Page 23 - SWGas Annual Report 2015

project were implemented in January 2016 and are expected to result in $6 million in revenue annually. The total
cost of this project is estimated at approximately $35 million, including remaining costs associated with site
restoration along the construction corridor.

PGA Filings
The rate schedules in all of Southwest’s service territories contain provisions that permit adjustments 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 result in over- or under-collections. At December 31, 2015, under-collections in California
resulted in an asset of $3.6 million, and over-collections in Arizona and northern and southern Nevada collectively
resulted in a liability of $45.6 million on the Company’s balance sheet. Gas cost rates paid to suppliers have been
lower than amounts recovered from customers during 2015. The lower cost of natural gas, combined with
surcharges in place during 2015, fully recovered PGA receivables existing at December 31, 2014. Filings to change
rates in accordance with PGA clauses are subject to audit by state regulatory commission staffs. PGA changes
impact cash flows but have no direct impact on profit margin. However, gas cost deferrals and recoveries can
impact comparisons between periods of individual Consolidated Statements of Income components. These include
Gas operating revenues, Net cost of gas sold, Net interest deductions, and Other income (deductions).

Southwest had the following outstanding PGA balances receivable/(payable) at the end of its two most recent fiscal
years (millions of dollars):

Arizona 2015 2014
Northern Nevada
Southern Nevada $ (3.5) $48.4
California (2.3) 10.2
20.4
(39.8) 8.6
3.6
$87.6
$(42.0)

Arizona PGA Filings. In May 2014, Southwest filed an application to provide for monthly adjustments to the
surcharge component of the Gas Cost Balancing Account to allow for more timely refunds to/recoveries from
ratepayers, which was approved in July 2014. As part of this filing, the ACC also approved an initial surcharge of
$0.06 per therm effective August 2014. This surcharge was reduced in June and July 2015 and was eliminated in
August 2015 as the receivable balance was fully collected, while gas cost rates paid to suppliers remained low for
the remainder of the year.

California Gas Cost Filings. In California, a monthly gas cost adjustment based on forecasted monthly prices is
utilized. Monthly adjustments modeled in this fashion provide the timeliest recovery of gas costs in any Southwest
jurisdiction and are designed to send appropriate pricing signals to customers.

Nevada Annual Rate Adjustment (“ARA”) Application. In November 2015, Southwest filed to adjust its quarterly
Deferred Energy Account Adjustment rate, which is based upon a twelve-month rolling average, in addition to
requesting adjusted Base Tariff Energy rates, both of which were also approved effective January 2016. These new
rates are intended to reduce the outstanding liability over a twelve-month period.

Southwest Gas Corporation