Ken Kenny – VP and Treasurer Jeff Shaw – CEO John Hester – SVP, Regulatory Affairs & Energy Resources

Good day, ladies and gentlemen and welcome to the Southwest Gas 2009 year end conference call. My name is Jeff, and I’ll be your operator for today. At this time, all participants are in a listen-only mode. Later we will facilitate a question-and-answer session. (Operator instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Ken Kenny, Vice President and Treasurer. Please proceed, Mr. Kenny.

Thank you, Jeff. Welcome to Southwest Gas Corporation’s 2009 earnings conference call. As Jeff mentioned, my name is Ken Kenny, and I am 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 Web site at www.swgas.com and click on the “Conference Call” link. Today, we have Mr. Jeffrey W Shaw, Southwest’s Chief Executive Officer, Mr. John P Hester, Southwest’s Senior Vice President, Regulatory Affairs and Energy Resources and other members of senior management to provide a brief overview of 2009 earnings and an outlook for 2010. Our general practice is not to provide earnings projections. Therefore, no attempt will be made to project earnings for 2010. 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 on management’s assumptions, which may or may not come true, and you should refer to the language in the press release and also our SEC filings for a description of those factors that may cause actual results to differ from the forward-looking statements. All forward-looking statements are made as of today and we assume no obligation to update any such statement. With that said, I’d like to turn the time over to Jeff.

Thank you, Ken. Thank you for joining us today on this call. And we’re pleased with the operating results we have to announce or have announced to the market. It’s a marked improvement over the prior year. I believe we continue to demonstrate resilience in a very challenging economic environment, by remaining focused on our core fundamentals of our business. Many say that but I think I’m going to be able to demonstrate in the comments that I give today that in fact that has really helped us to make progress by focusing on the core fundamentals. The detailed numbers are in our documents and I would point you to those. I won’t spend a lot of time on any of those detailed numbers, but I will discuss a number of noteworthy factors that point to our success. On an annual consolidated basic EPS basis, we achieved $1.95 in 2009, as opposed to $1.40 in 2008. The increase in earnings was principally attributable to higher operating income from the natural gas segment and a positive swing in contribution for other income. What you have seen in our documents referred to as Company-Owned Life Insurance or COLI. I will refer to that as COLI going forward. Our operating margin in 2009 grew by $13 million or 2%. The net result of several factors. Margin from our customer growth contributed $1 million and rate relief from all regulatory jurisdictions in 2009 accounted for $30 million. This was somewhat offset by warmer than normal weather. The difference between years was $7 million to the negative in 2009 as opposed to 2008. In 2009, we estimate that the negative impact of weather principally in the Arizona jurisdiction was about $18 million versus $11 million in 2008. Conservation due to energy efficiency and the impacts…

Thanks, Jeff. I’ll start with Arizona. In December of 2008, the Arizona Corporation Commission issued a decision in Southwest general rate case which authorized a $33.5 million increase in margin rates. As part of that application, Southwest sought implementation of a decouple rate design. While the Commission did not grant Southwest’s request on the rate design changes, the Commission has continued to review decoupling issues as part of a separate docket which is examining rate and regulatory incentives for the state’s gas and electric utilities. Southwest is actively participated in that docket, along with other utilities, the Commission staff, the Residential Utility Consumer Office, and Energy Efficiency advocates. The proceeding is focused on establishing utility energy efficiency standards and feature as much as discussion on decoupling. A draft regulation for the electric utilities was issued in October by staff, and was reviewed, modified and voted upon by the Commission in December of last year. Southwest is now waiting staff issuance of a draft regulation for gas utilities and expect that various state administrative reviews of the gas and electric utility rules will be completed later this year. Separately, having now experienced the rates established in our last rate case for just over a year, Southwest will be reviewing the potential timing of our next Arizona rate case over the next several months. Historically, Southwest has filed a rate case application in Arizona about once every three years. Once we complete the first quarter of this year we will review our results of operations and be better positioned to evaluate the timing of our next application then. There may also be some interplay between the timing of our next rate case application and the outcome of the rate and regulatory incentive docket I referenced. And so far as any opportunity to…

Thank you, John. What I’d like to do now is spend a little time on two of the items John referenced. In particular, our cost control efforts and how we are trying to achieve customer satisfaction. Two items I think are, again, to reemphasize what he has just said, in order to be successful and productive working with our regulators in the various jurisdictions we serve, we must show, we believe, the progress in the areas that we have control over. And I think we can do that and I’m going to talk about that now. First of all, with respect to our operating expenses, they were held to a modest 2% increase over 2008 during 2009. Depreciation expense increased by $513,000 only, less than $0.5% and average gas plant in service increased about $193 million or 5%. Depreciation expense was impacted by lower authorized depreciation rates in both California and Nevada through the most recent regulatory decisions. California had a $3 million annualized reduction effective January 2009. Nevada had a $2.3 million annualized reduction effective June of 2009. Operation and maintenance expenses, if you look over the last four years, we had between 2005 and 2006, a 2% increase, during the next year period, a 3.2% increase, the next year period, a 2.2% increase and last year, year-over-year, our O&M was 3% higher over the prior year. Now, our cost control efforts, the things that we have done, the investments in technology and operational innovations have allowed us to hold these increases to a rate of below that of inflation. And that’s been important. In fact, it’s been recognized even on the record in our regulatory filings that we’ve made. So that’s important and it’s been recognized and it’s helped us to recover those costs. Our operational improvements in…

Thanks, Jeff. That concludes our prepared presentation. Our operator, Jeff, will now explain the process for asking questions.

(Operator instructions). Okay, looks like there are no questions in the queue.

With no questions then, that concludes our earnings conference call today and we want to thank everyone for listening. Thank you.

Ladies and gentlemen that concludes today’s conference. Thank you so much for your participation. You may now disconnect. Have a wonderful day.