Southwest Gas Corp. posts quarterly loss

Kevin Rademacher

Friday, July 30, 2004 | 10:47 a.m.

The high cost of keeping up with growth was cited as the major culprit in a wider second-quarter loss for Southwest Gas Corp. of Las Vegas.

The natural gas distribution company on Thursday reported a loss of $8.4 million, or 24 cents per share, for the three months ending June 30. That's more than double the $4.1 million, or 12 cents per share, lost in the year-ago quarter.

The loss also is wider than the consensus 17 cents-a-share loss Wall Street analysts predicted, said Thompson First Call.

Revenue increased during the second quarter to $279 million, up from $256 million for the second quarter 2003.

Losses in the second and third quarters are expected for Southwest Gas due to the lack of sales for heating purposes. But losses were wider this quarter because of higher construction costs necessary to serve new customers, said Edward Janov, the company's senior vice president of finance.

For the 12 months ending June 30, the company said it added 74,000 customers and another 9,000 customers through the acquisition of Black Mountain Gas Co. in Phoenix. The cost of serving the new customers made up the majority of a $9.4 million, or 9 percent, increase in operating expenses for the quarter.

For the 12 months prior to June 30, 2003, the company added 60,000 customers, Janov said.

Additional operating expenses include higher costs for health care and new regulatory requirements. New federal regulations for pipeline safety require additional employee training, documentation and pipeline testing, Janov said, adding that the company is still incurring higher expenses related to new corporate governance requirements.

"It's not one particular item," Janov said. "We are suffering from the same pressures other companies are with higher medical expenses and regulatory costs."

Janov said losses could be offset if the state Public Utilities Commission grants the company's request to recover construction costs more quickly and increase the basic service charge (a set fee charged regardless of usage) to offset weather-related lulls in revenue.

Southwest Gas made the request in a general rate case. Hearings on that case -- which seeks an additional $18.9 million in annual revenue -- wrapped up this month. A ruling is expected in August. If approved as the company requested, a 6.2 percent rate hike would go into effect Sept. 1.

"Managing the cost of growth continues to be challenging," Janov said. "We are hopeful of a good outcome in the Nevada rate case."

The PUC staff recommended the request be cut in half and the state Bureau of Consumer Protection recommended an increase of only about $40,000 be allowed.

Southwest Gas has more than 1.5 million customers in Nevada, Arizona and California. There are more than 450,000 customers in Southern Nevada.