Conclusions of Law

1. The legal obligation of the Commission in a GRC is to establish just and reasonable rates to enable the utility to provide adequate service for the convenience of the public, ratepayers and employees, while earning a fair return on the property it employs in providing service.

2. Southwest bears the burden of proof to demonstrate by clear and convincing evidence that it is entitled to its requested rate increase. Such evidence must be clear, explicit and unequivocal; so clear as to leave no substantial doubt or sufficiently strong to demand the unhesitating assent of every reasonable mind.

3. Although a counterpoint may be raised by another party, Southwest bears the burden of proof, and must first justify the reasonableness of its position.

4. Southwest's direct showing must provide the clear and convincing evidence. Without establishing that basis, Southwest will not have met its burden of proof.

5. Southwest has not met its burden of proof to demonstrate the reasonableness of its expense estimating methodology.

6. Southwest did not violate Ordering Paragraphs 3 or 4 in D.92-12-015.

7. A sharing of D&O insurance costs between ratepayers and shareholders is an appropriate allocation that recognizes the benefits of D&O insurance accruing to shareholders and ratepayers.

8. The adopted ATM is a reasonable mechanism to replace annual cost of capital filings by Southwest.

9. Adopting an actual capital structure is a reasonable approach to ensuring ratepayers do not pay Southwest for equity that does not exist.

10. The adopted capital structure and ROE of 10.9% meet the Hope and Bluefield legal standards to provide Southwest an opportunity to earn a fair and reasonable rate of return commensurate with that of other investments having corresponding risks.

11. In procuring gas for winter 2000-2001, Southwest's August, 2001 fixed-price contract and repurchase price of the Reliant transaction neither stabilized prices nor minimized costs for gas deliveries to core customers

12. In order to give effect to the foregoing findings of fact and conclusions of law, the revenue requirement components and total revenue requirements set forth in the appendices should be adopted.