Southwest Gas Corporation and its subsidiaries (the "Company") consist of two business segments: natural gas operations ("Southwest" or the "natural gas operations" segment) and construction services.

Southwest is engaged in the business of purchasing, distributing, and transporting natural gas in portions of Arizona, Nevada, and California. Southwest is the largest distributor in Arizona, selling and transporting natural gas in most of central and southern Arizona, including the Phoenix and Tucson metropolitan areas. Southwest is also the largest distributor of natural gas in Nevada, serving the Las Vegas metropolitan area and northern Nevada. In addition, Southwest distributes and transports natural gas in portions of California, including the Lake Tahoe area and the high desert and mountain areas in San Bernardino County.

As of March 31, 2009, Southwest had 1,821,000 residential, commercial, industrial, and other natural gas customers, of which 984,000 customers were located in Arizona, 657,000 in Nevada, and 180,000 in California. Residential and commercial customers represented over 99 percent of the total customer base. During the twelve months ended March 31, 2009, 53 percent of operating margin was earned in Arizona, 35 percent in Nevada, and 12 percent in California. During this same period, Southwest earned 86 percent of operating margin from residential and small commercial customers, 5 percent from other sales customers, and 9 percent from transportation customers. These general patterns are expected to continue.

Southwest recognizes operating revenues from the distribution and transportation of natural gas (and related services) to customers. Operating margin is the measure of gas operating revenues less the net cost of gas sold. Management uses operating margin as a main benchmark in comparing operating results from period to period. The principal factors affecting operating margin are general rate relief, weather, conservation and efficiencies, and customer growth. Of these, weather is the primary reason for volatility in margin. Variances in temperatures from normal levels, especially in Arizona where rates are highly leveraged, have a significant impact on the margin and associated net income of the Company.

NPL Construction Co. ("NPL" or the "construction services" segment), a wholly owned subsidiary, is a full-service underground piping contractor that provides utility companies with trenching and installation, replacement, and maintenance services for energy distribution systems. NPL currently operates in 20 major markets nationwide. Construction activity is cyclical and can be significantly impacted by changes in general and local economic conditions, including the housing market, interest rates, employment levels, job growth, the equipment resale market, and local and federal tax rates. Generally, revenues and profits are lowest during the first quarter of the year due to less favorable winter weather conditions. Operating results typically improve as more favorable weather conditions occur during the summer and fall months.

This Management's Discussion and Analysis ("MD&A") of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and the notes thereto, as well as the MD&A, included in the 2008 Annual Report to Shareholders, which is incorporated by reference into the 2008 Form 10-K.

SOUTHWEST GAS CORPORATION Form 10-Q
March 31, 2009

Executive Summary

The items discussed in this Executive Summary are intended to provide an overview of the results of the Company's operations. As needed, certain items are covered in greater detail in later sections of management's discussion and analysis. As reflected in the table below, the natural gas operations segment accounted for an average of 88 percent of twelve-month-to-date consolidated net income over the past two years. As such, management's discussion and analysis is primarily focused on that segment. Natural gas sales are seasonal, peaking during the winter months; therefore, results of operations for interim periods are not necessarily indicative of the results for a full year.

Summary Operating Results
                                            Period Ended March 31,
                                   Three Months                 Twelve Months
                                2009           2008          2009          2008
                                   (In thousands, except per share amounts)

Contribution to net income
Natural gas operations       $    49,852     $  49,333     $  54,266     $  73,199
Construction services                129          (181 )       7,536         9,435
Net income                   $    49,981     $  49,152     $  61,802     $  82,634

Average number of common
  shares outstanding              44,424        43,012        43,825        42,592

Basic earnings per share
Consolidated                 $      1.13     $    1.14     $    1.41     $    1.94


Natural Gas Operations
Operating margin             $   239,296     $ 240,601     $ 734,113     $ 736,369

Contribution to consolidated net income from natural gas operations increased $519,000 in the first quarter of 2009 compared to same period in 2008. The improvement in contribution primarily resulted from lower financing costs partially offset by a decrease in operating margin and increased operating costs. The first quarter of 2009 contribution to consolidated net income from construction services improved $310,000 from the same period in 2008. The improvement between periods was primarily due to lower costs and increased gains on the sale of equipment.

1st Quarter 2009 Overview

Despite a small increase in net income, basic earnings per share declined between quarters due to an increase in the number of common shares outstanding.

Gas operations highlights include the following:
· Operating margin decreased approximately $1 million, or 1 percent, compared to the prior-year's quarter as negative impacts of weather variations ($17 million) and conservation/energy efficiencies ($6 million) were substantially offset by rate relief ($10 million) and seasonal operating margin recognition changes ($12 million)
· Operating expenses increased just one percent between quarters
· Net financing costs decreased $3.2 million between quarterly periods
· Nevada general rate case filed requesting $30.5 million and a decoupled rate structure
· Liquidity position remains strong
· In April 2009, S&P upgraded the Company's debt rating from BBB- to BBB

SOUTHWEST GAS CORPORATION Form 10-Q
March 31, 2009

Reduction in Customer Growth. During the twelve months ended March 31, 2009, Southwest completed 29,000 first-time meter sets. These meter sets led to just 2,000 net additional active meters during the same time frame. The difference between first-time meter sets and incremental active meters indicates a significant inventory of unoccupied homes, continuing a trend first experienced during 2007. Southwest is projecting continued sluggish net growth (1% or less) for 2009 as high foreclosure rates and recessionary conditions persist throughout its service territories. Once housing supply and demand come back into balance, Southwest expects to experience a correction in which customer additions exceed first-time meter sets. Although management cannot predict the timing of a turn around, it is not likely to occur in the near term.

Weather. The rate structures in each of Southwest's three states provide varying levels of protection from risks that drive operating margin volatility, particularly weather risk. During the first quarter of 2009, weather was extremely warm in its service territories, especially in Arizona, which experienced one of its warmest winters in 100 years. On a total Company basis, Southwest estimates that the weather impact on operating margin was a reduction of $13 million. Conversely, during the first quarter of 2008, colder-than-normal temperatures resulted in a favorable margin impact of $4 million.

In Southwest's California service territories, weather impacts were completely offset by the margin tracking mechanism allowing margin to grow as authorized in its most recent general rate case. In Nevada, the negative impacts were mitigated by a declining block rate structure. Most of the reduction occurred in Arizona, where rates are highly leveraged and a single block rate structure is in effect. In addition, the heating season is fairly condensed in Arizona, therefore variations from "normal" temperatures can cause material volatility in operating margin as over 50 percent of Southwest's annual operating margin is normally earned in Arizona.

Conservation, Energy Efficiencies, and Economic Impacts on Consumption. A significant portion of Southwest's operating margin (primarily in Arizona and partially in Nevada) is recognized based on the volumetric usage of its customers. Historically the impacts of this rate design methodology have been most pronounced when temperatures varied from normal levels. Over the longer-term, average usage has also declined due to new home construction practices and energy efficient appliances. Recently, the continued downturn in the economy and associated pro-active conservation efforts have resulted in an unprecedented drop in per-customer usage. For the quarter ended March 31, 2009, the estimated impact of these non-weather-related volumetric declines was a reduction to operating margin of $6 million. The decoupling methodology requested in the recent Nevada rate case, if approved as proposed, would mitigate this impact in Nevada. Management continues to work with regulators in Arizona to establish a decoupling methodology that would allow the Company to support and encourage conservation efforts without jeopardizing the recognition of authorized operating margin.

Company-Owned Life Insurance ("COLI"). Southwest has life insurance policies on members of management and other key employees to indemnify itself against the loss of talent, expertise, and knowledge, as well as to provide indirect funding for certain nonqualified benefit plans. The COLI policies have a combined net death benefit value of approximately $137 million at March 31, 2009. The net cash surrender value of these policies (which is the cash amount that would be received if Southwest voluntarily terminated the policies) is approximately $45 million at March 31, 2009 and is included in the caption "Other property and investments" on the balance sheet. Cash surrender values are directly influenced by the investment portfolio underlying the insurance policies. This portfolio includes both equity and fixed income (mutual fund) investments. As a result, generally the cash surrender value (but not the net death benefit) moves up and down consistent with the movements in the broader stock and bond markets. During the first quarter of 2009, Southwest recognized a net decline in the cash surrender values of its COLI policies of $1.6 million (compared to a net decline of $2.1 million in the same period of 2008). During the twelve months ended March 31, 2009, Southwest recognized a net decline in the cash surrender values of its COLI policies of $11.5 million (compared to a net decline of $945,000 in the same period of 2008). Current tax regulations provide for tax-free treatment of life insurance (death benefit) proceeds. Therefore, the changes in the cash surrender value components of COLI policies as they progress toward the ultimate death benefits are also recorded without tax consequences. Currently, the Company intends to hold the COLI policies for their duration and purchase additional policies as necessary.

SOUTHWEST GAS CORPORATION Form 10-Q
March 31, 2009

Liquidity. During 2008, significant attention was paid to companies' liquidity and credit risks. Focus on these risks will likely continue given the current national economic environment. The Company has experienced no significant impacts to its liquidity position from the current credit crisis. Southwest believes its liquidity position remains strong for several reasons. First, Southwest has a $300 million credit facility maturing in May 2012, $150 million of which is designated for working capital needs. The facility is composed of eight major banking institutions. Historically, usage of the facility has been low and concentrated in the first half of the winter heating period when gas purchases require temporary financing. Second, natural gas prices have remained low and beneficial rate mechanisms have resulted in steady gas-cost related operating cash flows. Third, Southwest has no significant debt maturities prior to February 2011. Because of Southwest's strong liquidity position, in December 2008, Southwest was able to take advantage of the current credit market by repurchasing $75 million of IDRBs at a net deferred gain of $14 million.

Credit Ratings. In April 2009, Standard & Poor's Ratings Services ("S&P") upgraded the Company's unsecured long-term debt ratings from BBB- (with a positive outlook) to BBB (with a stable outlook). S&P cited the Company's stronger financial performance due to reduced debt leverage and the recent general rate increase in the Company's Arizona service territory as reasons for the upgrade. The change in credit rating will result in an annualized estimated decrease of $200,000 to $300,000 in interest expense and fees on existing variable-rate debt.

SOUTHWEST GAS CORPORATION Form 10-Q
March 31, 2009





Results of Natural Gas Operations

Quarterly Analysis
                                                         Three Months Ended
                                                              March 31,
                                                         2009            2008
                                                       (Thousands of dollars)
Gas operating revenues                               $    635,106      $ 741,300
Net cost of gas sold                                      395,810        500,699
  Operating margin                                        239,296        240,601
Operations and maintenance expense                         84,662         85,206
Depreciation and amortization                              42,339         40,645
Taxes other than income taxes                              10,111         10,194
  Operating income                                        102,184        104,556
Other income (expense)                                     (1,786 )       (1,526 )
Net interest deductions                                    18,182         21,352
Net interest deductions on subordinated debentures          1,933          1,932
  Income before income taxes                               80,283         79,746
Income tax expense                                         30,431         30,413
  Contribution to consolidated net income            $     49,852      $  49,333

Contribution to consolidated net income from natural gas operations increased $519,000 in the first quarter of 2009 compared to 2008. The improvement in contribution reflects the benefit of lower financing costs partially offset by a slight reduction in operating margin.

Operating margin decreased a net $1 million in the first quarter of 2009 compared to the first quarter of 2008. The positive impacts to margin of rate relief and rate changes were approximately $22 million, consisting of $9 million in Arizona, $1 million of rate relief in California and nearly $12 million related to the return to a seasonal margin methodology in California. As a result of weather-related usage variations in Arizona, new margin from rate relief during the first quarter was approximately $3 million to $4 million less than expected. Differences in heating demand, caused primarily by weather variations, negatively impacted operating margin by approximately $17 million as overall temperatures in the current quarter were significantly warmer than normal ($13 million), while temperatures were somewhat colder than normal ($4 million) in the first quarter of 2008. Energy efficiency and conservation resulting from the sluggish economy negatively impacted operating margin by an estimated $6 million. Customer growth had a negligible positive impact as only 2,000 net new customers were added during the last twelve months.

Operations and maintenance expense decreased $544,000, or one percent, principally due to labor efficiencies associated with cost containment efforts.

Depreciation expense increased $1.7 million, or four percent, as a result of additional plant in service. Average gas plant in service for the current period increased $215 million, or five percent, compared to the corresponding period a year ago. This was attributable to the upgrade of existing operating facilities and the expansion of the system to accommodate customer growth.

Net financing costs decreased $3.2 million between the first quarters of 2009 and 2008 primarily due to lower average debt outstanding, including the redemption of $75 million of long-term debt in December 2008, and reduced interest rates associated with Southwest's commercial credit and other variable-rate facilities.

SOUTHWEST GAS CORPORATION Form 10-Q
March 31, 2009





Twelve-Month Analysis
                                                         Twelve Months Ended
                                                              March 31,
                                                        2009            2008
                                                       (Thousands of dollars)
Gas operating revenues                               $ 1,685,201     $ 1,829,051
Net cost of gas sold                                     951,088       1,092,682
  Operating margin                                       734,113         736,369
Operations and maintenance expense                       338,116         331,879
Depreciation and amortization                            168,031         159,205
Taxes other than income taxes                             36,697          37,280
  Operating income                                       191,269         208,005
Other income (expense)                                   (13,729 )         1,948
Net interest deductions                                   79,926          86,640
Net interest deductions on subordinated debentures         7,730           7,728
  Income before income taxes                              89,884         115,585
Income tax expense                                        35,618          42,386
  Contribution to consolidated net income            $    54,266     $    73,199

Contribution to consolidated net income from natural gas operations decreased $18.9 million in the current twelve-month period compared to the same period a year ago. The decline in contribution was primarily caused by lower other income, higher operating expenses, and lower operating margin, partially offset by reduced financing costs.

Operating margin decreased a net $2 million between periods. Rate relief and rate changes provided approximately $25 million of operating margin, consisting of $11 million in Arizona, $2 million of rate relief in California and nearly $12 million related to the return to a seasonal margin methodology in California. Modest customer growth contributed $4 million. Differences in heating demand caused primarily by weather variations between periods resulted in an estimated $21 million operating margin decrease as warmer-than-normal temperatures were experienced during both periods (during the twelve-month period of 2009, operating margin was negatively impacted by $28 million, while the negative impact in the twelve-month period of 2008 was $7 million). Energy efficiency and conservation resulting from current economic conditions negatively impacted operating margin by an estimated $10 million.

Operations and maintenance expense increased $6.2 million, or two percent, principally due to the impact of general cost increases. Labor efficiencies, primarily from the conversion to electronic meter reading and other cost containment efforts, mitigated the increase in operations and maintenance expense.

Depreciation expense increased $8.8 million, or six percent, as a result of additional plant in service. Average gas plant in service for the twelve-month period of 2009 increased $232 million, or six percent, compared to the twelve-month period of 2008. This was attributable to the upgrade of existing operating facilities and the expansion of the system to accommodate customer growth.

Other income decreased $15.7 million between the twelve-month periods of 2009 and 2008. This was primarily due to negative returns on COLI policies in the current period ($11.5 million) compared to negative returns in the prior period ($945,000) and a $2.1 million reduction in interest income between the twelve-month periods primarily due to the recovery of previously deferred purchased gas cost receivables.

Net financing costs decreased $6.7 million between the twelve-month periods of 2009 and 2008 primarily due to lower average debt outstanding and reduced interest rates associated with Southwest's commercial credit and other variable-rate facilities.

SOUTHWEST GAS CORPORATION Form 10-Q
March 31, 2009

Results of Construction Services

Contribution to consolidated net income from construction services for the first quarter of 2009 increased $310,000 compared to the same period of 2008. The improvement was primarily due to lower costs and increased gains on equipment sales between periods. Gains on sales of equipment were $1.1 million in the first quarter of 2009 and $705,000 in the first quarter of 2008.

Revenues decreased $17.6 million due primarily to a reduction in new construction work. The reduced workload resulted in a corresponding decrease in construction expenses ($17.5 million). Interest expense also decreased between periods due to a reduction in long-term borrowings.

Contribution to consolidated net income from construction services for the twelve-month period of 2009 decreased $1.9 million compared to the same period of 2008. This decrease was due primarily to a reduction in the volume of new construction work. Higher fuel cost and fuel-related expenses in the second and third quarters of 2008 also contributed to the decrease in net income. Gains on sales of equipment were $2.4 million in the twelve-month period of 2009 and $2 million in the twelve-month period of 2008.

Revenues decreased $7.1 million due primarily to a reduction in the volume of higher-margin new construction work resulting from the general slow down in the new housing market. New construction work has been largely replaced by infrastructure maintenance and improvement work, which generally yields lower profit margins. There was also a decrease in the amount of work from existing blanket contracts. Construction expenses decreased $5.1 million due primarily to the reduction in construction work, partially offset by the higher fuel and fuel-related expenses noted above.

NPL's revenues and operating profits are influenced by weather, customer requirements, mix of work, local economic conditions, bidding results, and the equipment resale market. Generally, revenues and profits are lowest during the first quarter of the year due to unfavorable winter weather conditions. Operating results typically improve as more favorable weather conditions occur during the summer and fall months.

Rates and Regulatory Proceedings

California General Rate Cases. Effective January 2009 Southwest received general rate relief in California. The California Public Utilities Commission ("CPUC") decision authorized an overall increase of $2.8 million in 2009 with an additional $400,000 deferred to 2010. In addition, attrition increases were approved to be effective for the years 2010-2013 of 2.95% in southern and northern California and $100,000 per year for the South Lake Tahoe rate jurisdiction. The CPUC also authorized a return to a seasonal margin methodology which will result in significant quarterly swings in reported operating margin (2009 versus 2008). In addition to the comparative operating margin increase of $12.8 million recognized in the first quarter of 2009, a decrease of $2 million in the second quarter, a decrease of $9 million in the third quarter, and an increase of $1 million for the fourth quarter of 2009 are expected. The CPUC also authorized lower depreciation rates which will reduce annualized depreciation expense by $3 million.

Nevada General Rate Case. Southwest filed a general rate application with the Public Utilities Commission of Nevada ("PUCN") in April 2009 requesting an increase in authorized operating revenues of $28.8 million, or 5.9 percent in the Company's southern Nevada rate jurisdiction and $1.7 million, or 1.4 percent in the northern Nevada rate jurisdiction, with an expected effective date of November 2009. The Company is also seeking to implement a decoupled rate structure based on recently established PUCN regulations that will help stabilize operating margin and allow the Company to more aggressively pursue customer conservation opportunities through implementation of substantive conservation and energy efficiency programs. Southwest's last general rate increase occurred in 2004.

FERC General Rate Case. Paiute Pipeline Company, a subsidiary of the Company, filed a general rate case with the Federal Energy Regulatory Commission ("FERC") in February 2009. The filing fulfills an obligation from the settlement agreement reached in the 2005 Paiute general rate case. The application requests an increase in operating revenues of approximately $3.9 million. New rates are anticipated to go into effect subject to refund within 180 days of filing.

SOUTHWEST GAS CORPORATION Form 10-Q
March 31, 2009

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- and under-collections. At March 31, 2009, over-collections in California and Southern Nevada resulted in a liability of $25.5 million and under-collections in Arizona and Northern Nevada resulted in an asset of $5.8 million on the Company's balance sheets. 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 income statement components. These include Gas operating revenues, Net cost of gas sold, Net interest deductions, and Other income (deductions).

As of March 31, 2009, December 31, 2008, and March 31, 2008, Southwest had the following outstanding PGA balances receivable/(payable) (millions of dollars):

                   March 31, 2009       December 31, 2008       March 31, 2008
Arizona           $            4.3     $              (9.6 )   $           12.6
. . .