11. Assignment of Proceeding

Timothy Alan Simon is the assigned Commissioner and Seaneen M. Wilson is the assigned ALJ in this proceeding.

1. Based on Southwest's forecast of uses adjusted for compliance with
Pub. Util. Code § 817, the forecast of funds needed by Southwest over the period 2010-2012 is $1.373 billion. Of this need:

a. $475 million will be provided from current financing authority;

b. $5.859 million will be provided by sale of Common Stock;

c. $50 million will be provided from drawdown of tax exempt bonds;

d. $459.747 will be provided from million from cash from internal sources;

e. $106.936 million will be provided from additional cash requirements/surplus; and

f. $200 million will be provided from new Debt Securities.

2. The proper term for securities issued pursuant to Pub. Util. Code § 817 is greater than 12 months.

3. The requested financing authority of $200,000,000 appears necessary to provide the external funding required to meet Southwest's projected cash requirements through 2012.

4. The proposed new financing requested by Southwest and the associated money, property, or labor to be procured or paid for with the proceeds of this proposed new financing, are, pursuant to Pub. Util. Code §§ 817 and 818, reasonably required for proper purposes, which purposes are not, in whole or in part, reasonably chargeable to operating expenses or to income.

5. Resolution F-616 requires utilities to issue securities using competitive bids if they have a bond rating of "A" or higher.

6. Southwest's debt rating is "Baa3" as reported in the 2009 Moody's Bond Rating and "BBB" in Standard & Poor's 2009 Bond Rating.

7. Southwest has employed no DBE firms for issuance of Debt Securities, Preferred Stock, or Common Stock in recent years, because it receives pricing concessions when it issues securities through a core group of banks.

8. Southwest uses DBEs for lease financing opportunities and investment management for employee benefit plans.

9. Evergreening Authority Guidelines were authorized in D.93-12-022.

10. Southwest's most recent authorization for Evergreening Authority in
D.05-02-049 expired on December 31, 2009.

11. The reasonableness of Southwest's construction budget, cash requirements forecast, and capital structure for ratemaking purposes is reviewed and authorized in GRC or cost of capital proceedings.

12. GO 24-B requires utilities to submit a monthly report to the Commission that contains, among other things: (a) the amount of debt issued by the utility during the previous month; (b) the total amount of debt outstanding at the end of the prior month; (c) the purposes for which the utility expended the proceeds realized from the issuance of debt during the prior month; and (d) a monthly statement of the separate bank account that the utility is required to maintain for all receipts and disbursements of money obtained from the issuance of debt.

13. The Commission has frequently authorized utilities to report on a quarterly basis the information required by GO 24-B in order to reduce the utilities' administrative and compliance costs.

14. This application does not propose, and today's Decision does not authorize, any specific new construction or changes in use of existing assets and facilities.

15. Pursuant to Pub. Util. Code §§ 1904(b) and 1904.1, Southwest has paid a fee of $15,838.73.

16. Notice of A.10-04-008 appeared in the Commission's Daily Calendar on April 9, 2010, and no protests were filed.

17. In Resolution ALJ 176-3252, the Commission preliminarily determined that A.10-04-008 be categorized as ratesetting and that a hearing would not be necessary.

1. Southwest should be granted authority to issue new Debt Securities of
$200 million.

2. Southwest's proposed new financing authority and the use of the proceeds from that authority, are for proper purposes and consistent with the requirements of Pub. Util. Code §§ 817 and 818.

3. Southwest should be granted authority to directly issue new Debt Securities in the form of debentures; notes; bonds; loans; commercial paper programs; extendible commercial notes; bank loans; capital leases; accounts receivable financing; private placements with insurance companies or other lenders; bankers acceptances; or floating rate debt, using variable or fixed rates; issuing such indebtedness as secured, unsecured, senior, subordinate, or with warrants or rights; in domestic or foreign markets.

4. Pursuant to Pub. Util. Code § 851, Southwest should be granted authority to encumber its utility property, including but not limited to capital leases and accounts receivable, to secure Debt Securities, as authorized herein.

5. Southwest should be granted authority to guarantee, or to pledge its assets on behalf of a regulated affiliates or regulated subsidiaries of Southwest, who qualifies to transact financing arrangements pursuant to § 701.5. A regulated subsidiary may be created solely for the purpose of issuing securities to the public or privately to support Southwest's operations or service in which case, Southwest should have 100% ownership and control of the subsidiary.

6. Southwest should be granted authority to issue Debt Securities through a governmental or quasi-governmental issuer to obtain tax-exempt status for the securities, authorized herein. This authority will be used whenever Southwest's facilities qualify for tax-exempt financing under federal or state law. In this structured financing, Southwest may unconditionally guaranty or otherwise secure the issuer's obligations to its debt holders. As a means of securing the issuer's obligations, Southwest may issue and pledge or deliver bonds in an equal principal amount to the issuer or a trustee.

7. Southwest should be granted authority to use the following kids of debt enhancements to manage interest rate risks of its Debt Securities authorized herein: put options; call options; credit enhancement arrangements; interest rate swap agreements; interest rate cap agreements; interest rate floor agreements; interest rate collar agreements; special-purpose entity transactions; hedges, treasury locks; caps; and collar agreements.

8. Southwest should be granted authority to exclude the debt enhancements authorized herein for purposes of calculating its total financing authority granted in this Decision.

9. Authority to enter into the debt enhancements authorized herein should be granted to Southwest, only in connection with actual, pending or planned issues of Debt Securities authorized herein.

10. Southwest should comply with the conditions shown in Attachment A to this Decision, regarding debt enhancement transactions authorized herein.

11. In regards to Southwest's requested debt enhancement transaction conditions, the word "must" should be substituted for the word "should."

12. Pursuant to Item 6 of Resolution F-616, and since Southwest's bond ratings are lower than "A," the Competitive Bidding Rules do not apply to Southwest.

13. Southwest should be granted Evergreening Authority for long-term Debt Securities, Preferred Stock, and Common Stock, subject to the Guidelines authorized by D.93-12-022, until five years from the date of this Decision.

14. Southwest should file with the Commission, on or before the 25th day of the month following each quarter, a statement for the preceding quarter showing all activity under the Evergreening Authority. This statement should be consolidated with its reports under GO Series 24-B.

15. Granting of financial authority to a utility does not obligate the Commission to approve any capital projects.

16. Review of the reasonableness of capital projects occur as needed through the regulatory process applicable to each capital project.

17. Approval of this financing request should not prejudge any of Southwest's forecasted capital projects for the period 2010 through 2012.

18. Since Southwest has paid the fee of $15,838.73 prescribed by §§ 1904(b) and 1904.1, the authority granted by this Decision should become effective as of the date of this Decision.

19. The order herein is not a finding of the reasonableness of SCE's proposed construction plan or expenditures, the resulting plant balances in rate base, the capital structure, or the cost of money, nor does it indicate approval of matters subject to review in a general rate case or other proceedings.

20. The order herein does not involve any commitment to any specific project which may result in a potentially significant impact on the environment; thus it is not a project subject to CEQA. (CEQA Guidelines Section 15378(b)(4).)

21. Southwest should not use the proceeds from the debt authorized by this Decision to fund its capital projects until Southwest has obtained any required Commission approvals for the projects, including any required environmental review under CEQA.

22. The authority granted Southwest herein is in compliance with Pub. Util. Code §§ 701.5, 816, 817, 818, 824, and 851.

ORDER

IT IS ORDERED that:

1. Southwest Gas Corporation is authorized to issue new Debt Securities in the amount of $200 million for terms of greater than 12 months.

2. Southwest Gas Corporation is authorized to issue new Debt Securities in the form of: debentures; notes; bonds; loans; commercial paper programs; extendible commercial notes; bank loans; capital leases; accounts receivable financing; private placements with insurance companies or other lenders; bankers acceptances; or floating rate debt; using variable or fixed rates; issuing such indebtedness as secured, unsecured, senior, subordinate, or with warrants or rights; in domestic or foreign markets.

3. Pursuant to Pub. Util. Code § 851, Southwest Gas Corporation is authorized to encumber its utility property including but not limited to capital leases and accounts receivable to secure the Debt Securities authorized herein.

4. Southwest Gas Corporation is authorized to issue Debt Securities through and guarantee or pledge its assets on behalf of a regulated subsidiary or regulated affiliate of Southwest Gas Corporation, pursuant to § 701.5. Southwest Gas Corporation's regulated affiliate or regulated subsidiary may be created solely for the purpose of issuing securities to the public or privately to support Southwest Gas Corporation's operations or service in which case, Southwest Gas Corporation must have 100% ownership and control of the subsidiary.

5. Southwest Gas Corporation is authorized to issue Debt Securities through a governmental or quasi-governmental issuer to obtain tax-exempt status for the securities, if the facilities qualify for tax-exempt financing under federal or state law. In this structured financing, Southwest Gas Corporation may unconditionally guarantee or otherwise secure the issuer's obligations to its debt holders. As a means of securing the issuer's obligations, Southwest Gas Corporation may issue and pledge or deliver bonds in an equal principal amount to the issuer or a trustee.

6. Southwest Gas Corporation is granted authority to use the following kinds of debt enhancements to manage interest rate risks in connection with actual, pending or planned issues of Debt Securities: put options; call options; credit enhancement arrangements; interest rate swap agreements; interest rate cap agreements; interest rate floor agreements; interest rate collar agreements; special-purpose entity transactions; hedges; and treasury locks, caps, and collar agreements.

7. Southwest Gas Corporation is authorized to exclude the authorized debt enhancements for purposes of calculating its total financing authorized herein.

8. Southwest Gas Corporation must comply with the conditions shown in Attachment A to this Decision, regarding debt enhancement transactions authorized herein.

9. In regards to Southwest Gas Corporation's debt enhancement transaction conditions shown in Attachment A to this Decision, the word "must" is substituted for the word "should."

10. Southwest Gas Corporation is authorized to use Evergreening Authority for Debt Securities, Preferred Stock, and Common Stock, subject to the Evergreening Authority Guidelines authorized by Decision 93-12-022, until five years from the date of this Decision.

11. Southwest Gas Corporation must file with the Commission, on or before the 25th day of the month following each quarter, a statement for the preceding quarter showing all activity under the Evergreening Authority granted herein. This statement should be consolidated with its reports under General Order Series 24-B.

12. Southwest Gas Corporation must report on a quarterly basis all the information required by General Order 24-B with respect to debt issued pursuant to this Order. However, Southwest Gas Corporation must report this information on a monthly basis if directed to do so by the Commission staff.

13. Southwest Gas Corporation may not use the proceeds from the debt authorized by this Decision to fund its capital projects until Southwest Gas Corporation has obtained any required Commission approvals for the projects, including any required environmental review under California Environmental Quality Act.

14. Since Southwest Gas Corporation has paid the fee of $15,838.73 prescribed by §§ 1904(b) and 1904.1, the authority granted by this Decision is effective as of the date of this Decision.

15. Southwest Gas Corporation must comply with all applicable environmental laws and regulations when planning and implementing any capital expenditure programs financed, in whole or in part, with the proceeds from the Debt Securities authorized by this Decision.

16. Application 10-04-008 is closed.

This order is effective today.

Dated October 28, 2010, at San Francisco, California.

ATTACHMENT A

A. Southwest must provide the Energy Division and the Division of Water and Audits' (DWA) Utility Audit, Finance and Compliance Branch (UAFCB), a report providing the following information concerning the amount of interest rate management contracts and other derivative financial instruments: date of execution, date of expiration, amount, counterparty, counterparty rating, nature of transaction, index used, and termination provisions.

B. Southwest must provide the Energy Division and the DWA UAFCB a copy of any agreement Southwest enters into in connection with the issuance of bonds.

C. Southwest must limit its exposure to any one counterparty as follows:

A. Southwest must limit its counterparty portfolio exposure as follows:

A. Southwest's variable rate exposure (unhedged variable rate debt and fixed to floating rate risk management contracts) must not exceed 35% of the total debt outstanding. Total debt outstanding includes all fixed rate and variable rate debt instruments issued by Southwest, but does not include any short-term financing (debt that will mature within one year of its date of issuance) issued by Southwest.

B. Southwest must separately report all interest income and expense arising from all interest rate transactions in all monthly and annual financial reports to the Commission.

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