TO: Editors, News Directors

DATE: January 30, 2002

FOR: Immediate Release

Consumer to See Lower Gas Bills from Two Companies

PHOENIX - The Arizona Corporation Commission acted yesterday to reduce natural gas bills for customers of Southwest Gas and Black Mountain Gas Company's Cave Creek Division. The Commission eliminated surcharges that earlier were placed on bills to offset the sharp increases in the commodity cost of natural gas.

Southwest Gas customers will save about 5 percent on a typical residential bill. Customers of Black Mountain Gas Company's Cave Creek Division - which had a higher surcharge - will see an average decrease of approximately 14 percent on the typical residential bill. The Commission action takes effect February 1 or in the company's next billing cycle.

At the time the Commission approved the surcharges, natural gas prices were very high and it was uncertain what the price of natural gas would be during the winter of 2001-2002. Natural gas is traded on the commodity markets and prices cycle from highs to lows like other commodities such as oil, coal or gold. When companies have to pay sharply higher prices to buy the gas for their customers, companies can request a temporary surcharge until prices normalize.

It is important to note that gas companies are not allowed to make a profit on the cost of natural gas. Customers pay the gas company for the fuel they use on a dollar-for-dollar basis. A company earns a rate of return based on the costs of delivering gas to customers. The cost of putting the pipe in the ground, maintaining the meters, having crews available to respond at a moment's notice to an emergency, training and all other expenses are examined during a rate case.

The savings from the elimination of the surcharge should be welcome news to Arizona customers. Several customers have called the Commission after receiving high bills in December. Three factors caused higher than usual gas bills in December:

· Cold weather - December had 10 times the number of heating degree days as November. November was atypically warm while considerably lower December temperatures required the use of heat 10 times more often.

· Gas costs - Again, there was a huge spike in the cost of gas over the past 12 to 18 months. While gas prices are trending lower, the gas companies are still recouping money from ratepayers through a 12-month rolling average and surcharges. Arizona gas utilities use a 12-month rolling average. The Commission monitors this rolling average rate to help even out the highs and lows on the commodity market and insulate the consumer from monthly price spikes.

· Rate increase - The Arizona Corporation Commission approved a slight rate increase for Southwest Gas customers in October 2001. The company had requested an increase of $37.1 million but after more than a year of analysis, the Commission cut it to $21.6 million. The resulting increase is approximately $1.66 more on summer bills and $3.46 on typical winter bills.

A combination of lower gas costs and the removal of these surcharges will result in immediate savings to customers. The Arizona Corporation Commission continues to monitor gas prices and trends to determine if it can take other steps to reduce costs to consumers.