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Southwest Gas CorporationSouthwest Gas Corporation

February 16, 2001February 16, 2001

Southwest Gas CorporationSouthwest Gas CorporationUpdate on FactorsUpdate on Factors

Affecting Gas PricesAffecting Gas Prices StorageStorage

Storage levels continue below recent yearsStorage levels continue below recent years

DeliverabilityDeliverability Rig count at over 800Rig count at over 800

Power generationPower generation High power demand keeps pressure on pricesHigh power demand keeps pressure on prices

Crude oilCrude oil Futures below $30Futures below $30

Industry structureIndustry structure No recent changesNo recent changes

Southwest Gas CorporationSouthwest Gas CorporationShort Term InfluencesShort Term Influences

Capacity allocations on El PasoCapacity allocations on El Paso

WeatherWeather

Southwest Gas CorporationSouthwest Gas Corporation

Service TerritoryService Territory

ArizonaArizonaNevadaNevada

California California

Southwest Gas CorporationSouthwest Gas Corporation

Customers servedCustomers served ArizonaArizona 748,000 748,000 NevadaNevada 455,000 455,000 CaliforniaCalifornia 124,000 124,000

TotalTotal 1,327,0001,327,000

Southwest Gas CorporationSouthwest Gas Corporation

What demand (or load) growth rate are What demand (or load) growth rate are you currently experiencing?you currently experiencing?

Growth rate exceeds 5%/annumGrowth rate exceeds 5%/annum

Southwest Gas CorporationSouthwest Gas Corporation

What are your load projections for the What are your load projections for the next two years?next two years?

Southwest’s extreme peak day sales Southwest’s extreme peak day sales forecast in forecast in dekathermsdekatherms

ArizonaArizona 2001 2001 653,000653,000 2002 2002 685,000685,000

Total System 2001 1,180,224Total System 2001 1,180,224 2002 2002 1,238,161 1,238,161

Southwest Gas CorporationSouthwest Gas Corporation What is your projected annual sales What is your projected annual sales

for 2001 and 2002?for 2001 and 2002? Southwest’s annual sales forecast in Southwest’s annual sales forecast in

dekatherms for the 12-month period dekatherms for the 12-month period ending October of each year ending October of each year

ArizonaArizona 2001 2001 70,567,464*70,567,464* 2002 2002 69,110,180*69,110,180*

Total System 2001 118,550,913*Total System 2001 118,550,913* 2002 2002 118,254,078* 118,254,078*

**Includes increased power plant sales that are not Includes increased power plant sales that are not forecasted in future yearsforecasted in future years

Southwest Gas CorporationSouthwest Gas Corporation

Do you have firm contracts in place to Do you have firm contracts in place to meet customer demand?meet customer demand?

YESYES

Each year, Southwest Gas holds Each year, Southwest Gas holds portfolio selection processportfolio selection process Fixed-price solicitationsFixed-price solicitations Indexed solicitationsIndexed solicitations

Southwest Gas CorporationSouthwest Gas Corporation

Are you making any spot purchases on the Are you making any spot purchases on the commodities market to meet local demand?commodities market to meet local demand?

YESYES

Southwest buys spot supplies in lieu of Southwest buys spot supplies in lieu of firm contract supplies when those spot firm contract supplies when those spot purchases result in lower gas costs for purchases result in lower gas costs for customerscustomers

Southwest Gas CorporationSouthwest Gas Corporation

What is the wholesale and retail supply What is the wholesale and retail supply availability for Arizona for 2001 and 2002?availability for Arizona for 2001 and 2002?

To date, Southwest has been able to enter To date, Southwest has been able to enter into firm contracts with suppliers to into firm contracts with suppliers to provide adequate supplies for our provide adequate supplies for our customerscustomers

We do not foresee problems obtaining We do not foresee problems obtaining future commodity contracts, however, future commodity contracts, however, large numbers of natural gas fired large numbers of natural gas fired generation will create greater competitiongeneration will create greater competition

Southwest Gas CorporationSouthwest Gas Corporation

What is the interstate pipeline capacity for What is the interstate pipeline capacity for Arizona for 2001 and 2002?Arizona for 2001 and 2002?

Is that capacity going to be sufficient to meet Is that capacity going to be sufficient to meet the projected needs of both retail and the projected needs of both retail and wholesale gas consumption?wholesale gas consumption?

Full requirements contractsFull requirements contracts Non-coincidental peaksNon-coincidental peaks Allows growthAllows growth Staff’s support in EPNG rate casesStaff’s support in EPNG rate cases May not be able to hold full requirements in next EPNG May not be able to hold full requirements in next EPNG

rate caserate case Expect capacity expansion will be required to meet Expect capacity expansion will be required to meet

power plant growthpower plant growth

Southwest Gas CorporationSouthwest Gas Corporation

With the new power plants planned or With the new power plants planned or approved for Arizona, are there steps that approved for Arizona, are there steps that you would take today to prepare for future you would take today to prepare for future demands on the infrastructure? demands on the infrastructure?

With regulatory support, Southwest would With regulatory support, Southwest would purchase additional capacity now and hold purchase additional capacity now and hold for future use to ensure that a portion of for future use to ensure that a portion of today’s remaining capacity or a portion of a today’s remaining capacity or a portion of a less expensive expansion is available for less expensive expansion is available for retail customersretail customers

Southwest Gas CorporationSouthwest Gas Corporation

What effect, if any, will the cost of natural What effect, if any, will the cost of natural gas have on your supply plan? gas have on your supply plan?

Increase existing price volatility mitigationIncrease existing price volatility mitigation Develop multi-year mitigation programDevelop multi-year mitigation program Work with Staff to develop plan to ensure retail Work with Staff to develop plan to ensure retail

customers have access to interstate capacity customers have access to interstate capacity

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February 16, 2001February 16, 2001

Questions?Questions?