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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 2, 1999
SOUTHWEST GAS CORPORATION
(Exact name of registrant as specified in its charter)
California 1-7850 88-0085720
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
5241 Spring Mountain Road
Post Office Box 98510
Las Vegas, Nevada 89193-8510
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 876-7237
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Item 5. Other Events
Northern California Expansion Project. In 1995, Southwest Gas Corporation
(Southwest) initiated a multi-year, three-phase construction project to expand
its northern California service territory and extend service into Truckee,
California. The California Public Utilities Commission (CPUC) established a
$29.1 million cost cap for the project. Cost overruns experienced during the
construction of Phase II of the project have led Southwest to pursue regulatory
and legal avenues aimed at minimizing its regulatory disallowance exposure. See
Note 11 of the Notes to Consolidated Financial Statements in the 1998 Annual
Report to Shareholders for additional background information.
In February 1999, Southwest petitioned the Supreme Court of the state of
California for review of the July 1998 CPUC decision ordering Southwest to
complete the project under the terms and scope of the 1995 certificate. In
June 1999, the petition for review was denied.
In April 1999, following six months of mediation, Southwest and the Truckee Town
Council negotiated a Settlement Agreement and Mutual Release (Agreement) which
reconciled disputes and claims against each other. The Agreement addresses the
civil suit against the town of Truckee, the remaining project scope, recovery of
project costs, and the timing of the next California general rate case, among
other items.
During the summer of 1999, Southwest resumed construction on the project. Due to
the short construction season, the project will not be completed until 2003.
Southwest expects to incur approximately $4 million of construction expenditures
in 1999.
In June 1999, Southwest and the town of Truckee filed the Agreement as part of a
Joint Petition with the CPUC to modify the certificate of public convenience and
necessity granted in 1995 and the related cost recovery mechanism. In this
filing, Southwest reduced the estimated remaining cost to complete the project
from $25 million to approximately $18 million based on construction bids
received. On November 2, 1999, the assigned Administrative Law Judge issued a
Draft Decision recommending denial of the Joint Petition and addressing certain
issues regarding compliance with existing orders. The parties to the proceeding
have 20 days to file comments on the Draft Decision. The Draft Decision is
scheduled to be on the agenda at the December 2, 1999 CPUC meeting at which time
the CPUC may act on the Draft Decision, postpone action, or consider other
alternatives. Both Southwest and representatives of the town of Truckee will be
filing comments and working with the CPUC, as allowed under CPUC rules, to
obtain approval of the Joint Petition as filed.
Management believes there is a reasonable possibility these efforts will be
successful and the CPUC will ultimately approve the Joint Petition. If the Joint
Petition is approved, Southwest would reduce its regulatory disallowance
exposure from approximately $17 million to approximately $2 million, pretax,
based on current estimates to complete the project. If not approved, Southwest
will resume its pursuit of other regulatory and legal avenues with the intent of
reversing or mitigating the effects of the CPUC decisions to complete the
project under its original terms and scope. Once a final order is issued, an
evaluation of the likelihood of success of these other avenues can be made.
Pending a final decision by the CPUC, Southwest has not recorded any additional
write-offs for this project beyond an $8 million charge recognized in the fourth
quarter of 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SOUTHWEST GAS CORPORATION
Date: November 8, 1999 /s/ EDWARD A. JANOV
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Edward A. Janov
Vice President/Controller and
Chief Accounting Officer
