Friday, April 29, 2005 | 11:11 a.m.
Pleasant weather in the first quarter cooled earnings for Las Vegas-based Southwest Gas Corp. of Las Vegas.
The company on Thursday reported first-quarter net income of $32.8 million, or 88 cents a share, down from $41 million, or $1.19 a share for the same 2004 quarter.
Jeffrey Shaw, Southwest Gas chief executive, said higher operating costs also dampened earnings.
Operating margin, defined as revenue minus the cost of gas sold, fell by about $6 million, or 3 percent, in the first quarter of 2005, compared with the same 2004 quarter.
Warm weather, conservation and energy efficiency were credited with trimming $12 million from operating margin.
Operating expenses during the quarter increased by $6.7 million, or 6 percent, compared with the year-ago period. The company blamed the increase on general costs and the higher costs associated with serving new customers. Southwest Gas said it has added about 82,000 new customers in the past 12 months.
Customer growth added about $5 million in operating margin, and another $1 million came from rate relief in California and Nevada.
Ken Kenny, Southwest Gas treasurer, said the weather in the first quarter was particularly disappointing since it followed a promising fourth quarter of 2004 in which earnings jumped by nearly $6 million year-over-year.
"Then it really warmed up, not only here but in other jurisdictional areas, particularly in Arizona," he said.
Kenny also pointed to the higher cost of natural gas chewing up a significant revenue increase. Southwest Gas had first-quarter revenue of $543 million, up from $473 million a year ago.
Recent rate case decisions in California and Nevada helped insulate the utility from weather-related issues. In 2004, the Public Utilities Commission of Nevada increased by 50 cents the fixed charge that all customers pay, regardless of usage. The company also received a declining block rate mechanism that makes the first units of natural gas used by customers more expensive in order to cover static costs, such as lines, maintenance and construction.
The company, however, has not received similar rate relief in Arizona, where a rate case is currently pending, Kenny said.
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