Detailed Narrative
Regulatory Strategy and Rate Case Progress
Southwest Gas is actively progressing rate cases across all three jurisdictions (California, Nevada, Arizona) to ensure timely recovery of investments. In California, the Commission's decision provided approximately $40 million of incremental annual revenue, with a final decision on cost of capital expected later this month. Nevada's general rate case is progressing towards an October 2026 effective date, with intervenor testimony recommending a 9.3% ROE and average revenue increase of just under $40 million. Arizona's general rate case is on track for an April 2027 effective date, with intervenor testimony anticipated in late September.
Great Basin 2028 Expansion Project Enhancements
The Great Basin 2028 Expansion Project achieved significant milestones, securing additional binding precedent agreements to bring total contracted demand to approximately 1 Bcf per day. Due to strong market demand, the project design was revised to a 48-inch pipeline, increasing the estimated capital investment to $2.3 billion and projected incremental annual margin to $270 million to $300 million. The company plans to incorporate these updates into its long-term capital expenditures and earnings guidance in February 2027, with a FERC CPCN filing targeted before year-end 2026 and an in-service date in Q4 2028.
Financial Performance and Balance Sheet Strength
Adjusted EPS from continuing operations rose to $0.45 in Q2 2026, up from $0.37 in Q2 2025, driven by strong HoldCo performance and reduced interest expense. The company reported a 12-month ended return on equity of 8.1% (8% adjusted), aiming to close the gap to its 9.89% authorized return. Southwest Gas maintains a strong financial position with $270 million in cash and nearly $1 billion in available liquidity, alongside investment-grade credit ratings from all three agencies.
Capital Investment and Long-Term Growth
The company is on track to invest approximately $1.25 billion in capital expenditures in 2026, focusing on safety, reliability, and system growth. The current 5-year capital program is expected to nearly double the system-wide rate base by the end of 2030, supporting a projected rate base CAGR of 9.5% to 11.5%. The expanded Great Basin project, with an additional $600 million in CapEx, is not yet fully incorporated into the long-term outlook but is expected to drive future growth.
Financing Strategy and Equity Needs
Southwest Gas anticipates no equity issuances in 2026 outside of its dividend reinvestment plan, with the remainder of its financing plan consisting of a $400 million utility-level debt issuance. The company expects only modest equity needs to fund the expanded Great Basin 2028 Project, leveraging significant holding company leverage capacity. An at-the-market (ATM) equity program will be updated and extended as part of a routine shelf registration renewal, but is not a signal of near-term issuance.