Even with solid earnings improvement, Las Vegas, NV-based Southwest Gas Corp's. lingering issue with regulators in the three states in which it operates is how to make its natural gas distribution earnings more stable and less influenced by swings in the weather in Nevada, Arizona and the eastern desert/mountain fringes of California. Net income for the first quarter ended March 31 was $49.8 million, or $l.19/share, compared to $44.2 million, or $1.12/share, for the same period in 2006.
"We experienced both extremes during the quarter -- a cold January and hot March -- and remain resolute in our need to continue working with regulators to improve the level and stability of earnings and cash flows going forward," said Jeffrey Shaw, Southwest's CEO. Rate relief from Arizona and California, however, contributed to the increased earnings, Shaw said, and operating margins expanded for both the quarter and the 12 months ended March 31.
Operating margins increased substantially in the first quarter and for the 12 months ended March 31 -- $22 million, or 11%, in the first quarter and $69 million for the 12-month period. Rate relief added a net $8 million in operating margin in the first quarter, with $15 million in Arizona general rate relief and $1 million for California attrition amounts, offset by an $8 million impact of implementing a California rate adjustment mechanism that became effective this year.
Southwest continues to deal with strong population growth in both Nevada and Arizona, and an added 62,000 customers during the 12-month period contributed to an incremental $6 million in operating margin in the first quarter, the gas-only utility said. Southwest's customer base swelled to 1.79 million, centered as it is in the nation's fastest growing region.
With the growth comes increased operating expenses, and Southwest saw those costs rise $9 million, or 7%, in the first quarter, compared to the same period in 2006, and increase by $14.2 million, or 3%, for the 12-month period compared to the 12 months ended March 31, 2006.
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