Good day ladies and gentleman and welcome to the 2008 Southwest Gas year end earning conference call. (Operator Instructions) I would now like to turn the presentation over to the host for today’s call, Mr. Ken Kenny, Vice President, and Treasurer, please proceed sir.

Welcome to Southwest Gas Corporation 2008 earnings conference call. My name is Ken Kenny and I’m the Vice President, Treasurer. Our conference call is being broadcast live over the internet. For those of you who would like to access the webcast, please visit our website at www.swgas.com and click on the conference call link. Today we have Mr. Jeffrey W. Shaw, Southwest Chief Executive Officer, Mr. George C. Biehl, Executive Vice President and Chief Financial Officer and Corporate Secretary, Mr. John P. Hester, Senior Vice President, Regulatory Affairs and Energy Resources, and other members of senior management to provide a brief overview of 2008 earnings and an outlook for 2009. Our general practice is not to provide earnings projections. Therefore no attempt will be made to project earnings for 2009. Rather the company will address those factors that may impact this coming year’s earnings. Further our lawyers have asked me to remind you that some of the information that will be discussed contains forward-looking statements. These statements are based management’s assumptions which may or may not come true and you should refer to the language in press release and also our SEC filings for a description of the factors that may cause actual results to differ from our forward-looking statements. All forward-looking statements are made as of today and we assume no obligation to update any such statements. With that said I would like to turn the time over to Jeff.

Thank you Ken, first let me thank you all for listening in on the call today. There’s no doubt that we are in some very challenging, interesting, if not curious times. Before we get started and delve into some of the details of 2008, I thought I might give an overview to set the stage. We continue to remain focused on our core fundamental strategies. Those are generally speaking, these, first of all we work closely with regulatory bodies to improve the level and stability of revenues and cash flows. We pursue sensible cost control. We aggressively manage our growth and we focus on maintaining a highly trained, efficient, motivated work force. What I’d like to do is take a couple of minutes for there’s no question we are a stronger company today then we were even five years ago. And I’m going to give some specific examples, first with respect to our efforts in the regulatory arena, you will note that we have completed general rate cases in Arizona which we received a $33.5 million increase to operating revenues effective December 1, 2008. We also completed a general rate case in California, new rates effective the beginning of this year. We just last month filed a general rate case for [Paiu] Pipeline Company our [inaudible] regulated pipeline company. And we will file a general rate case in Nevada during the second quarter of this year. A rule by the way is in place in Nevada that will permit us to file for decoupled rates. When we are able to receive those types of rates in Nevada we will in 45% of our business have decoupled rates. And the dialogue continues in Arizona. They did acknowledge on the record that there is a customer benefit from a conservation standpoint to…

Thanks Jeff, I think that sets a good stage. Before I go through the financial review of 2008 I’d just like to say one thing. I think what you’ll hear today is some intentional redundancy on some of these major initiatives that we’re doing and it is intentional. In a single word I think its, that our story at this point in time is execution. Jeff has laid out the core strategies and we’re executing but some of the drivers, there’s probably going to be some overlap. We’ll try to be brief and concise yet not hurried. So with that, I’m going to start and review 2008 in its entirety, in other words the full year. The annual consolidated basis EPS was $1.40 in 2008 versus $1.97 in 2007. Now consolidated net income in 2008 was $61 million versus $83.2 million the prior year. Consistent with our earnings release, what I want to do is break down the decreased earnings into the major components the way we see them. And then cite some major factors underlying each of the components and then as well discuss pertinent trends and management initiatives that pertain to some of these drivers. So the major components of the decline in EPS from 2007 to 2008 which was $0.57 per share in total, I’m going to cite three components. First is the decrease in the natural gas operations contribution and that’s primarily from a decline in operating income and operating income of course is a line item in all our financials on the gas op side, certainly in the MD&A. The second component is decrease in case surrender value of company owned life insurance which is attributable to financial market declines. And that was $0.30 a share of the $0.57. Lastly we had a decrease from…

Thank you George, as Jeff mentioned at the outset of the call Southwest certainly saw a significant amount of rate case activity in the past year. First and foremost in that activity was the resolution of our pending Arizona rate case filing. That is an application that was filed with the Arizona Corporation Commission in August of 2007. Originally in that application we had requested a $50.2 million increase or approximately 4.81%. The basis for the request was our desire to recover our increased operating costs, the costs associated with investment infrastructure for customers, and then in addition an increase in the cost of capital to help continue to fund that investment. In our last rate case decision that was effective March of 2006 the cost of capital we had had established was 9.5% return on equity that was applicable to a 40% common equity component of the capital structure. In this application that was just recently resolved, we were asking for an 11.25% return on equity which would have been applicable to a 45% common equity component. The net capital structure is in turn applicable to a $1.1 billion rate base. In the application we were also seeking some changes in rate design, we wanted to increase the basic service charges for our customer classes and we wanted to implement the decoupled rate design. The Commission this past year issued a decision with rates effective December 1, 2008 and in that decision they authorized a $33.5 million increase or approximately 3.28%. That $33.5 million increase incorporates a 10% return on equity which is applicable to a 43.44% common equity component. In addition we did see increases in our basic service charges, most notably the residential basic service charge was increased by $1.00 per month from $9.70 to $10.70 and…

Thank you John, I’ll just give a few concluding comments here. First of all from a capital expenditure standpoint, looking forward, we expect over the next three years to incur approximately $720 million through 2009 through 2011. Some of that will be dependent upon the level of growth. However in 2009 we expect about $260 million that we will expend. Those expenditures are not necessarily directly correlated to customer growth. We do have franchise requirements, code and regulatory work, we have federal laws that we must comply with and so there is an embedded level of capital expenditures that we will need to incur each year. We also have some cost to complete two operation centers in southern Nevada in the current year. Again I mentioned that we did collect builder contributions. We expect to continue to do that going forward. With respect to debt maturities we’ve covered that. We’re not until 2011 until we have any significant debt maturities. Our cash flows we expect over the next three years to cover on average 85% of our long-term capital needs including the capital expenditures and dividend requirements. We expect approximately $40 to $50 million over that three years to be collected through issuance of stock under our customer stock purchase plans, our employee investment plans, and any remaining cash flow requirements will be provided by existing credit facilities and our other external financing sources. I will mention our pension expense for calendar year 2008 was $17 million. We do expect that to increase in the year 2009 by $2 million to $19 million in 2009. We could expect to see a continuing upward trend depending on how the market performs. The minimum pension funding obligation during 2009 will be approximately $22 million. I will state then to conclude we believe that the strategies that we have focused are indeed yielding benefits. I think the metrics, I think all of the statistics that we discussed in this call are pointing to the fact that we have seen success. We believe that continuing to focus on those fundamental strategies is what we want to do going forward and that will allow us to continue to build the value for the shareholder. We believe that this is right course for us to follow and we are not panicked but are focused and will continue to manage our business as we have because we believe it’s the right thing to do. With that I’ll turn the call over for questions.

(Operator Instructions) Your first question comes from the line of Barry Klein – Citigroup Barry Klein – Citigroup : On the O&M side, you mentioned numbers about 2 to 3% it sounded like over the last few years but that was in a higher volume growth environment, would you expect those numbers to come down or are those pretty much, you expect that to be a good run rate for the next year or two.

I think George as he was talking about the operations and maintenance expenses gave a historical sketch. Clearly we’re focused on those expenses. I do think it would be impractical for us to say that we would have no increase in expenses. There are many things that are unpredictable that we have to contend with. We do not know for instance what the cost of fuel might be. We don’t know where the market is going to go and how that might impact pension expense. We don’t know specifically what might happen with bad debt expense although I will say fortunately our average customer bill in the southwest is much, much lower on a comparative basis then you would see anywhere else in the Midwest or the northeast or places where you have cold weather. So while bad debt expense is something yes we contend with, it is never the magnitude that some of the other utilities contend with. So I think we do have employees, we do have employee benefits, we’ve been able to keep our healthcare costs under control. I think we will definitely be able to keep our expenses at a lower level as long as we don’t have anything that’s unexpected that comes along. Barry Klein – Citigroup : You mentioned the number of growth expected to be 1% or less for 2009, is that what you’ve seen so far through the year if you exclude the impact of weather.

I guess we’re so early in the year, I would say yes but its just too early to tell. I guess I would answer it this way, we certainly haven’t seen so far any indication that has significantly deviated from that. Once again, and I don’t want to be too repetitive here but at some point in time we are going to see these structures, these single family homes, LDC basically, are going to be occupied and we’re going to see customer growth again. But we really haven’t seen it turn around but then again we only have data through January. Barry Klein – Citigroup : With regard to a couple of the rate cases or actually just to California, there was a $3 million increase, $3 million decrease in depreciation so that, just to clarify that means basically $6 million assuming everything else is constant, $6 million down to the bottom line.

Yes, that’s correct. Barry Klein – Citigroup : And then on, something else about over the next four years about $2 million per year increase, that was worked into the rate increase, is that correct.

Yes, yes for each of the four years following 2009 we will have margin increases of in excess of $2 million year on year.

Your next question comes from the line of Unspecified Analyst

On the COLI, as we look to indicators as to how that develops here in 2009 is that a case where if generally stock markets go up that number will be a favorable number for 2009.

You’re correct, it will fluctuate with the market. Again it will be a noncash benefit or charge depending on where the market moves. If you look at COLI historically thus far, we have had a few death benefits that we have brought in. They’ve been small but over time we fully intend to hold those policies and realize the cash under those policies. So net cash surrender value while its there and its available to us, if we ever chose to cash out the policies, that’s not our intention and for our purposes its almost irrelevant as we manage our business.

Just making sure that accounting that somehow or other defer that or something like that. So we’re not looking at that as a driver of the COLI line to be if markets stay the same that number is probably about zero but if markets recover then its going to be a positive.

I guess all I could tell you is, just for some historic perspective we’ve had these policies or this funding vehicle in place for well over a decade and it was fairly steady. I mean it was just, it was not really significant until of course the market downturn in 2008. Now I’m not using history necessarily as a predictor of the future as far as the accounting impacts for that, but we just underscore it’s a funding vehicle we’re required to follow the accounting guidelines or requirements. They’re more then guidelines. In 2008 certainly historically was an aberration.

I wasn’t sure whether in prior years when the markets were headed up whether it was a positive I don’t recall that. Maybe its just kind of buried in some deep—

Well that’s a good point. Actually it was a positive but it was fairly negligible.

On the construction services business, as I look at the 10-K here, the numbers for the net income on that business now have trailed down over the last couple of years and I remember in past years you would say the business was looking pretty good and that was probably not going to be necessarily representative for all years. Are we at a level now that as you look at backlogs and things like that that the business that we had here in 2008 is a bit more representative.

I would say that’s probably a reasonable assumption. If you see growth again pick up to a higher level throughout the country in terms of new customer construction, new housing construction, you might see NPL improve over and above what we are seeing. But its probably at a level that’s more sustainable now then what it was let’s say in the 2005, 2006 timeframe.

Your next question comes from the line of Daniel Fidell - Brean Murray, Carret & Co. Daniel Fidell - Brean Murray, Carret & Co. : Just a quick question regarding decoupling in Arizona, you said that there’s some study, or you’re in the process I think you said of putting together some studies looking back a number of years and the impact on customers, how quickly could Arizona regulators sign off on a new decoupling mechanism or would it need to be couched in full general rate proceeding and then to the extent that a mandated form of decoupling was included in the stimulus Bill, what’s sort of your read on that and what’s, have they had any [comments] on that and how do you see that impacting the process.

I think that your characterization that once the Commission comes to a conclusion on what type of decoupling mechanism it might like to pursue going forward that that’s something that we would be looking to implement as part of the general rate case proceeding, and then secondly we have had quite a bit of question and discussion with the Commission and some of the individual Commissioners about what the impact of some of the stimulus funding is going to be. Its something that we don’t have all the details analyzed just yet but certainly its something that we consider directionally positive and hope that that helps continue to prompt the discussion and identify the merits of decoupling going forward again not just for the company but for our customers as well. Daniel Fidell - Brean Murray, Carret & Co. : Can you just give us what the next general time line would be with regard to decoupling in Arizona. You said you were engaged in a study now, is it, do you anticipate that will be done and under their review by spring, summer, just any kind of general time line.

Well two things, first of all with respect to the study that is something that we’re going to be filing next month. So that will be submitted to the Commission in April of 2009. And then secondly they have a more generic proceeding where they are having discussion with a number of parties including the gas and electric utilities, energy efficiency advocates, some of the cooperatives in Arizona, where they want to take a look at various regulatory and rate incentives that could be implemented for utilities. That’s something that’s going to be a little bit more of an ongoing discussion and something that I would imagine would occur at least throughout the balance of this year probably. Daniel Fidell - Brean Murray, Carret & Co. : Just for clarity, you do not believe if they do feel comfortable either based on the stimulus Bill or any kind of data they get out of the study for the ability for you to implement decoupling in Arizona just on a one off basis perhaps as soon as the next 12 months, it would have to be couched in a general rate case proceeding.

That would be my expectation, yes.

There are no additional questions at this time; I would like to turn it back over to management for any additional or closing comments.

Thank you very much for listening in on Southwest Gas 2008 earnings conference call and we appreciate it.