September 8, 2005September 8, 2005

ArizonaArizonaGas Cost UpdateGas Cost Update

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NYMEX Close

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NYMEX Close

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NYMEX Natural Gas Futures for January 2006

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Updated through September 02, 2005

Gas Acquisition PolicyGas Acquisition Policy

#Acquire best cost portfolio consideringAcquire best cost portfolio considering$ PricePrice$ ReliabilityReliability$ FlexibilityFlexibility$ Protection from short-term market volatilityProtection from short-term market volatility

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Gas Purchase MethodGas Purchase Method

#Purchase 50 percent of our average annual Purchase 50 percent of our average annual needs in advance at fixed-priceneeds in advance at fixed-price

#Purchase 6 to 18 months in advance Purchase 6 to 18 months in advance

#Go to market every 4 to 6 weeksGo to market every 4 to 6 weeks

#2003 began a 2-year forward purchase2003 began a 2-year forward purchase

#The remainder floats with the market indexThe remainder floats with the market index

#Daily purchases to meet economic dispatchDaily purchases to meet economic dispatch$ Index vs. daily spotIndex vs. daily spot

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Arizona Supply / Demand View

0

100,000

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11/1/

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Fixed Price Supplies Index Based Supplies

Late Cycle Peaking Supplies Normal Demand

Extreme Demand

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SWG Arizona Basin Gas Cost vs. Fixed and Indexed Components

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Basin Cost Fixed Component Indexed Component EPNG San Juan IFERC

APSP Price ComparisonAPSP Price Comparison

WinterWinter

05/06 APSP05/06 APSP

% of Normal Demand% of Normal Demand

$ 6.46$ 6.46

54%54%

05/06 Strip 05/06 Strip (approximately)(approximately) 10.8010.80

06/07 APSP 06/07 APSP

% of Average Demand% of Average Demand

7.037.03

16%16%

06/07 Strip 06/07 Strip (approximately)(approximately) 9.009.00

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Southwest Gas CorporationArizona

Gas CostJuly 2004 - June 2006

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Gas Cost Rate WACOG

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Southwest Gas Corporation Arizona

Projected 2005 -2006 Average Residential Bill and Monthly Gas Cost Per Therm

November 2005 - March 2006

$29.64

$65.61

$89.72

$72.26

$61.87

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Nov-05 Dec-05 Jan-06 Feb-06 Mar-06

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($)

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Average Projected Monthly Bill ($) Monthly Gas Cost and Surcharges ($)

Outreach Outreach Educational EffortsEducational Efforts

andandProgram ResultsProgram Results

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Outreach and Educational EffortsOutreach and Educational Efforts

Consumer OutreachConsumer Outreach

Energy ServicesEnergy Services

Energy and Bill Assistance Energy and Bill Assistance

EducationEducation

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Consumer OutreachConsumer OutreachConsumer OutreachConsumer Outreach

Target$ Residents and businesses throughout Arizona and other

Southwest service territories

Message$ The wise and safe use of natural gas$ Energy efficiency$ Available energy and bill assistance programs

Communication Methods$ Utility bill messages and inserts$ Brochures and specialty items$ New releases$ Community events $ www.swgas.com

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Bill InsertsBill Inserts

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News to UseNews to Use

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Web SiteWeb Site

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Energy ServicesEnergy ServicesEnergy ServicesEnergy Services

Designed Designed $ Answer questions about natural gasAnswer questions about natural gas$ Energy savings Energy savings $ Brochures and educational materialsBrochures and educational materials$ Appliance referralsAppliance referrals$ Se habla EspanolSe habla Espanol

Call toll-free: 1-800-654-2765Call toll-free: 1-800-654-2765

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Low-Income Ratepayer Low-Income Ratepayer Assistance Program (LIRA)Assistance Program (LIRA)

Low-Income Ratepayer Low-Income Ratepayer Assistance Program (LIRA)Assistance Program (LIRA)

Customers with an income level at or below 150 percent of the Federal Poverty Income Guidelines

Provides a 20 percent discount on the first 150 therms used each month from November through April

LIRA is a self-certification program

LIRA customers need to re-certify every two years

Quarterly Bill Inserts/Application

Online Application

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LIRA ParticipationLIRA ParticipationLIRA ParticipationLIRA Participation

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1999 2000 2001 2002 2003 2004

Participants

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Low-Income Energy Conservation Low-Income Energy Conservation (LIEC)(LIEC)

Low-Income Energy Conservation Low-Income Energy Conservation (LIEC)(LIEC)

DesignedDesigned$ Assist income-qualified customers with Assist income-qualified customers with

homes in need of weatherization measureshomes in need of weatherization measures$ Cost-effectively conserve energy and waterCost-effectively conserve energy and water$ Improve the health, and safety of Improve the health, and safety of

participating householdsparticipating households$ Inform customers of LIRAInform customers of LIRA

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Low-Income Energy Conservation Low-Income Energy Conservation (LIEC) - (LIEC) - continuedcontinued

Low-Income Energy Conservation Low-Income Energy Conservation (LIEC) - (LIEC) - continuedcontinued

PartnershipsPartnerships$ Southwest contracts with nine Community Southwest contracts with nine Community

Action Agencies through the Arizona Action Agencies through the Arizona Department of Commerce – Energy OfficeDepartment of Commerce – Energy Office

$ Leverage with other utilities and funding Leverage with other utilities and funding sources including in the statewide sources including in the statewide Weatherization Assistance Program (WAP)Weatherization Assistance Program (WAP)

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Weatherization ParticipationWeatherization ParticipationWeatherization ParticipationWeatherization Participation

0

100

200

300

400

500

600

700

1999 2000 2001 2002 2003 2004

LIEC(General)

LIEC (Multi-family)

StatewideWAP

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Additional Southwest Gas AssistanceAdditional Southwest Gas AssistanceAdditional Southwest Gas AssistanceAdditional Southwest Gas Assistance

Equal Payment PlanEqual Payment Plan$ Evenly distributes annual natural gas costs into equal

monthly payments$ Eliminates seasonal fluctuations in customer bills$ Spreads significant increases/decreases in natural

gas costs over 12 months in a subsequent year

Energy ShareEnergy Share$ Fuel fund administered by the Salvation Army$ Approximately $130,000 collected annually

Partner with Local AgenciesPartner with Local Agencies$ Donate natural gas appliances$ Annual roundtable meeting with Community Agencies

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ReferralsReferralsReferralsReferrals ReferRefer

$ Customers with unexpected financial Customers with unexpected financial difficulties such as the loss of a job or medical difficulties such as the loss of a job or medical emergencies with agencies who provide direct emergencies with agencies who provide direct assistance assistance with energy costs or repairswith energy costs or repairs

Example of Funding SourcesExample of Funding Sources$ Low Income Home Energy Assistance Low Income Home Energy Assistance

Program (LIHEAP) Program (LIHEAP) $ Utility Repair, Replacement and Deposit Utility Repair, Replacement and Deposit

Program (URRD)Program (URRD)

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Energy EducationEnergy Education

Educate children (K-12) on energy Educate children (K-12) on energy efficiency and safetyefficiency and safety$ Partner with U.S. Department of Energy, Partner with U.S. Department of Energy,

National Energy Foundation and School National Energy Foundation and School DistrictsDistricts

Realtor ® education classRealtor ® education class$ Approved by the Arizona Department of Approved by the Arizona Department of

Real Estate for continuing education Real Estate for continuing education creditscredits

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