# Southwest Gas Holdings, Inc.: Form 10-Q for the period ended Mar 31, 2025

- Company: [Southwest Gas Holdings, Inc.](/companies/swx.md) (CIK 1692115)
- Form: 10-Q
- Filed: 2025-05-12
- Accepted by EDGAR: May 12, 2025, 08:09 ET
- Period: 2025-03-31
- Accession: 0001692115-25-000119
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1692115/000169211525000119/swx-20250331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1692115/000169211525000119/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Cost of revenue | 3 months, 2025-01-01 to 2025-03-31 | $528.6m | us-gaap:CostOfGoodsAndServicesSold |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | $200.4m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2025-01-01 to 2025-03-31 | $72.3m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | $27.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | $113.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | $1.58 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $1.58 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 72,138,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | $291.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $187.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2025-01-01 to 2025-03-31 | $44.5m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2025-03-31 | $406.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-03-31 | $1.43bn | us-gaap:AssetsCurrent |
| Total assets | at 2025-03-31 | $12.08bn | us-gaap:Assets |
| Current liabilities | at 2025-03-31 | $1.81bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2025-03-31 | $4.33bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2025-03-31 | $28.9m | us-gaap:LongTermDebtCurrent |
| Short-term borrowings | at 2025-03-31 | $690.0m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2025-03-31 | $3.58bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 46,276 characters.

Southwest Gas Holdings is a holding company that owns all of the shares of common stock of Southwest Gas; and until April 22, 2024, all of the shares of common stock of Centuri. Consistent with the Company’s earlier determination to simplify the Company’s portfolio of businesses, the Company determined it would pursue a separation of Centuri. In April 2024, the Company and Centuri announced the completion of the Centuri IPO. Following the Centuri IPO, the Company owns approximately 81% of the outstanding Centuri common stock. The Company intends to fully dispose of its ownership in Centuri in one or more disposition transactions, including by way of sales of its shares of Centuri common stock, one or more exchange offers for Company shares, or distributions to Company stockholders via spin-off, or any combination thereof.

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| SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q |
| SOUTHWEST GAS CORPORATION | March 31, 2025 |

Our business includes Southwest Gas, which is engaged in the business of purchasing, distributing, and transporting natural gas for customers in portions of Arizona, Nevada, and California. Southwest Gas is the largest regulated distributor of natural gas in Arizona and Nevada, and also distributes and transports natural gas for customers in portions of California. Additionally, through its subsidiaries, Southwest Gas operates two regulated interstate pipelines serving portions of Nevada and California. Southwest Gas makes investments in infrastructure to support customer demand associated with population growth and economic development activity, and the safe and reliable operation of its system through adherence to integrity management programs.

As of March 31, 2025, Southwest Gas had approximately 2,265,000 residential, commercial, industrial, and other natural gas customers, of which 1,215,000 customers were located in Arizona, 843,000 in Nevada, and 207,000 in California. Over the past twelve months, first-time meter sets were approximately 40,000, of which 23,000 were added in Arizona, 16,000 in Nevada, and 1,000 in California, which align with a similar number of new meter sets in these same territories during the twelve months ended March 31, 2024. Residential and small commercial customers represented over 99% of the total customer base. During the twelve months ended March 31, 2025, 53% of operating margin (Regulated operations revenues less the net cost of gas sold) was earned in Arizona, 35% in Nevada, and 12% in California. During this same period, Southwest Gas earned 85% of its operating margin from residential and small commercial customers, 4% from other sales customers, and 11% from transportation customers. These patterns are expected to remain materially consistent for the foreseeable future.

Southwest Gas recognizes operating revenues from the distribution and transportation of natural gas (and related services) to customers. Operating margin is a financial measure defined by management as Regulated operations revenues less the net cost of gas sold. However, operating margin is not specifically defined in U.S. GAAP. Thus, operating margin is considered a non-GAAP measure. Management uses this financial measure because Regulated operations revenues include the net cost of gas sold, which is a tracked cost that is passed through to customers without markup under PGA mechanisms. Fluctuations in the net cost of gas sold impact revenues on a dollar-for-dollar basis, but do not impact operating margin or operating income. Therefore, management believes operating margin provides investors and other interested parties with useful and relevant information to analyze Southwest Gas’ financial performance in a rate-regulated environment. The principal factors affecting changes in operating margin are general rate relief (including impacts of infrastructure trackers) and customer growth. Public utility commission decisions on the amount and timing of relief may impact our earnings. Refer to the Summary Operating Results table below for a reconciliation of gross margin to operating margin, and refer to *Rates and Regulatory Proceedings,* in this MD&A, for details of various rate proceedings.

The demand for natural gas is seasonal, with greater demand in the colder winter months and decreased demand in the warmer summer months. All of Southwest Gas’ service territories have decoupled rate structures (alternative revenue programs), which are designed to eliminate the direct link between volumetric sales and revenue, thereby mitigating the impacts of weather variability and conservation on operating margin, allowing Southwest Gas to pursue energy efficiency initiatives. Nearly all of our customers, and resulting revenue and margin, are included as part of mechanisms that reduce the impact of weather and volume variability on our earnings.

Centuri is a strategic infrastructure services company that partners with regulated utilities to build and maintain the energy network that fuels millions of homes and businesses across the U.S. and Canada. With a commitment to serve as long-term partners to customers and communities, Centuri’s employees enable regulated utilities to safely and reliably deliver natural gas and electricity, as well as achieve their goals for environmental sustainability. Centuri operates in 89 primary locations across 46 states and four Canadian provinces. Centuri operates in the U.S., primarily as NPL, Neuco, Linetec, Riggs Distler, and National, and in Canada, primarily as NPL Canada.

Utility infrastructure services activity can be impacted by changes in infrastructure replacement programs and capital budgets of utilities, weather, and local and federal regulation (including tax rates and incentives). Utilities continue to implement or modify system integrity management programs to enhance safety pursuant to federal and state mandates. These programs have resulted in multi-year utility system replacement projects throughout the U.S. Likewise, there has been similar attention placed on electric grid modernization through national infrastructure legislation and related initiatives. Generally, Centuri revenues are lowest during the first quarter of the year due to less favorable winter weather conditions. Revenues typically improve as more favorable weather conditions occur during the summer and fall months. In cases of severe weather, such as following a regional storm, Centuri may be engaged to perform restoration activities related to above-ground utility infrastructure, and related results impacts are not solely within the control of management. In addition, in certain circumstances, such as with large bid contracts (especially those of a longer duration), or unit-price contracts with revenue caps, results may be impacted by differences between costs incurred and those anticipated when the work was originally bid. Work awarded, or failing to be awarded, by individual large customers can impact operating results.

All of our businesses may be impacted by economic conditions that impact businesses generally, such as inflationary impacts on goods and services consumed in the business, rising or sustained high interest rates, labor markets and costs (including in

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regard to contracted or professional services), and the availability of those resources. Certain of these impacts may be more predominant in certain of our operations, such as with regard to fuel costs for work equipment and skilled/trade labor costs at Centuri.

This MD&A of Financial Condition and Results of Operations should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto, as well as the MD&A, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, in addition to the Risk Factors included in these documents as may be updated from time to time.

Executive Summary

**The items discussed in this Executive Summary are intended to provide an overview of the results of the Company’s, Southwest Gas’, and Centuri’s operations and are covered in greater detail in later sections of this MD&A.**

Summary Operating Results

*(In thousands, except per share amounts)*

| Contribution to net income | Period Ended March 31, Three Months 2025 | 2024 |
| --- | ---: | ---: |
| Natural gas distribution | $142,942 | $135,825 |
| Utility infrastructure services | (19,968) | (36,230) |
| Corporate and administrative | (9,104) | (11,858) |
| Net income | $113,870 | $87,737 |
| Weighted average common shares | 72,012 | 71,728 |
| Basic earnings per share |  |  |
| Consolidated | $1.58 | $1.22 |
| Natural Gas Distribution |  |  |
| Reconciliation of Gross Margin to Operating Margin (Non-GAAP measure) |  |  |
| Utility Gross Margin | $287,384 | $256,808 |
| Plus: |  |  |
| Operations and maintenance (excluding Admin. & General) expense | 80,763 | 81,305 |
| Depreciation and amortization expense | 93,690 | 84,823 |
| Operating margin | $461,837 | $422,936 |

#### 1st Quarter 2025 overview

Southwest Gas Holdings highlights include the following:

- Finished the first quarter of 2025 with more than $400 million of cash on a consolidated basis; the Company continues to expect limited capital market needs through the end of 2025 (depending on the post-Centuri IPO separation execution form)
- Corporate and administrative expenses include $9.8 million in interest expense related to borrowings and approximately $600,000 in Centuri separation costs

Natural gas distribution highlights include the following:

- Arizona rate approval in March 2025, reflecting an ~$80 million annualized revenue increase with a return on common equity of 9.84% relative to a 48.5% equity ratio
- Twelve-month operating margin of $1.4 billion
- Operations and maintenance expenses reflect cost discipline
- 40,000 first-time meters sets occurred over the past 12 months
- Finished the quarter with over $380 million in cash (given collection of previously deferred purchased gas costs)
- $163 million capital investment year-to-date

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Utility infrastructure services highlights include the following:

- Revenues of $550.1 million in the first quarter of 2025 reflect an increase of $22.1 million, or 4%, compared to the first quarter of 2024
- Seasonal results improved $16.2 million in the first quarter of 2025, compared to the first quarter of 2024

Results of Natural Gas Distribution

#### Quarterly Analysis

| (Thousands of dollars) | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Regulated operations revenues | $746,416 | $1,052,933 |
| Net cost of gas sold | 284,579 | 629,997 |
| Operating margin | 461,837 | 422,936 |
| Operations and maintenance expense | 129,407 | 130,866 |
| Depreciation and amortization | 93,690 | 84,823 |
| Taxes other than income taxes | 23,761 | 22,903 |
| Operating income | 214,979 | 184,344 |
| Other income | 9,302 | 18,100 |
| Net interest deductions | 44,631 | 36,444 |
| Income before income taxes | 179,650 | 166,000 |
| Income tax expense | 36,708 | 30,175 |
| Contribution to consolidated results | $142,942 | $135,825 |

Results from natural gas distribution operations improved $7.1 million between the first quarters of 2025 and 2024. The increase was primarily due to an increase in Operating margin offset by increases in Depreciation and amortization and Net interest deductions and a decrease in Other income.

Operating margin increased $38.9 million quarter over quarter. Combined rate relief across all our territories added approximately $27 million of incremental margin, and an additional $5 million was attributable to customer growth reflective of approximately 40,000 first-time meter sets added during the last twelve months. The combined impacts of increases in recovery/return associated with regulatory account balances ($4.8 million) and the variable interest expense adjustment mechanism in Nevada ($3.3 million) (for which amortization is recognized in interest expense), also resulted in incremental margin between comparable periods. Partially offsetting these impacts were changes in other miscellaneous revenue and revenue from customers outside of the decoupling mechanisms.

Operations and maintenance expense decreased $1.5 million or 1% between quarters. The decrease was attributable to, among other things, lower pension service cost and contractor and outside services expense. These decreases were mostly offset by higher insurance, compensation-related, and other employee benefit costs. Both periods exclude costs attributable to construction that are part of Net regulated operations plant, and costs that would otherwise be expensed but may instead be deferred as part of regulatory assets.

Depreciation and amortization expense increased $8.9 million, or 10%, between quarters, reflecting a $746 million, or 7% increase in average gas plant in service since the corresponding first quarter of 2024, in addition to the $4.8 million in higher amortization related to regulatory account balances noted above. The increase in plant was attributable to pipeline capacity reinforcement work, franchise requirements, scheduled pipe replacement activities, and new infrastructure.

Other income (which is net of other deductions) decreased $8.8 million between quarters. The decrease was primarily driven by a $5.3 million decrease in values associated with COLI policies and a $4 million decrease in interest income primarily reflecting a reduction in carrying charges associated with regulatory account balances, notably, deferred purchased gas cost balances, which, on a combined basis, decreased from an asset balance of $199 million as of March 31, 2024 to a net liability balance of $282 million as of March 31, 2025. Interest is earned when balances are assets and interest expense is incurred when balances are liabilities.

Net interest deductions increased approximately $8.2 million in the first quarter of 2025, as compared to the prior-year quarter, primarily due to the impacts of surcharges/surcredits and deferral activity related to a regulatory mechanism associated with

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Southwest Gas’ industrial development revenue bonds. Interest also increased due to amounts incurred on the over-collected PGA balance.

Results of Utility Infrastructure Services

#### Quarterly Analysis

| (Thousands of dollars) | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Utility infrastructure services revenues | $550,081 | $528,023 |
| Operating expenses: |  |  |
| Utility infrastructure services expenses | 528,571 | 515,643 |
| Depreciation and amortization | 34,223 | 34,319 |
| Operating loss | (12,713) | (21,939) |
| Other income (deductions) | (481) | 32 |
| Net interest deductions | 17,862 | 24,099 |
| Loss before income taxes | (31,056) | (46,006) |
| Income tax benefit | (6,405) | (9,601) |
| Net loss | (24,651) | (36,405) |
| Net loss attributable to noncontrolling interests | (4,683) | (175) |
| Contribution to consolidated results | $(19,968) | $(36,230) |

Utility infrastructure services revenues increased $22.1 million, or 4%, in the first quarter of 2025 when compared to the prior-year quarter, driven primarily by increased electric utility infrastructure services revenues of $52.1 million, net of a decrease in gas utility infrastructure services revenues of $30 million. The increase in electric utility infrastructure services revenues was primarily due to an increase in net volumes under existing customer MSAs and incremental bid work, as well as an increase in emergency restoration services revenue of approximately $8.9 million ($18.1 million in the first quarter of 2025 compared to $9.2 million in the first quarter of 2024). This increase was partially offset by a previously anticipated decrease in offshore wind revenue of $22.3 million. The decrease in gas utility infrastructure services revenues was primarily due to a reduction in net volumes under existing customer MSAs, caused in large part to adverse winter weather conditions in several regions, leading to shutdown days and delays, in addition to impacts from lower MSA volumes with certain customers due to their budgetary constraints, including as some approached or met the end of their fiscal years for which their capital budgets had been established.

Utility infrastructure services expenses increased $12.9 million, or 3%, in the first quarter of 2025 when compared to the prior-year quarter due primarily to a higher volume of infrastructure services provided, which caused such expenses to increase at a rate generally commensurate with costs necessary to generate the revenue discussed above. Increased margin in the first quarter of 2025, however, was primarily due to the increased profitability of storm work and more efficient utilization of fixed costs in generating the higher level of revenue. Also included in total Utility infrastructure services expenses were general and administrative costs, which decreased approximately $1.4 million between quarters due to a decrease in strategic review costs, as well as a decrease in severance costs and corporate salaries related to restructuring efforts that occurred in the prior year. These decreases were partially offset by an increase in stock-based compensation (which was impacted by forfeitures in the first quarter of 2024) and other incentive compensation, which increased due to improved operating results. Gains on sale of equipment in the first quarter of 2025 and 2024 (reflected as an offset to Utility infrastructure services expenses) were approximately $0.4 million and $0.9 million, respectively.

The decrease in net interest deductions of $6.2 million between quarters was primarily due to a reduction in the average balance of debt outstanding during the comparative periods.

Income tax benefit decreased $3.2 million between quarters, primarily due to a decrease in pre-tax loss in the first quarter of 2025.

Rates and Regulatory Proceedings

Southwest Gas is subject to the regulation of the ACC, the PUCN, and the CPUC, and two of Southwest Gas’ subsidiaries are subject to regulation by the FERC.

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#### Arizona Jurisdiction

*Arizona General Rate Case.* Southwest Gas filed its 2024 Arizona rate case application in February 2024, proposing an increase in revenue of approximately $126 million and a return on common equity of 10.15%, relative to a 50% target equity ratio, and a proposed twelve-month post-test year adjustment for non-revenue producing plant to reflect the continued significant capital investments in the state and to update rates to more closely align with Southwest Gas’ current level of operations and maintenance expense. The ACC’s final decision in March 2025 authorized an overall annual rate increase of approximately $80.2 million, and a return on common equity of 9.84% relative to a 48.5% equity ratio. Southwest Gas’ proposals for the continuation of full revenue decoupling under the DCA mechanism and a property tax tracking mechanism were approved, but the proposed UGCE mechanism to address timelier recovery of the purchased gas cost portion of uncollectible customer accounts following write-off was ultimately withdrawn in favor of the historical regulatory treatment for uncollectible accounts and related expense. The COYL program was terminated; however, an application will be filed to request recovery of the associated outstanding revenue requirement. Rates associated with the ACC’s decision became effective in March 2025, commensurate with the timing of the rate case order.

Initially included as part of the rate case application, Southwest Gas proposed the establishment of the SIM, a capital tracker designed to support required code and regulatory-related infrastructure replacements in Arizona, which was subsequently bifurcated from the rate case application. A settlement agreement supporting implementation of the SIM was reached with the majority of the parties, including a SIM surcharge effective April 1 each year subject to refund, to recover the revenue requirement associated with eligible plant placed in service by December 31 of the prior calendar year. The settlement will be considered by the ACC at a future open meeting with a final decision anticipated in the third quarter of 2025.

*Delivery Charge Adjustment.* The DCA, or Arizona decoupling mechanism, as noted above, includes a filing each April, which along with other reporting requirements, contemplates a rate to return/recover the over- or under-collected margin tracker (decoupling mechanism) balance. The most recent filing was made in April 2025 to request a rate to address the under-collected balance of $40.7 million existing as of March 31, 2025. Consideration of the most recent request is anticipated in the third or fourth quarter of 2025. The existing rate, which became effective August 1, 2024, will remain in place until a decision is made regarding the most recent request.

*Tax Reform.* A TEAM was approved in Southwest Gas’ 2019 general rate case to timely recognize tax rate changes resulting from federal or state tax legislation following the TEAM implementation. In addition, the TEAM tracks and returns/recovers the revenue requirement impact of changes in amortization of EADIT, including that which resulted from 2017 U.S. federal tax reform, compared to the amount authorized in the most recently concluded rate case. Following the inaugural surcredit rate establishment under the TEAM mechanism in December 2022, Southwest Gas filed subsequent TEAM rate applications, including a recent filing, which proposes to update the TEAM surcharge to recover approximately $5.2 million resulting from changes related to the amortization of EADIT. The existing surcredit rate became effective June 1, 2024, and the proposed surcharge rate has been approved to become effective June 1, 2025.

*PGA Modification*. On January 27, 2025, Southwest Gas filed a request to increase the GCBA adjustment to allow for a greater credit rate to be implemented more quickly in order to facilitate the return of the existing over-collected balance. Typical adjustments authorized by previous decisions limit the increase in the GCBA rate to $0.01 per month. The ACC approved Southwest Gas’ recent request to implement a credit rate of $0.08138 per therm effective April 1, 2025, which is expected to be in place for approximately one year and will terminate when the GCBA balance is reduced to less than $10 million.

#### Nevada Jurisdiction

*Nevada General Rate Case*. Southwest Gas filed its most recent general rate case in September 2023, updated with a certification filing primarily for plant placed in service, and incremental annual leak survey costs, through November 2023. Those updates resulted in an updated overall request of approximately $74 million. The PUCN issued a decision approving an annual increase in revenues of $59 million, approving the earlier proposed settlement, and authorizing a return on common equity of 9.5%, including the use of a hypothetical capital structure of 50% debt and 50% equity. Included in the settled items were: a continuation of full revenue decoupling; authority to continue tracking incremental annual leak survey costs in a regulatory asset; and refreshed depreciation rates somewhat lower than those proposed. New rates became effective in April 2024.

*General Revenues Adjustment.* The GRA, or Nevada decoupling mechanism, was affirmed as part of Southwest Gas’ most recently concluded general rate case and adjustments are included in the ARA filings intended to update rates to recover/return amounts associated with various regulatory mechanisms, including the GRA. Recovery of rates and adjustments thereto as part of the ARA primarily impact cash flows, but not net income overall. Rates for the GRA and other regulatory mechanisms relating to the November 2023 ARA filing became effective May 1, 2024, earlier than the typical July 1 effective date. The

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most recent ARA filing was made in November 2024, associated with balances as of September 30, 2024. Updated rates are anticipated July 1, 2025.

*Line Locate Activity Expenses Application.* Southwest Gas filed an application with the PUCN for authority to establish regulatory accounting treatment for line locate activity expenses and to establish a damage prevention cost mechanism. This would allow Southwest Gas to track the actual level of line locate costs in operation and maintenance expense and to record, in a regulatory asset or liability account, the difference between amounts incurred and the level established in the most recent general rate case. Approval to establish the damage prevention cost mechanism will provide the means to recover or return the accumulated balance of the line locate expenses tracked in the proposed regulatory account. This proposal is made without carrying charges on the regulatory mechanism balance proposed to be established, focusing solely on stemming the financial attrition suffered in between rate cases related to this work. Hearings are scheduled in June 2025 and resolution of this application is anticipated in the third quarter of 2025.

#### California Jurisdiction

*California General Rate Case.* Southwest Gas filed its most recent general rate case in September 2024 related to a future test year (2026), originally proposing a statewide revenue increase of approximately $49 million. Southwest Gas later updated its request to $43.7 million through supplemental testimony, requesting a revised revenue increase of $36.6 million for the southern California rate jurisdiction, a decrease of $2.8 million for the northern California rate jurisdiction, and an increase of $9.8 million for the South Lake Tahoe rate jurisdiction. The request is based on a capital structure consisting of 50% long-term debt and 50% common equity with a requested return on common equity of 11.35%, a modest increase compared to the 11.16% currently authorized. A continuation of Southwest Gas’ 2.75% PTY margin attrition adjustment for attrition years 2027 – 2030 is included, as well as continued use of the automatic trigger mechanism in lieu of annual cost of capital filings. Southwest Gas’ filing also includes a risk-based decision-making framework, proposing the continuation of the targeted pipe replacement program, the meter protection program, and COYL Program, along with the addition of a new annual leak survey program, collectively, under the infrastructure reliability and replacement adjustment mechanism umbrella. Authority to establish a damage prevention cost balancing account to record and recover (or return) certain costs associated with damage prevention expenses, specifically those related to line locating activities, was also requested. Consolidation of Southwest Gas’ northern California and South Lake Tahoe rate jurisdictions into a single rate-making jurisdiction was also proposed. Direct testimony from the Public Advocate’s Office was received and hearings are scheduled in the second quarter of 2025. The rate case will continue to be processed during 2025 with a final decision expected in the fourth quarter of 2025, and new rates expected to be effective in January 2026.

*Attrition Filing.* Following the 2021 implementation of rates approved as part of the previous general rate case, the continuation of annual PTY margin attrition increases of 2.75% began in January 2022. The most recent annual margin attrition increase was also inclusive of adjustments related to the amortization of EADIT. The cumulative impact resulted in an annual increase of $7.3 million effective January 2025 for Southwest Gas’ combined southern California, northern California, and South Lake Tahoe rate jurisdictions. The PTY increase of $3.6 million associated with the North Lake Tahoe Lateral revenue requirement became effective February 1, 2025.

#### FERC Jurisdiction

*General Rate Case.* Great Basin, a wholly owned subsidiary of Southwest Gas, filed a notice of a change in rates (pursuant to applicable regulations) on March 6, 2024, requesting that rates for its natural gas service subject to the filing be made effective April 6, 2024. The FERC, however, suspended the case for a five-month period, which allowed rates to go into effect, subject to refund, on September 6, 2024. The filing included a request to continue a term-differentiated rate structure, which was adopted as part of Great Basin’s previous general rate case, to provide an overall annual revenue increase of approximately $13 million, and a return on equity of 11.95% and a capital structure of 50% long-term debt and 50% common equity. A primary driver of the increase was approximately $99 million of capital investments, much of which was placed in service by the end of the August 31, 2024 test year. An all-party settlement was reached recommending approval of a $9.6 million revenue increase based on a 9.76% pretax rate of return. Rate base increased to approximately $191 million, a 41% increase over the previously authorized $135.5 million. The settlement was filed with the FERC for final consideration in December 2024, and a Letter Order was issued in March 2025, approving the uncontested settlement. Since no party requested reconsideration, the Letter Order became effective April 2, 2025 and refund amounts in excess of the base tariff rates established in the settlement will be issued by June 2, 2025.

*2028 Expansion Project.* In response to inquiries related to available capacity and changing market needs, Great Basin posted notice of a Binding Open Season for a 2028 system expansion. The Binding Open Season, initially scheduled from January 28, 2025 through April 30, 2025 to determine the level of interest of existing and potential shippers for new or

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additional firm transportation service, was extended through May 28, 2025 to allow for consideration of alternative in-service date requests as part of the bids.

PGA Filings

The rate schedules in all of Southwest Gas’ service territories contain provisions that permit adjustment to rates as the cost of purchased gas changes. These deferred energy provisions and purchased gas adjustment clauses are collectively referred to as “PGA” clauses. Differences between gas costs recovered from customers and amounts paid for gas by Southwest Gas result in over- or under-collections. Balances are recovered from, or refunded to, customers on an ongoing basis with interest. As of March 31, 2025, under-collections in California resulted in an asset of approximately $7 million and over-collections in the Arizona and Nevada territories resulted in a liability of approximately $289 million. The substantial reduction in balances between periods in the table below reflects a combination of specific recovery rates in place to collect the build-up of earlier balances as a result of the cost paid for gas in those earlier periods (rates for which are subject to certain limitations depending on the jurisdiction), and the impacts related to base rates under the mechanisms, which have exceeded the cost of recent gas supply purchases by Southwest Gas.

Filings to change rates in accordance with PGA clauses are subject to audit by state regulatory commission staffs. The operation of the mechanism in California is typically the most responsive to changes in gas supply costs, and maximum rate adjustments for the earlier build-up (positive or negative) apply to Nevada and Arizona; however, refer to the *PGA Modification* discussion above (in 2025) related to Arizona. PGA changes impact cash flows but have no direct impact on operating margin. However, gas cost deferrals and recoveries can impact comparisons between periods of individual consolidated income statement components. These include Regulated operations revenues, Net cost of gas sold, Net interest deductions, and Other income (deductions).

The following table presents Southwest Gas’ outstanding PGA balances receivable/(payable):

| (Thousands of dollars) | March 31, 2025 | December 31, 2024 | March 31, 2024 |
| --- | ---: | ---: | ---: |
| Arizona | $(48,055) | $(46,980) | $135,899 |
| Northern Nevada | (44,224) | (31,212) | 3,103 |
| Southern Nevada | (196,908) | (164,067) | 38,873 |
| California | 7,000 | 13,937 | 20,807 |
|  | $(282,187) | $(228,322) | $198,682 |

Capital Resources and Liquidity

Historically, cash on hand and cash flows from operations have provided a substantial portion of cash used in investing activities (primarily for construction expenditures and property additions). In recent years, Southwest Gas has undertaken substantial pipe replacement activities to fortify system integrity and reliability, including on an accelerated basis in association with certain gas infrastructure replacement programs. This activity has necessitated the issuance of both debt and equity securities to supplement cash flows from operations, before cash reserves built up at the utility in more recent periods, including from collections under the PGA mechanisms. Southwest Gas Holdings and Southwest Gas’ capitalization strategy is to maintain an appropriate balance of equity and debt to preserve investment-grade credit ratings, which help minimize interest costs. Investment-grade credit ratings have been maintained by Southwest Gas Holdings and Southwest Gas.

#### Cash Flows

Southwest Gas Holdings, Inc.:

*Operating Cash Flows.* Cash flows provided by consolidated operating activities decreased $252 million in the first three months of 2025 as compared to the same period of 2024. The decrease was primarily driven by the substantial reduction of collection of previously deferred purchased gas costs for Southwest Gas. Recovery rates were in place to collect the earlier build-up of PGA balances, which are collectively now in a net liability position. The remaining difference reflects the impacts of increased earnings and changes in other components of working capital overall.

*Investing Cash Flows.* Cash flows used in investing activities decreased $13 million in the first three months of 2025 as compared to the same period of 2024. The decrease was driven by reduced outflows for construction expenditures and property additions in the first three months of 2025 compared to the same period of 2024, partially offset by proceeds received from the sale of other property in 2024, with no similar inflow in 2025.

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| SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q |
| SOUTHWEST GAS CORPORATION | March 31, 2025 |

*Financing Cash Flows.* Cash flows from consolidated financing activities decreased $70 million in the first three months of 2025 as compared to the same period of 2024. The decrease was primarily due to lower borrowing activity in 2025 and increased repayments under Centuri’s revolving credit and term loan facility.

Corporate and administrative expenses/outflows for Southwest Gas Holdings in the first three months of 2025 overall primarily include interest paid on outstanding borrowings.

The capital requirements and resources of the Company generally are determined independently for the individual business segments. Each business segment is generally responsible for securing its own debt financing sources. However, the holding company may raise funds through stock issuances or other external financing sources in support of each business segment.

Southwest Gas Corporation:

*Operating Cash Flows.* Cash flows provided by operating activities decreased approximately $292 million in the first three months of 2025 as compared to the same period of 2024 primarily attributable to the substantial reduction in collection of deferred purchased gas costs (as discussed above), in addition to reflecting cash flows from other working capital changes overall.

*Investing Cash Flows.* Cash used in investing activities decreased $8 million in the first three months of 2025 as compared to the same period of 2024. Outflows for capital expenditures decreased by $28 million between periods, partially offset by inflows from the sale of property in 2024. See also *Natural Gas Distribution Segment Construction Expenditures, Debt Maturities, and Financing* below.

*Financing Cash Flows.* Net cash used in financing activities increased $6 million in the first three months of 2025 as compared to the same period of 2024 primarily due to an increase in dividends paid between periods.

#### Natural Gas Distribution Segment Construction Expenditures, Debt Maturities, and Financing

During the three-month period ended March 31, 2025, construction expenditures for the natural gas distribution segment were $163 million. The majority of these expenditures were associated with new construction and other general plant additions, with the remainder attributable to the replacement of existing transmission and distribution pipeline facilities to fortify system integrity and reliability.

Management estimates natural gas segment construction expenditures during the three-year period ending December 31, 2027 will be approximately $2.6 billion. Of this amount, approximately $880 million is expected to be incurred during calendar year 2025. Southwest Gas plans to continue to request regulatory support to undertake projects, or to accelerate projects as necessary for the improvement of system flexibility and reliability, or to expand, where relevant, to unserved or underserved areas. Southwest Gas may expand existing, or initiate new, programs. Significant replacement activities are expected to continue well beyond the next few years. See also **Rates and Regulatory Proceedings**. During that same three-year period, cash flows from operating activities of Southwest Gas are expected to provide approximately 74% of the funding for gas operations of Southwest Gas and total construction expenditures and dividend requirements. Any additional cash requirements, including construction-related, and any paydown or refinancing of debt, are expected to be provided by existing credit facilities, parent equity contributions, and/or other external financing sources. The timing, types, and amounts of additional external financings will be dependent on a number of factors, including the cost of gas purchases, conditions in capital markets, timing and amount of rate relief, timing and amount of surcharge collections from, or amounts returned to, customers related to regulatory mechanisms and programs, maturities of long-term debt instruments, as well as growth levels in Southwest Gas’ service areas and earnings. External financings may include the issuance of debt securities, bank and other short-term borrowings, and other forms of financing. Southwest Gas has $75 million of long-term debt maturing in 2026, but no debt maturities in 2025.

#### Dividend Policy

Dividends are payable on the Company’s common stock at the discretion of the Board. In setting the dividend rate, the Board considers, among other factors, current and expected future earnings levels, our ongoing capital expenditure plans, expected external funding needs, our payout ratio, and our ability to maintain investment-grade credit ratings and liquidity. The Company has paid dividends on its common stock since 1956. In February 2025, the Board determined to maintain the quarterly dividend at $0.62 per share, effective with the June 2025 payment. Although no assurances can be provided on our future dividend payments, the Board currently intends to reevaluate the dividend upon the completion of the Centuri separation, and it is anticipated that we will pay a dividend at a level consistent with industry peers.

#### Liquidity

Several factors (some of which are out of the control of the Company) that could significantly affect liquidity in the future include: activities from the planned separation of Centuri, variability of natural gas prices, changes in ratemaking policies of

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| SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q |
| SOUTHWEST GAS CORPORATION | March 31, 2025 |

regulatory commissions, regulatory lag, customer growth in the natural gas distribution segment, the ability to access and obtain capital from external sources, interest rates, income tax laws and changes thereto, pension funding requirements, inflation, and the level of earnings. Natural gas prices and related gas cost recovery rates, as well as plant investment, have historically had the most significant impact on liquidity.

On an interim basis, Southwest Gas defers over- or under-collections of gas costs to PGA balancing accounts. In addition, Southwest Gas uses this mechanism to either refund amounts over-collected or recoup amounts under-collected as compared to the price paid for natural gas during the period since the last PGA rate change went into effect. At March 31, 2025, the balance in the PGA accounts included an under-collection of approximately $7 million pertaining to the California jurisdiction and an over-collection of $289 million pertaining to Arizona and Nevada. The substantial reduction in the PGA balance as of this date compared to the same period in 2024 is also highlighted by Southwest Gas’ substantial cash balance of $386 million existing as of March 31, 2025. See **PGA Filings** for more information.

Southwest Gas Holdings has a credit facility with a borrowing capacity of $300 million that expires in December 2026. This facility is intended for short-term financing needs. At March 31, 2025, $140 million was outstanding under this facility.

In August 2024, Southwest Gas Holdings entered into a $550 million term loan that is set to mature in July 2025. The Company expects no difficulty in addressing the maturing obligation.

Southwest Gas has a credit facility with a borrowing capacity of $400 million, which is set to expire in August 2029. Southwest Gas designates $150 million of capacity under the facility for long-term borrowing needs and the remaining $250 million for working capital purposes. There was no activity on either the long-term or short-term portions of the existing facility during the three-month period ending March 31, 2025. Additionally, at March 31, 2025, no borrowings were outstanding on either the long-term or short-term portions of the existing facility. The credit facility can be used as necessary to meet liquidity requirements, including temporarily financing under-collected PGA balances, or meeting the refund needs of over-collected balances. The credit facility in place has generally been adequate for Southwest Gas’ working capital needs outside of funds raised through operations and other types of external financing. Any additional cash requirements could include utilization of the credit facility, equity contributions from the Company, and/or other external financing sources.

Southwest Gas has a $50 million commercial paper program. Any issuance under the commercial paper program is supported by Southwest Gas’ revolving credit facility and, therefore, does not represent additional borrowing capacity. Any borrowing under the commercial paper program is designated as long-term debt. Interest rates for the commercial paper program are calculated at the current commercial paper rate during the borrowing term. At March 31, 2025, there were no borrowings outstanding under this program.

Centuri has a $1.545 billion secured revolving credit and term loan multi-currency facility. The capacity of the line of credit is $400 million, with related amounts borrowed and repaid being generally available to be re-borrowed; the term loan facility has a limit of $1.145 billion. The term loan facility expires on August 27, 2028 and the revolving credit facility expires on August 27, 2026. This multi-currency facility allows the borrower to request loan advances in either Canadian or U.S. dollars. The obligations under the credit agreement are secured by present and future ownership interests in substantially all direct and indirect subsidiaries of Centuri, substantially all of the tangible and intangible personal property of each borrower, certain of their direct and indirect subsidiaries, and all products, profits, and proceeds of the foregoing. Centuri assets securing the facility at March 31, 2025 totaled $2.3 billion. The maximum amount outstanding on the combined facility during the first three months of 2025 was $804.2 million. As of March 31, 2025, $98 million was outstanding on the revolving credit facility, in addition to $706 million that was outstanding on the term loan portion of the facility. Also at March 31, 2025, there was approximately $242 million, net of letters of credit, available for borrowing under the line of credit.

In April 2024, Centuri successfully completed an IPO. As of March 31, 2025, the Company continues to own approximately 81% of the outstanding shares of Centuri common stock. The Company intends to fully dispose of its ownership in Centuri in one or more disposition transactions, including by way of sales of the Company’s shares of Centuri common stock, one or more exchange offers for Company shares, or distributions to Company stockholders via spin-off, or a combination thereof.

#### Critical Accounting Policies and Estimates

As of March 31, 2025, there have been no significant changes with regard to the critical accounting policies and estimates disclosed in the MD&A in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2024.

## Market risk

As filed, 353 characters.

See **Item 7A. Quantitative and Qualitative Disclosures about Market Risk** in the 2024 Annual Report on Form 10-K filed with the SEC. No material changes have occurred related to the disclosures about market risk since December 31, 2024.

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| SOUTHWEST GAS HOLDINGS, INC. | Form 10-Q |
| SOUTHWEST GAS CORPORATION | March 31, 2025 |

## Controls and procedures

As filed, 2,081 characters.

Management of Southwest Gas Holdings, Inc. and Southwest Gas has established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in their respective reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to management of each company, including each respective Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and benefits of controls must be considered relative to their costs. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the control. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

Based on the most recent evaluation, as of March 31, 2025, management of Southwest Gas Holdings, Inc. and Southwest Gas, including the Chief Executive Officer and Chief Financial Officer, believes the Company’s and Southwest Gas’ disclosure controls and procedures are effective at attaining the level of reasonable assurance noted above.

There have been no changes in the Company’s or Southwest Gas’ internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the first quarter of 2025 that have materially affected, or are likely to materially affect the Company’s internal control over financial reporting.

Filed May 12, 2025.
Source: SEC EDGAR, the filing index for accession 0001692115-25-000119. Last ingested by Listed: Nov 4, 2026, 08:38 ET. No prices; not investment advice.