Southwest Gas cuts losses in third quarter

Customer growth, improved construction contracts and a 2009 rate increase all helped boost Southwest Gas Corp.'s third-quarter financial results.

The company lost $4.8 million, or 11 cents a share, in the quarter ending Sept. 30, compared with $8.3 million, or 18 cents a share, in the same period in 2009. The utility's quarterly operating revenue came in at $307.7 million, down from $317.5 million a year earlier.

The loss per share fell below analysts' expectations, which Thomson Reuters projected at 27 cents.

"Our focus on controlling costs has been beneficial during these challenging economic conditions," said Jeffrey Shaw, the utility's chief executive officer.

It's common for Southwest Gas to post losses in the second and third quarters, when warm weather means little need for heating.

Shaw attributed the improved results to higher returns on life-insurance investments and to increased business in the utility's construction-services subsidiary. The underground-piping subsidiary, called NPL Construction Co., contracts nationwide with other utilities to provide trenching, installation, replacement and maintenance functions.

Southwest Gas also boosted its operating margin, defined as operating revenue minus the cost of natural gas it sold, by $2 million year over year in the quarter.

Half of that gain came from a Nov. 1 rate increase in Nevada. The increase allowed the company a 4 percent gain in the portion of rates that covers operating costs such as taxes, capital investments and investor returns. (When the Public Utilities Commission of Nevada approved the rate jump, it also factored in separate rate cases accounting for plummeting natural-gas prices, so locals' natural-gas bills actually fell 2.5 percent last winter, to an average of $72.56.)

The other half of the improved operating margin came from a growing customer base. Southwest Gas added 17,000 customers in the 12 months prior to Sept. 30, for a total of 1.82 million ratepayers in Nevada, Arizona and California. That's a noticeable improvement compared with recent customer-expansion numbers: In the year before March 30, for example, the utility reported adding just 9,000 customers.

The company won't provide breakdowns of which states grew their customer bases the most until the end of the year.

Southwest Gas also said in its financial report that it plans to ask Arizona utilities regulators to let it decouple the cost of natural gas from its gas sales. If it's OK'd, the move, which the Nevada Public Utilities Commission approved in 2009, would let the utility pursue natural-gas conservation efforts without seeing its earnings dip as a result of lower consumption.

The utility's shares closed on Monday at $35.87 on the New York Stock Exchange, unchanged from Friday's close.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.