007, approximately $22.6 million of the Series C Serial Bonds
      remained outstanding.


8


Middlesex
      is obligated to perform under the guarantee in the event notice is received
      from
      the Series C Serial Bonds trustee of an impending debt service deficiency.
      If
      Middlesex funds any debt service obligations as guarantor, Perth Amboy is
      required to reimburse the Company. There are other provisions in the agreement
      that make it unlikely that we would be required to perform under the guarantee,
      such as scheduled annual rate increases for water and wastewater services as
      well as rate increases that may be implemented at anytime by Perth Amboy. In
      the
      event revenues from customers could not satisfy the reimbursement requirements,
      Perth Amboy has Ad Valorem taxing powers, which could be used to raise the
      needed amount.





Water
      Supply - Middlesex has an agreement with the New Jersey Water Supply Authority
      (NJWSA) for the purchase of untreated water through November 30, 2023, which
      provides for an average purchase of 27 million gallons per day (mgd). Pricing
      is
      set annually by the NJWSA through a public rate making process. The agreement
      has provisions for additional pricing in the event Middlesex overdrafts or
      exceeds certain monthly and annual thresholds.





Middlesex
      also has an agreement with a non-affiliated regulated water utility for the
      purchase of treated water. This agreement, which expires February 27, 2011,
      provides for the minimum purchase of 3 mgd of treated water with provisions
      for
      additional purchases.





Purchased
      water costs are shown below:





(In
                Thousands)Three
                Months Ended
            
            
            Nine
                Months EndedSeptember
                30,
            
            
            September
                30,2007
            
            
            2006
            
            
            2007
            
            
            2006Purchased
                WaterTreated
            
            $
            569
            
            
            $
            475
            
            
            $
            1,568
            
            
            $
            1,409Untreated
            
            
            602
            
            
            
            647
            
            
            
            1,730
            
            
            
            1,706Total
                Costs
            
            $
            1,171
            
            
            $
            1,122
            
            
            $
            3,298
            
            
            $
            3,115





Construction
      – The Company expects to spend approximately $20.3 million on its construction
      program in 2007.





Litigation
      – In July 2005, Tidewater received a notice of violation and request for
      corrective action issued by the Delaware State Fire Marshal regarding the
      alleged failure of one of the community water systems operated by Tidewater
      to
      meet Delaware fire protection requirements.  Tidewater appealed the
      Fire Marshal’s decision with the Delaware State Fire Prevention Commission (the
“SFPC”) and, in November 2005, the SFPC denied Tidewater’s appeal.  In
      October 2007, Tidewater agreed to dismiss its appeal of the SFPC’s decision with
      the Sussex County Superior Court in Delaware of the notice of violation and
      request for corrective action issued by the Fire Marshal.  In return
      for the dismissal both parties have agreed that 15 of the original 67 community
      water systems previously identified will require certain modifications over
      a
      ten-year period in order to provide full fire protection. The expected capital
      investment to comply with the settlement is $12.0 to $14.0 million and will
      be
      expended ratably over the ten-year period.  We will apply to the PSC
      to increase base rates to recover the costs of any such modifications. Although
      these types of modifications have routinely been included in previous rate
      matters, the PSC may not approve a portion or all of the costs associated with
      the fire protection upgrades.





The
      Company is a defendant in lawsuits in the normal course of business. We believe
      the resolution of pending claims and legal proceedings will not have a material
      adverse effect on the Company’s consolidated financial
      statements.


9





Change
      in
      Control Agreements – The Company has Change in Control Agreements with certain
      of its Officers that provide compensation and benefits in the event of
      termination of employment in connection with a change in control of the
      Company.





**Note
      8 – Employee Retirement Benefit Plans**





**Pension
      –**The Company has a noncontributory defined benefit pension plan, which
      covers all employees with more than 1,000 hours of service hired before April
      1,
      2007. The Company contributed $1.5 million of cash to the plan on August 3,
      2007. The Company also maintains an unfunded supplemental retirement benefit
      plan for certain active and retired company officers and currently pays $0.3
      million in annual benefits to the retired participants.





**Postretirement
      Benefits Other Than Pensions**– The Company maintains a postretirement
      benefit plan other than pensions for substantially all of its retired employees.
      Coverage includes healthcare and life insurance. Retiree contributions are
      dependent on credited years of service. The Company expects to make cash
      contributions to the plan of approximately $1.6 million during  the
      fourth quarter of 2007.





The
      following table sets forth information relating to the Company’s periodic costs
      for its retirement plans.





(In
                Thousands)Pension
                Benefits
            
            
            Other
                BenefitsThree
                Months Ended September 30,2007
            
            
            2006
            
            
            2007
            
            
            2006Service
                Cost
            
            $
            324
            
            
            $
            328
            
            
            $
            205
            
            
            $
            189Interest
                Cost
            
            
            452
            
            
            
            426
            
            
            
            224
            
            
            
            201Expected
                Return on Assets
            
            
            (455
            )
            
            
            (402
            )
            
            
            (120
            )
            
            
            (83
            )Amortization
                of Unrecognized Losses
            
            
            19
            
            
            
            64
            
            
            
            84
            
            
            
            111Amortization
                of Unrecognized Prior Service Cost
            
            
            2
            
            
            
            3
            
            
            
            -
            
            
            
            -Amortization
                of Transition Obligation
            
            
            -
            
            
            
            -
            
            
            
            34
            
            
            
            34Net
                Periodic Benefit Cost
            
            $
            342
            
            
            $
            419
            
            
            $
            427
            
            
            $
            452





Pension
                Benefits
            
            
            Other
                BenefitsNine
                Months Ended September 30,2007
            
            
            2006
            
            
            2007
            
            
            2006Service
                Cost
            
            $
            972
            
            
            $
            972
            
            
            $
            616
            
            
            $
            555Interest
                Cost
            
            
            1,356
            
            
            
            1,281
            
            
            
            671
            
            
            
            620Expected
                Return on Assets
            
            
            (1,364
            )
            
            
            (1,219
            )
            
            
            (361
            )
            
            
            (256
            )Amortization
                of Unrecognized Losses
            
            
            56
            
            
            
            184
            
            
            
            253
            
            
            
            351Amortization
                of Unrecognized Prior Service Cost
            
            
            7
            
            
            
            6
            
            
            
            -
            
            
            
            -Amortization
                of Transition Obligation
            
            
            -
            
            
            
            -
            
            
            
            101
            
            
            
            101Net
                Periodic Benefit Cost
            
            $
            1,027
            
            
            $
            1,224
            
            
            $
            1,280
            
            
            $
            1,371





10





**Note
      9 – Stock Based Compensation**





The
      Company maintains a Restricted Stock Plan, under which 61,012 shares of the
      Company's common stock are held in escrow by the Company as of September 30,
      2007 for key employees. Such stock is subject to forfeiture by the employee
      in
      the event of termination of employment within five years of the award other
      than
      as a result of retirement, death, disability or change in control. The maximum
      number of shares authorized for grant under this plan is 240,000 shares. For
      the
      nine months ended September 30, 2007, 1,900 shares vested and 925 shares were
      forfeited under the Plan.





The
      Company recognizes compensation expense at fair value for its restricted stock
      awards in accordance with SFAS 123(R), “Shared Based
      Payment”.  Compensation expense is determined by the market value of
      the stock on the date of the award and is being amortized over a five-year
      period. Compensation expense for the three months ended September 30, 2007
      and
      2006 was $0.1 million. Compensation expense for the nine months ended September
      30, 2007 and 2006 was $0.2 million.  Total unearned compensation
      related to restricted stock was $0.6 million at September 30, 2007.





**Note
      10 – Other Comprehensive Income**





Comprehensive
      income was as follows:





(In
                Thousands)Three
                Months Ended
            
            
            Nine
                Months EndedSeptember
                30,
            
            
            September
                30,2007
            
            
            2006
            
            
            2007
            
            
            2006Net
                Income
            
            $
            4,158
            
            
            $
            3,377
            
            
            $
            9,242
            
            
            $
            8,157Other
                Comprehensive Income:Change
                in Value of Equity Investments,
              Net
                of Income Tax
            
            
            (6
            )
            
            
            39
            
            
            
            (21
            )
            
            
            39Other
                Comprehensive Income
            
            
            (6
            )
            
            
            39
            
            
            
            (21
            )
            
            
            39Comprehensive
                Income
            
            $
            4,152
            
            
            $
            3,416
            
            
            $
            9,221
            
            
            $
            8,196





11





**Item
      2.         Management’s Discussion
      and Analysis of Financial Condition and Results of Operations**





The
      following discussion and analysis should be read in conjunction with the
      unaudited condensed consolidated financial statements of the Company included
      elsewhere herein and with the Company’s Annual Report on Form 10-K for the
      fiscal year ended December 31, 2006.





**Forward-Looking
      Statements**




Certain
      statements contained in this periodic report and in the documents incorporated
      by reference constitute “forward-looking statements” within the meaning of
      Section 21E of the Securities Exchange Act of 1934 and Section 27A of the
      Securities Act of 1933. The Company intends that these statements be covered
      by
      the safe harbors created under those laws.  These statements include,
      but are not limited to:




-
            statements
                as to expected financial condition, performance, prospects and earnings
                of
                the Company;


-
            statements
                regarding strategic plans for
                growth;


-
            statements
                regarding the amount and timing of rate increases and other regulatory
                matters;


-
            statements
                regarding expectations and events concerning capital
                expenditures;


-
            statements
                as to the Company’s expected liquidity needs during fiscal 2007 and beyond
                and statements as to the sources and availability of funds to meet
                its
                liquidity needs;


-
            statements
                as to expected rates, consumption volumes, service fees, revenues,
                margins, expenses and operating
                results;


-
            statements
                as to the Company’s compliance with environmental laws and regulations and
                estimations of the materiality of any related
                costs;


-
            statements
                as to the safety and reliability of the Company’s equipment, facilities
                and operations;


-
            statements
                as to financial projections;


-
            statements
                as to the ability of the Company to pay
                dividends;


-
            statements
                as to the Company’s plans to renew municipal franchises and consents in
                the territories it serves;


-
            expectations
                as to the amount of cash contributions to fund the Company’s retirement
                benefit plans, including statements as to anticipated discount rates
                and
                rates of return on plan assets;


-
            statements
                as to trends; and


-
            statements
                regarding the availability and quality of our water
                supply.




These
      forward-looking statements are subject to risks, uncertainties and other factors
      that could cause actual results to differ materially from future results
      expressed or implied by the forward-looking statements. Important factors that
      could cause actual results to differ materially from anticipated results and
      outcomes include, but are not limited to:




-
            the
                effects of general economic
                conditions;


-
            increases
                in competition in the markets served by the
                Company;


-
            the
                ability of the Company to control operating expenses and to achieve
                efficiencies in its operations;


-
            the
                availability of adequate supplies of
                water;


-
            actions
                taken by government regulators, including decisions on base rate
                increase
                requests;


-
            new
                or additional water quality
                standards;


-
            weather
                variations and other natural
                phenomena;


-
            the
                existence of attractive acquisition candidates and the risks involved
                in
                pursuing those acquisitions;


-
            acts
                of war or terrorism;


-
            significant
                changes in the housing starts in
                Delaware;


-
            the
                availability and cost of capital resources;
                and


-
            other
                factors discussed elsewhere in this quarterly
                report.




Many
      of
      these factors are beyond the Company’s ability to control or predict. Given
      these uncertainties, readers are cautioned not to place undue reliance on any
      forward-looking statements, which only speak to the Company’s understanding as
      of the date of this report. The Company does not undertake any obligation to
      release publicly any revisions to these forward-looking statements to reflect
      events or circumstances after the date of this report or to reflect the
      occurrence of unanticipated events, except as may be required under applicable
      securities laws.




For
      an
      additional discussion of factors that may affect the Company’s business and
      results of operations, see Item 1A. - Risk Factors in the Company’s Annual
      Report on Form 10-K for the fiscal year ended December 31,
      2006.


12





**Overview**





The
      Company has operated as a water utility in New Jersey since 1897, and in
      Delaware, through our wholly-owned subsidiary, Tidewater, since 1992. We are
      in
      the business of collecting, treating, distributing and selling water for
      residential, irrigation, commercial, municipal, industrial and fire protection
      purposes. We also operate a New Jersey municipal water and wastewater system
      under contract and provide wastewater services in New Jersey and Delaware
      through our subsidiaries. Our utility companies are regulated as to rates
      charged to customers for water and wastewater services in New Jersey and
      Delaware, as to the quality of service provided and as to certain other matters.
      Our USA, USA-PA and White Marsh subsidiaries are not regulated
      utilities.





Our
      New
      Jersey water utility system (the Middlesex System) provides water services
      to
      approximately 59,300 retail, commercial and fire service customers, primarily
      in
      central New Jersey. The Middlesex System also provides water service under
      contract to municipalities in central New Jersey with a total population of
      approximately 303,000. Through our subsidiary, USA-PA, we operate the water
      supply system and wastewater collection system for the City of Perth Amboy,
      New
      Jersey. Pinelands Water and Pinelands Wastewater provide water and wastewater
      services to residents in Southampton Township, New Jersey.





Tidewater
      and Southern Shores provide water services to approximately 31,000 retail
      customers in New Castle, Kent, and Sussex Counties, Delaware. Our TESI
      subsidiary provides regulated wastewater service to approximately 1,400
      residential retail customers. White Marsh serves approximately 5,100 customers
      under unregulated operating contracts with various owners of small water and
      wastewater systems in Kent and Sussex Counties.





USA
      provides customers both inside and outside of our service territories a service
      line maintenance program called LineCareSM. In the
      first
      quarter of 2007 we introduced a similar program for wastewater customers called
      LineCare+SM.





The
      majority of our revenue is generated from regulated water services to customers
      in our franchise areas. We record water service revenue as such service is
      rendered and include estimates for amounts unbilled at the end of the period
      for
      services provided since the end of the last billing cycle. Fixed service charges
      are billed in advance by our subsidiary, Tidewater, and are recognized in
      revenue as the service is provided.




Our
      ability to increase operating income and net income is based significantly
      on
      four factors: weather, adequate and timely rate relief, effective cost
      management, and customer growth. These factors are evident in the discussions
      below which compare our results of operations with prior periods.





**Recent
      Developments**





*Rate
      Increases*





Effective
      October 26, 2007, Middlesex received approval from the New Jersey Board of
      Public Utilities (BPU) for a 9.1%, or $5.0 million increase in its base water
      rates on an interim basis subject to refund.  The rate increase,
      resulting from a settlement among the parties to the proceeding, has been
      categorized as interim until one of the intervening municipal utilities
      authorities in the matter formally acts on this settlement agreement at their
      next scheduled public meeting to be held on November 7, 2007.  BPU
      approval to make the increase permanent is expected on November 8, 2007. The
      increase was predicated on a rate base of $164.4 million and an authorized
      return of equity of 10.0%.  Middlesex had originally filed for an $8.9
      million or 16.5% base rate increase with the BPU on April 18,
      2007.  The rate increase is intended to recover increased costs of
      operations, maintenance, labor and benefits, purchased power, purchased water
      and taxes, as well as capital investment of approximately $23.0 million since
      June 2005.


13





In
      accordance with the tariff established for Southern Shores, an annual rate
      increase of 3% was implemented on January 1, 2007.  The increase
      cannot exceed the lesser of the regional Consumer Price Index or 3%. The
      contracted rate schedule is set to expire on December 31, 2007.  The
      Company is in the process of renegotiating the rate schedule.





**Operating
      Results by Segment**





The
      Company has two operating segments, Regulated and Non-Regulated. Our Regulated
      segment contributed 90% of total revenues and 95% of net income for the nine
      months ended September 30, 2007 and 89% of total revenues and 94% of net income
      for the nine months ended September 30, 2006. The discussion of the Company’s
      results of operations is on a consolidated basis, and includes significant
      factors by subsidiary. The segments in the tables included below consist of
      the
      following companies: Regulated-Middlesex, Tidewater, Pinelands, Southern Shores,
      and TESI; Non-Regulated- USA, USA-PA, and White Marsh.





**Results
      of Operations – Three Months Ended September 30, 2007**





(In
                Thousands)Three
                Months Ended September 30,2007
            
            
            2006Regulated
            
            
            Non-
              Regulated
            
            
            Total
            
            
            Regulated
            
            
            Non-
              Regulated
            
            
            TotalRevenues
            
            $
            21,906
            
            
            $
            2,229
            
            
            $
            24,135
            
            
            $
            20,388
            
            
            $
            2,244
            
            
            $
            22,632Operations
                and maintenance expenses
            
            
            10,173
            
            
            
            1,788
            
            
            
            11,961
            
            
            
            9,467
            
            
            
            1,886
            
            
            
            11,353Depreciation
                expense
            
            
            1,854
            
            
            
            33
            
            
            
            1,887
            
            
            
            1,850
            
            
            
            33
            
            
            
            1,883Other
                taxes
            
            
            2,495
            
            
            
            63
            
            
            
            2,558
            
            
            
            2,475
            
            
            
            62
            
            
            
            2,537**Operating
                income**
            
            
            7,384
            
            
            
            345
            
            
            
            7,729
            
            
            
            6,596
            
            
            
            263
            
            
            
            6,859Other
                income
            
            
            259
            
            
            
            -
            
            
            
            259
            
            
            
            205
            
            
            
            -
            
            
            
            205Interest
                expense
            
            
            1,707
            
            
            
            27
            
            
            
            1,734
            
            
            
            1,867
            
            
            
            23
            
            
            
            1,890Income
                taxes
            
            
            1,977
            
            
            
            119
            
            
            
            2,096
            
            
            
            1,680
            
            
            
            117
            
            
            
            1,797**Net
                income**
            
            $
            3,959
            
            
            $
            199
            
            
            $
            4,158
            
            
            $
            3,254
            
            
            $
            123
            
            
            $
            3,377





Operating
      revenues for the three months ended September 30, 2007 increased $1.5 million,
      or 6.6%, from the same period in 2006 due to extended dry weather, customer
      growth and rate relief in our Delaware service territories. With the conclusion
      of a Tidewater base rate increase filing in Delaware, we implemented an
      additional 12% increase on February 28, 2007.  This provided an
      additional $0.7 million of revenues. Customer growth and higher consumption
      contributed $0.6  million of revenues.  Revenues from our
      regulated wastewater operations in Delaware increased by $0.1 million due to
      customer growth.  All other operations accounted for $0.1 million of
      additional revenues.





While
      we
      anticipate continued organic customer and consumption growth, particularly
      in
      our Delaware systems, such growth and increased consumption cannot be
      guaranteed. Revenues from our water systems are highly dependent on the effects
      of weather, which may adversely impact future consumption despite customer
      growth. Customer growth in both the regulated water and wastewater businesses
      are dependent upon economic conditions surrounding new housing as well as
      developer construction timetables. Since early 2007, we have experienced a
      slow
      down in the rate of customer growth in Delaware.  Appreciable organic
      customer and consumption growth is less likely in our New Jersey systems due
      to
      the extent to which our service territory is developed.





Operation
      and maintenance expenses increased $0.6 million or 5.4%. Water production costs
      were $0.3 million higher due to increased sales in Delaware and higher unit
      costs for water and electric power costs in New Jersey.  Repair costs
      for water main breaks in our New Jersey system were $0.1 million higher than
      the
      same period in 2006 due to the number and size of the breaks.  All
      other expense categories increased by $0.2 million.




14


Interest
      expense decreased by $0.1 millioncommensurate with lower
      short-term borrowings compared to the prior year period.




Income
      taxes increased $0.3 million as a result of increased operating income as
      compared to the prior year.




Net
      income increased by 23.5% from $3.4 million to $4.2 million. However, due to
      a
      higher number of shares outstanding, basic earnings per share grew by 6.8%
      to
      $0.31 for the three months ended September 30, 2007 compared to $0.29 for the
      same period in 2006.  Diluted earnings per share were $0.31 and $0.28
      for three months ended September 30, 2007 and 2006. Middlesex sold and issued
      1.5 million shares of common stock in November 2006.




**Results
      of Operations – Nine Months Ended September 30, 2007**




(In
                  Thousands)Nine
                  Months Ended September 30,2007
              
              
              2006Regulated
              
              
              Non-
                Regulated
              
              
              Total
              
              
              Regulated
              
              
              Non-
                Regulated
              
              
              TotalRevenues
              
              $
              58,239
              
              
              $
              6,629
              
              
              $
              64,868
              
              
              $
              55,051
              
              
              $
              6,848
              
              
              $
              61,899Operations
                  and maintenance expenses
              
              
              28,884
              
              
              
              5,426
              
              
              
              34,310
              
              
              
              26,899
              
              
              
              5,645
              
              
              
              32,544Depreciation
                  expense
              
              
              5,510
              
              
              
              97
              
              
              
              5,607
              
              
              
              5,174
              
              
              
              90
              
              
              
              5,264Other
                  taxes
              
              
              7,039
              
              
              
              182
              
              
              
              7,221
              
              
              
              6,932
              
              
              
              178
              
              
              
              7,110**Operating
                  income**
              
              
              16,806
              
              
              
              924
              
              
              
              17,730
              
              
              
              16,046
              
              
              
              935
              
              
              
              16,981Other
                  income
              
              
              1,008
              
              
              
              -
              
              
              
              1,008
              
              
              
              518
              
              
              
              -
              
              
              
              518Interest
                  expense
              
              
              4,738
              
              
              
              78
              
              
              
              4,816
              
              
              
              5,140
              
              
              
              73
              
              
              
              5,213Income
                  taxes
              
              
              4,337
              
              
              
              343
              
              
              
              4,680
              
              
              
              3,762
              
              
              
              367
              
              
              
              4,129**Net
                  income**
              
              $
              8,739
              
              
              $
              503
              
              
              $
              9,242
              
              
              $
              7,662
              
              
              $
              495
              
              
              $
              8,157





Operating
      revenues for the nine months ended September 30, 2007 increased $3.0 million,
      or
      4.8%, from the same period in 2006. Revenue improved by $3.1 million in our
      Delaware water systems, of which $2.4 million was a result of a base rate
      increase that was granted to Tidewater.  The rate increase was
      implemented in two parts; a 15% interim rate increase in June 2006 and an
      additional 12% final increase on February 28, 2007.  Customer growth
      and higher consumption contributed $1.2 million of increased revenues. Fees
      charged to new customers for initial connection to our Delaware water systems
      were lower by $0.5 million as new residential and commercial development has
      slowed in our Delaware service territories.  Consumption revenues in
      our Middlesex system were lower by $0.2 million. USA-PA’s fees for managing the
      Perth Amboy water and wastewater systems were $0.2 million lower than the same
      period in 2006 due mostly to lower pass-through charges.  There was an
      equal and offsetting amount of lower expenses connected with this management
      contract. Revenues from our regulated and non-regulated wastewater operations
      in
      Delaware increased by $0.2 million.  All other operations accounted
      for $0.1 million of additional revenues.





Operation
      and maintenance expenses increased $1.8 million, or 5.4%. Labor and benefit
      costs were $0.8 million higher due to wage increases and increased headcount
      to
      meet the needs of the growing Delaware customer base.  Pumping and
      water treatment costs increased a combined $0.6 million due to higher costs
      for
      electricity, chemicals and disposal of residuals. Repair costs for water main
      breaks in our New Jersey system were $0.1 million higher than the same period
      in
      2006 due to the number and size of the breaks. All other operating costs
      increased by $0.3 million.


15


Depreciation
      expense increased $0.3 million, or 6.5%, due to a higher level of utility plant
      in service.  The $0.5 million increase in other income resulted from
      the sale of non-utility property and higher earnings on our short-term
      investments.  Interest expense decreased by $0.4 millioncommensurate with lower
      short-term borrowings compared to the prior year period.





Income
      taxes increased by $0.6 million as a result of increased operating income as
      compared to the prior year.





Net
      income increased by $1.1 million, or 13.4%.  However, due to a higher
      number of shares outstanding, basic earnings per share were $0.69 for the nine
      months ended September 30, 2007 in line with the same period in
      2006.  Diluted earnings per share were $0.68 for nine months ended
      September 30, 2007 and 2006.  Middlesex sold and issued 1.5 million
      shares of common stock in November 2006.





**Liquidity
      and Capital Resources**





Cash
      flows from operations are largely dependent on three factors: the impact of
      weather on water sales, adequate and timely rate increases, and customer growth.
      The effect of those factors on net income is discussed in results of operations.
      For the nine months ended September 30, 2007, cash flows from operating
      activities were $12.1 million, an increase of $0.5 million from the prior year.
      This increase was attributable to increased earnings, and the timing of payments
      to vendors. These higher cash flows were partially offset by an increase in
      the
      level of customer receivables. The $12.1 million of net cash flow from
      operations enabled us to fund 78% of our utility plant expenditures internally
      for the period, with the remainder funded with proceeds from requisitions under
      the New Jersey State Revolving Fund (SRF) program loans.





The
      capital spending program for 2007 is currently estimated to be $20.3 million,
      which is lower by $34.3 million than the amount previously reported in our
      2006
      Annual Report on Form 10-K. This decrease is due primarily to the slowing of
      new
      residential and commercial development in our Delaware service territories.
      Through September 30, 2007, we have expended $15.6 million.  For the
      remainder of 2007 we expect to incur $4.7 million of costs for the following
      projects: $2.7 million for additions and improvements to our Delaware water
      systems; $0.5 million for infrastructure additions for our Delaware wastewater
      systems; and $1.0 million for the RENEW program, to complete the cleaning and
      cement lining of approximately nine miles of unlined water mains in the
      Middlesex system. There remains a total of approximately 120 miles of unlined
      mains in the 730-mile Middlesex system. Total RENEW spending for 2007 is
      expected to be $3.9 million.  The capital program also includes $0.5
      million for scheduled upgrades to our existing systems in New
      Jersey.





To
      fund
      our capital program in 2007, we have utilized remaining proceeds from the
      November 2006 common stock offering, internally generated funds and funds
      available under existing New Jersey SRF program loans (currently, $2.6 million)
      and Delaware SRF program loans (currently, $2.1 million). These programs provide
      low cost financing for projects that meet certain water quality and system
      improvement benchmarks. If needed, we will also borrow funds through $40.0
      million of available lines of credit with several financial institutions. As
      of
      September 30, 2007, $6.6 million was outstanding against the lines of
      credit.





We
      periodically issue shares of common stock in connection with our dividend
      reinvestment and stock purchase plan (DRP).  From time to time, we may
      issue additional equity to reduce short-term indebtedness, fund our capital
      program, and for other general corporate purposes.





We
      currently project that we may be required to expend between $63 million and
      $87
      million for capital projects in 2008 and 2009 combined. To the extent possible
      and because of the favorable interest rates available to regulated water
      utilities, we will finance our capital expenditures under SRF loan programs.
      We
      also expect to use internally generated funds, proceeds from the DRP and
      proceeds from additional common stock offerings, as needed to maintain an
      appropriate capital structure balance.


16





In
      addition to the effect of weather conditions on revenues, increases in certain
      operating costs will impact our liquidity and capital resources. As described
      above, we have recently received rate relief for Middlesex and earlier in the
      year for Tidewater and Southern Shores. Changes in operating costs and timing
      of
      capital projects will have an impact on revenues, earnings, and cash flows
      and
      will also impact the timing of filings for future rate increases.





**Recent
      Accounting Pronouncements**– See Note 1 of the Notes to Unaudited
      Condensed Consolidated Financial Statements for a discussion of recent
      accounting pronouncements.





**Item
      3.                  
Quantitative and Qualitative Disclosures of Market
      Risk**





The
      Company is subject to the risk of fluctuating interest rates in the normal
      course of business.  Our capital program is partially financed with
      fixed rate, long-term debt and, to a lesser extent, short-term debt. The
      Company’s interest rate risk related to existing fixed rate, long-term debt is
      not material due to the term of the majority of our Amortizing Secured Notes
      and
      First Mortgage Bonds, which have maturity dates ranging from 2009 to
      2038.  Over the next twelve months, approximately $2.7 million of the
      current portion of sixteen existing long-term debt instruments will mature.
      Applying a hypothetical change in the rate of interest of 10% on those
      borrowings would not have a material effect on earnings.





**Item
      4.                  
Controls and Procedures**




As
      required by Rule 13a-15 under the Exchange Act, an evaluation of the
      effectiveness of the design and operation of the Company’s disclosure controls
      and procedures was conducted by the Company’s Chief Executive Officer along with
      the Company’s Chief Financial Officer. Based upon that evaluation, the Company’s
      Chief Executive Officer and the Company’s Chief Financial Officer concluded that
      the Company’s disclosure controls and procedures are effective as of the end of
      the period covered by this Report. There have been no changes in the Company’s
      internal controls or in other factors, which materially affected internal
      controls during the quarter ended September 30, 2007.





Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed in Company reports filed or
      submitted under the Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the Securities and Exchange
      Commission’s rules and forms. Disclosure controls and procedures include,
      without limitation, controls and procedures designed to ensure that information
      required to be disclosed in Company reports filed under the Exchange Act is
      accumulated and communicated to management, including the Company’s Chief
      Executive Officer and Chief Financial Officer as appropriate, to allow timely
      decisions regarding disclosure.





17








**PART
      II.  OTHER INFORMATION**





**Item
                1.**
            **Legal
                Proceedings**





Reference
      is made to the Company’s Annual Report on Form 10-K for the year ended December
      31, 2006 and Quarterly Report on Form 10-Q filed for the period ended March
      31,
      2007 and June 30, 2007.  Note 7 to the unaudited Condensed
      Consolidated Financial Statements for the period ended September 30, 2007,
      included in Part 1 of this Quarterly Report on Form 10-Q, is hereby incorporated
      by reference.





**Item
                1A.**
            **Risk
                Factors**





We
      expect
      our revenues to increase from customer growth in Delaware for our regulated
      water operations and, to a lesser degree, our regulated wastewater operations
      as
      a result of the anticipated construction and sale of new housing units in the
      territories we serve.  Although the residential building market in
      Delaware has experienced growth in recent years, this growth may not continue
      in
      the future.  If housing starts in the Delaware territories we serve
      decline significantly as a result of economic conditions or otherwise, our
      revenue growth may not meet our expectations and our financial results could
      be
      negatively impacted.





As
      described in Note 7 to the unaudited Condensed Consolidated Financial Statements
      for the period ended September 30, 2007, included in Part 1 of this Quarterly
      Report on Form 10-Q, Tidewater has agreed to dismiss its appeal of the notice
      of
      violation and request for corrective action issued by the Delaware Fire
      Marshal.  In return for the dismissal both parties have agreed that 15
      of the original 67 community water systems previously identified will require
      certain modifications over a ten-year period in order to provide full fire
      protection. The expected capital investment to comply with the settlement is
      $12.0 to $14.0 million and will be expended ratably over the ten-year
      period.  We will apply to the PSC to increase base rates to recover
      the costs of any such modifications. To the extent the PSC does not approve
      rate
      increases to offset these costs, or if there is a significant delay in receiving
      approval for such rate increases, such costs could have a material adverse
      effect on our operating results.





Except
      as
      described above, information about risk factors for the three months ended
      September 30, 2007 does not differ materially from those set forth in Part
      I,
      Item 1A. of the Company’s Annual Report on Form 10-K for the year ended December
      31, 2006.





**Item
                2.**
            **Changes
                in
                Securities**





None.





**Item
                3.**
            **Defaults
                Upon Senior
                Securities**





None.





**Item
                4.**
            **Submission
                of Matters to a Vote of Security
                Holders**





None.





**Item
                5.**
            **Other
                Information**





None.


18





**Item
                6.**
            **Exhibits**





31
            Section
                302 Certification by Dennis W. Doll pursuant to Rules 13a-14 and
                15d-14 of
                the Securities Exchange Act of
                1934.





31.1
            Section
                302 Certification by A. Bruce O’Connor pursuant to Rules 13a-14 and 15d-14
                of the Securities Exchange Act of
                1934.





32
            Section
                906 Certification by Dennis W. Doll pursuant to 18 U.S.C. §1350, as
                adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.





32.1
            Section
                906 Certification by A. Bruce O’Connor pursuant to 18 U.S.C. §1350, as
                adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.











19





**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, as amended, the
      registrant has duly caused this report to be signed on its behalf by the
      undersigned thereunto duly authorized.





MIDDLESEX
                WATER COMPANYBy:
            /s/
                A. Bruce O’ConnorA.
                Bruce O’ConnorVice
                President andChief
                Financial Officer








Date:  November
      2, 2007






20