Southwest Gas Holdings, Inc. (SWX)

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Southwest Gas Holdings is a holding company that owns all of the shares of common stock of Southwest Gas; until April 22, 2024, all of the shares of common stock of Centuri; and until February 14, 2023, all of the shares of common stock of MountainWest (February 14, 2023 is the date on which the MountainWest sale closed).

Our business includes Southwest Gas, which is engaged in the business of purchasing, distributing, and transporting natural gas for customers in portions of Arizona, Nevada, and California. Southwest Gas is the largest regulated distributor of natural gas in Arizona and Nevada, and also distributes and transports natural gas for customers in portions of California. Additionally, through its subsidiaries, Southwest Gas operates two regulated interstate pipelines serving portions of Nevada and California. Southwest Gas makes investments in infrastructure to support customer demand associated with population growth and economic development activity and the safe and reliable operation of its system through adherence to integrity management programs.

As of December 31, 2024, Southwest Gas had approximately 2,258,000 residential, commercial, industrial, and other natural gas customers, of which 1,210,000 customers were located in Arizona, 841,000 in Nevada, and 207,000 in California. First-time meter sets were approximately 41,000 in 2024 of which 23,000 were located in Arizona, 17,000 in Nevada, and 1,000 in California; compared to 40,000 in 2023 of which 24,000 were located in Arizona, 15,000 in Nevada, and 1,000 in California. Residential and commercial customers represented over 99% of the total customer base. During 2024, 53% of operating margin (gas operating revenues less the net cost of gas sold) was earned in Arizona, 35% in Nevada, and 12% in California. During this same period, Southwest Gas earned 85% of its operating margin from residential and small commercial customers, 4% from other sales customers, and 11% from transportation customers. These general patterns are expected to remain materially consistent for the foreseeable future.

Southwest Gas recognizes operating revenues from the distribution and transportation of natural gas (and related services) to customers. Operating margin is a financial measure defined by management as Regulated operations revenues less the net cost of gas sold. However, operating margin is not specifically defined in U.S. GAAP. Thus, operating margin is considered a non-GAAP measure. Management uses this financial measure because Regulated operations revenues include the net cost of gas sold, which is a tracked cost that is passed through to customers without markup under PGA mechanisms. Fluctuations in the net cost of gas sold impact revenues on a dollar-for-dollar basis, but do not impact operating margin or operating income. Therefore, management believes operating margin provides investors and other interested parties with useful and relevant information to analyze Southwest Gas’ financial performance in a rate-regulated environment. The principal factors affecting changes in operating margin are general rate relief (including impacts of infrastructure program recoveries) and customer growth. Public utility commission decisions on the amount and timing of relief may impact our earnings. Refer to the Summary Operating Results table below for a reconciliation of gross margin to operating margin, and refer to Rates and Regulatory Proceedings in this Management’s Discussion and Analysis for details of various rate proceedings.

The demand for natural gas is seasonal, with greater demand in the colder winter months and decreased demand in the warmer summer months. All of Southwest Gas’ service territories have decoupled rate structures (alternative revenue programs), which are designed to eliminate the direct link between volumetric sales and revenue, thereby mitigating the impacts of weather variability and conservation on operating margin, allowing Southwest Gas to pursue energy efficiency initiatives. Nearly all of our customers, and resulting revenue and margin, are included as part of mechanisms that reduce the impact of weather and volume variability on our earnings.

Consistent with the Company’s earlier determination to simplify the Company’s portfolio of businesses, the Company determined it would pursue a separation of Centuri, including forming a new independent publicly traded utility infrastructure services company. In April 2024, the Company and Centuri announced the completion of an IPO of Centuri’s common stock, with the issuance of 14,260,000 shares ($0.01 par value) at a price of $21.00 per share, along with a concurrent private placement of 2,591,929 shares, at a price equal to the IPO price, with Icahn Partners LP and Icahn Partners Master Fund LP, investment entities associated with Carl C. Icahn. The Company owns approximately 81% of Centuri following these events. Through the first quarter of 2024 and leading up to the Centuri IPO, it was a wholly owned subsidiary of the Company. The net proceeds to Centuri from the IPO and the concurrent private placement totaled approximately $328 million, including optional purchase of IPO shares from underwriters. The Company intends to fully dispose of its ownership in Centuri in one or more disposition transactions, including by way of sales of our shares of Centuri common stock, one or more exchange offers for Company shares, or distributions, or any combination thereof.

Centuri is a strategic infrastructure services company that partners with regulated utilities to build and maintain the energy network that fuels millions of homes and businesses across the U.S. and Canada. With a commitment to serve as long-term

partners to customers and communities, Centuri’s employees enable regulated utilities to safely and reliably deliver natural gas and electricity, as well as achieve their goals for environmental sustainability. Centuri operates in 87 primary locations across 45 U.S. states and two Canadian provinces. Centuri operates in the U.S., primarily as NPL, Neuco, Linetec, and Riggs Distler, and in Canada, primarily as NPL Canada.

Utility infrastructure services activity can be impacted by changes in infrastructure replacement programs and capital budgets of utilities, weather, and local and federal regulation (including tax rates and incentives). Utilities continue to implement or modify system integrity management programs to enhance safety pursuant to federal and state mandates. These programs have resulted in multi-year utility system replacement programs throughout the U.S. Likewise, there has been similar attention placed on electric grid modernization through national infrastructure legislation and related initiatives. Generally, Centuri revenues are lowest during the first quarter of the year due to less favorable winter weather working conditions. Revenues typically improve as more favorable weather conditions occur during the summer and fall months. In cases of severe weather, such as following a regional storm, Centuri may be engaged to perform restoration activities related to above-ground utility infrastructure, and related results impacts are not solely within the control of management. In addition, in certain circumstances, such as with large bid contracts (especially those of a longer duration), or unit-price contracts with revenue caps, results may be impacted by differences between costs incurred and those anticipated when the work was originally bid. Work awarded, or failing to be awarded, by individual large customers can impact operating results.

All of our businesses may be impacted by economic conditions that impact businesses generally, such as inflationary impacts on goods and services consumed in the business, rising or sustained high interest rates, labor markets and other costs (including in regard to contracted or professional services), and the availability of those resources. Certain of these impacts may be more predominant in certain of our operations, such as with regard to fuel costs for work equipment and skilled/trade labor costs at Centuri.

Executive Summary

The items discussed in this Executive Summary are intended to provide an overview of the results of the Company’s, Southwest Gas’, and Centuri’s operations and are covered in greater detail in later sections of management’s discussion and analysis.

Summary Operating Results

Overview

Southwest Gas Holdings:

•Completed the Centuri IPO with net proceeds of $328 million used primarily to repay amounts under Centuri’s term loan and revolving credit facility

•Finished the year with more than $360 million of cash on a consolidated basis given recovery of earlier under-recovered PGA balances; the Company continues to expect limited capital markets needs through the end of 2025

•Extended the $550 million term loan credit agreement, which now matures on July 31, 2025, with a 17.5 basis point reduction in the applicable spread

•Corporate and administrative expenses include $44 million in interest expense related to borrowings and $8.2 million in Centuri separation costs, offset by certain tax benefits

Natural gas distribution:

•41,000 first-time meters sets (1.8% growth rate) added over the past 12 months

•Operating margin increased $73 million, or 6%, between 2024 and 2023, including Arizona and Nevada rate relief, California attrition adjustments, and Great Basin rates effective September 2024 (subject to refund)

•Operations and Maintenance expenses were relatively flat between periods, reflecting cost discipline

•Replaced the existing $400 million revolving credit facility, extending the maturity from 2025 to 2029

•Finished the year with over $300 million of cash, following the collection of previously deferred purchased gas costs

•$847 million capital investment in 2024

Utility infrastructure services:

•Revenues of $2.6 billion in 2024, a decrease of $262 million, or 9%, compared to 2023

•Operating income of $86.8 million in 2024, a decrease of $49.6 million, compared to 2023

•Paid down $316 million of debt from proceeds of the Centuri IPO

•Acquired the remaining interest in Linetec previously held by noncontrolling parties

•Entered into an accounts receivable securitization facility

•Capital allocation discipline and efficient asset utilization resulted in reductions in depreciation expense

This section of Form 10-K provides comparisons of 2024, 2023, and 2022 results and pertinent components indicated by segment. Also provided is a discussion of 2024 and 2023, including comparisons between those years. Discussion of 2022 items and year-to-year comparisons between 2023 and 2022, which are not included in this Form 10-K, can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Results of Natural Gas Distribution

2024 vs. 2023

Contribution to consolidated net income from natural gas distribution operations increased $19 million between 2024 and 2023. The increase was primarily due to an increase in Operating margin, offset by increases in Operations and maintenance expense, Net interest deductions, and Depreciation and amortization.

Operating margin increased $73 million between years. Customer growth provided approximately $12 million as 41,000 first-time meter sets were added in 2024, and combined rate relief across all our service territories added approximately $66 million of incremental margin. Favorable impacts ($9.2 million, combined) were also realized in connection with certain rate components of infrastructure trackers and the Nevada variable interest rate expense mechanism. Furthermore, late fee assessments on customer account balances provided approximately $3 million in incremental margin. Offsetting these increases was a decrease in recoveries associated with regulatory programs, totaling $6.8 million for which an associated comparable decrease is also reflected in amortization expense (discussed below). In addition, certain immaterial out-of-period corrections occurred in both 2023 and 2024 resulting in an unfavorable variance between comparative periods, primarily driven by an $8 million favorable adjustment in 2023. Customary gas used in operations (the effects of which are offset in Operations and Maintenance expense) also reduced operating margin ($4 million).

Operations and maintenance expense increased $9 million, or 2%, between 2024 and 2023. The increase was primarily driven by general cost increases in benefit, incentive, and pension related costs, and leak survey and line locating costs, partially offset by contractor and professional services costs (the majority of which related to utility optimization consulting fees in 2023). Both periods exclude costs attributable to construction that are part of Net regulated operations plant, and costs that would otherwise be expensed but are instead permissible to be deferred into regulatory assets (e.g., incremental leak survey costs in Nevada).

Depreciation and amortization expense increased $8 million, or 3%, between years including due to a $720 million, or 7%, increase in average gas plant in service in the current year. The increase in gas plant was attributable to pipeline capacity reinforcement work, franchise requirements, scheduled pipe replacement activities, and new infrastructure. This increase was offset by a decrease in amortization of regulatory account balances of $6.8 million as noted above.

Other income decreased $16 million between 2024 and 2023, primarily due to a decline of $17.2 million in interest income compared to the prior year, related to a reduction in carrying charges associated with regulatory account balances, notably, PGA balances, which decreased from an asset balance of $553 million as of December 31, 2023 to a net liability balance of $228 million as of December 31, 2024. Interest income is earned when these balances are in asset positions and interest expense is incurred when balances are in liability positions.

Net interest deductions increased $12 million between 2024 and 2023 primarily due to the impacts of surcharges/surcredits and deferral activity related to a regulatory mechanism associated with interest on Southwest Gas’ industrial development revenue

bonds. Interest also increased due to amounts incurred on the over-collected PGA balance. Additionally contributing to the increase was a lower level of debt-related AFUDC, which had the impact of increasing interest expense on a relative basis in 2024.

Results of Utility Infrastructure Services

2024 vs. 2023

Consolidated results from utility infrastructure services decreased $32.7 million in 2024 compared to 2023. Results in the current year were negatively impacted by lower MSA volumes driven in large part by budgetary challenges faced by key customers, a decline in offshore wind work due to the conclusion of several projects during the current year, and timing of bid projects.

Utility infrastructure services revenue decreased $262 million, or 9%, in 2024 when compared to the prior-year, driven primarily by decreased gas utility infrastructure services revenues of $133.8 million and decreased electric utility infrastructure services revenues of $128.3 million. The decrease in gas utility infrastructure services revenues was primarily due to a reduction in net volumes under existing customer MSAs stemming primarily from delayed or unfavorable regulatory decisions faced by key customers and timing of bid projects, and the prior year benefited from the commencement of a large project that was substantially complete in 2023. The decrease in electric utility infrastructure services revenues was primarily due to a decrease in offshore wind revenues of $114.4 million due to project conclusion, as well as a reduction in net volumes under existing customer MSAs, partially offset by an increase in emergency restoration services revenue of approximately $50.3 million. Centuri revenues from contracts with Southwest Gas totaled $106.8 million in 2024 and $116.4 million in 2023. Centuri accounts for services provided to Southwest Gas at contractual prices.

Utility infrastructure services expenses decreased $202.3 million, or 8%, in 2024 due primarily to lower volume of infrastructure services provided. Subcontractor costs decreased during 2024 compared to the prior-year primarily due to decreased work under offshore wind projects and changes in mix of work. Project margin in 2024 decreased primarily due to lower margins on bid work (the prior year benefited from a highly profitable bid that did not recur in the current year); decreased volumes on MSAs leading to underutilization of fixed costs; and unfavorable changes in the mix of work. Included in total Utility infrastructure services expenses were general and administrative costs, which decreased approximately $1.1 million between years. Gains on sale of equipment in 2024 and 2023 (reflected as an offset to Utility infrastructure services expenses) were approximately $3.6 million and $4.5 million, respectively.

Depreciation and amortization expense decreased $10.1 million between periods, primarily due to a number of small tools within electric utility infrastructure services operations becoming fully depreciated in 2023 and not requiring replacement based on project needs. Additionally, more efficient utilization of existing fixed assets in recent periods has slowed the growth of the depreciable asset base, with capital expenditures of $99.3 million, $106.6 million, and $130.2 million in 2024, 2023 and 2022, respectively.

The decrease in net interest deductions of $7 million was primarily due to activity with regard to Centuri’s debt balance. This activity included repayment, in concert with proceeds received from the Centuri IPO and private placement, of $156 million under Centuri’s revolving credit facility and $160 million under its term loan facility. Centuri also paid down an additional $100 million in debt under its term loan facility with proceeds from its accounts receivable securitization facility. Amounts

under the revolving portion of the credit facility are available to be re-borrowed, with such activity partially offsetting the impacts.

Income tax expense decreased $11 million between years, primarily due to a decrease in pre-tax income in 2024, and also reflects other impacts, including expenditures that are not deductible for tax purposes.

Rates and Regulatory Proceedings

Southwest Gas is subject to the regulation of the ACC, the PUCN, the CPUC, and two of Southwest Gas’ subsidiaries are subject to regulation by the FERC.

General Rate Relief and Rate Design

Rates charged to customers vary according to customer class and rate jurisdiction and are set by the individual state and federal regulatory commissions that govern Southwest Gas’ service territories. Southwest Gas makes periodic filings for rate adjustments as the cost of providing service (including the cost of natural gas purchased) changes, and as additional investments in new or replacement pipeline and related facilities are made. Rates are intended to provide for recovery of all commission-approved costs and a reasonable return on investment. On their own, the mix of fixed and variable components in rates assigned to various customer classes (rate design) can significantly impact the operating margin actually realized by Southwest Gas. Management has worked with its regulatory commissions in designing rate structures that support the timely recovery of our costs, including returns to investors, in providing safe, affordable, and reliable service to its customers while mitigating volatility in prices to customers and stabilizing returns to investors. Such rate structures were in place in all of Southwest Gas’ operating areas during all periods for which results of natural gas distribution operations are disclosed above.

Arizona Jurisdiction

Arizona General Rate Case. Southwest Gas filed its 2024 Arizona rate case application in February 2024, proposing an increase in revenue of approximately $126 million to reflect the continued significant capital investments in the state and to update rates to more closely align with Southwest Gas’ current level of operations and maintenance expense. The request includes a return on common equity of 10.15% and a 0.81% fair value increment, relative to a 50% target equity ratio and a proposed twelve-month post-test year plant adjustment for otherwise non-revenue producing plant. In addition to proposing the continuation of full revenue decoupling under the DCA mechanism, Southwest Gas also proposed to set the carrying cost for the interest component of the DCA and GCBA rate adjustment mechanisms to equal the Commission-authorized Weighted Average Cost of Capital, and to establish a UGCE, which represents the gas cost-related portion of net write-offs of uncollectible customer accounts. The UGCE would allow Southwest Gas timelier recovery of the portion of net write-off accounts that relate to purchased gas cost. Hearings were held in November 2024 and a final ACC decision is anticipated with rates to become effective early in the second quarter 2025.

Initially included as part of the rate case application, Southwest Gas proposed the establishment of the SIM mechanism, a capital tracker designed to support required code and regulatory-related infrastructure replacements in Arizona, which was subsequently bifurcated from the rate case application. A hearing on this issue is expected in May 2025 with a final decision anticipated in the fourth quarter 2025.

Delivery Charge Adjustment. The DCA, or Arizona decoupling mechanism, as noted above, includes a filing each April, which along with other reporting requirements, contemplates a rate to return/recover the over- or under-collected margin tracker (decoupling mechanism) balance. The most recent filing was made in April 2024 to request a rate to address the over-collected balance of $17.5 million existing as of March 31, 2024. The requested rate to return the over-collected balance was approved and new rates became effective August 1, 2024. The next filing is anticipated to be made no later than April 30, 2025, and will address the balance at the end of the first quarter 2025.

Tax Reform. A TEAM was approved in Southwest Gas’ 2019 general rate case to timely recognize tax rate changes resulting from federal or state tax legislation following the TEAM implementation. In addition, the TEAM tracks and returns/recovers the revenue requirement impact of changes in amortization of EADIT, including that which resulted from 2017 U.S. federal tax reform, compared to the amount authorized in the most recently concluded rate case. Following the inaugural surcredit rate establishment under the TEAM mechanism in December 2022, Southwest Gas filed subsequent TEAM rate applications, including a recent filing, which proposes to update the TEAM surcharge to recover approximately $5.2 million resulting from changes related to the amortization of EADIT. The existing surcredit rate became effective June 1, 2024, and the proposed surcharge rate is anticipated to become effective June 1, 2025.

PGA Modification. On March 1, 2023, Southwest Gas filed a request to adjust the interest rate applicable to the outstanding PGA balance to more closely match the interest expense incurred to finance the balance. In the alternative, the filing requested an expansion of the current GCBA adjustment to clear the balance then existing. In July 2023, the ACC approved an increase to the GCBA rate (over a two-year period) effective August 1, 2023, to support the timely recovery of the approximately

$358 million balance as of May 31, 2023. The increased GCBA rate was authorized to remain in place for up to two years or until the balance dropped below $10 million. The GCBA rate was set to $0.00 per therm, effective October 1, 2024, and has since transitioned to a credit rate consistent with the current over-collected balance. Ongoing deferred energy rates, separate from the GCBA rate, continue to be updated monthly.

Nevada Jurisdiction

Nevada General Rate Case. Southwest Gas filed its most recent general rate case in September 2023 based on the test year ended May 2023. The initial request was updated with a certification filing primarily for plant placed in service and incremental annual leak survey costs through November 2023. Those updates resulted in an updated overall request of approximately $74 million, an increase over the initial request of $69.8 million. A stipulation was reached with Regulatory Operations Staff and the Bureau of Consumer Protection, settling certain issues and agreeing to a black box settlement with a statewide increase of $65.6 million, prior to any adjustments related to the cost of capital. Following a hearing on cost of capital issues, the PUCN issued a decision approving an annual increase in revenues of $59 million, approving the proposed settlement, and authorizing a return on common equity of 9.5%, including the use of a hypothetical capital structure of 50% debt and 50% equity. Included in the settled items were: a continuation of full revenue decoupling; authority to continue tracking incremental annual leak survey costs in a regulatory asset; and refreshed depreciation rates somewhat lower than those proposed. New rates became effective in April 2024.

General Revenues Adjustment. The GRA, or Nevada decoupling mechanism, was affirmed as part of Southwest Gas’ most recently concluded general rate case and adjustments are included in the ARA filings intended to update rates to recover/return amounts associated with various regulatory mechanisms, including the GRA. Recovery of rates and adjustments thereto as part of the ARA primarily impact cash flows, but not net income overall. Rates for the GRA and other regulatory mechanisms relating to the November 2023 ARA filing became effective May 1, 2024, earlier than the typical July 1 effective date. The most recent ARA filing was made in November 2024, considering balances as of September 30, 2024. Updated rates are anticipated July 1, 2025.

Line Locate Activity Expenses Application. Southwest Gas filed an application with the PUCN for authority to establish regulatory accounting treatment for Line Locate Activity Expenses and to establish the Damage Prevention Cost Mechanism. This would allow Southwest Gas to track the actual level of line locate operation and maintenance expenses and record in a regulatory asset or liability the difference when compared to the operation and maintenance expenses established in the most recent general rate case. Approval to establish the Damage Prevention Cost Mechanism will provide the means to recover or return the accumulated balance of the line locate expenses tracked in the proposed regulatory account. This proposal is made without carrying charges, focusing solely on stemming the financial attrition suffered in between rate cases related to this work. Resolution of this application is anticipated in the third quarter 2025.

California Jurisdiction

California General Rate Case. Southwest Gas filed its most recent general rate case in September 2024 related to a future test year (2026), proposing a statewide revenue increase of approximately $49 million, consisting of a revenue increase of $38.5 million for the southern California rate jurisdiction, an increase of $63,000 for the northern California rate jurisdiction, and an increase of $10.2 million for the South Lake Tahoe rate jurisdiction. The request is based on a capital structure consisting of 50% long-term debt and 50% common equity with a requested return on common equity of 11.35%, a modest increase compared to the 11.16% currently authorized. A continuation of Southwest Gas’ PTY margin attrition adjustment for attrition years 2027 – 2030 is included, as well as continued use of the Automatic Trigger Mechanism in lieu of annual cost of capital filings. Southwest Gas’ filing also includes a risk-based decision-making framework, proposing the continuation of the Targeted Pipe Replacement Program, the Meter Protection Program, and COYL Program, along with the addition of a new Annual Leak Survey Program, collectively under the Infrastructure Reliability and Replacement Adjustment Mechanism umbrella. Authority to establish a Damage Prevention Cost Balancing Account to record and recover (or return) certain costs associated with damage prevention expenses, specifically those related to line locating activities, was also requested. Consolidation of Southwest Gas’ northern California and South Lake Tahoe rate jurisdictions into a single rate-making jurisdiction is also proposed. The rate case will be processed during 2025 with a final decision expected in the fourth quarter of 2025, and new rates expected to be effective in January 2026.

Attrition Filing. Following the 2021 implementation of rates approved as part of the previous general rate case, the continuation of annual PTY margin attrition increases of 2.75% began in January 2022. The most recent annual margin attrition increase was also inclusive of adjustments related to the amortization of EADIT. The cumulative impact resulted in an annual increase of $7.3 million effective January 2025 for Southwest Gas’ combined southern California, northern California, and South Lake Tahoe rate jurisdictions. The PTY increase of $3.6 million associated with the North Lake Tahoe Lateral revenue requirement became effective February 1, 2025.

Service Area Extension. Southwest Gas filed a request to expand its southern California certificated service area, a CPCN, to include the Army’s National Training Center at Fort Irwin, located northeast of Barstow, California. The CPCN was approved by the CPUC in April 2024 and authorizes Southwest Gas to construct approximately 21 miles of distribution main pipeline to deliver natural gas service to the newly certificated area of Fort Irwin, which at the time of filing was estimated to cost approximately $38.7 million.

FERC Jurisdiction

General Rate Case. Great Basin, a wholly owned subsidiary of Southwest Gas, filed a notice of a change in rates (pursuant to applicable regulations) on March 6, 2024, requesting that rates for natural gas service subject to the filing be made effective April 6, 2024. The FERC, however, suspended the case for a five-month period, which allowed rates to go into effect, subject to refund, on September 6, 2024. The filing included a request to continue a term-differentiated rate structure which was adopted as part of Great Basin’s previous general rate case, to provide an overall annual revenue increase of approximately $16 million (subsequently updated to $13 million), and a return on equity of 14.05% and 13.05% applicable to each category of shippers, as applicable, and a capital structure of 44% long-term debt and 56% common equity. A primary driver of the proposed increase was approximately $99 million of capital investments, much of which was placed in service by the end of the August 31, 2024 test year. An all-party settlement was reached and filed with the FERC for final consideration in December 2024 and is pending a decision, which is anticipated during the second quarter of 2025. Motion rates, subject to refund, became effective in September 2024, followed by interim rates, which became effective November 1, 2024. The interim rates are the same as the filed settlement rates and will remain in place until a final FERC decision is received. A portion of the rates implemented subject to refund have been appropriately reserved and will be refunded, as necessary, pending the final outcome in the case.

PGA Filings

The rate schedules in all of Southwest Gas’ 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 Gas result in over- or under-collections. Balances are recovered from, or refunded to, customers on an ongoing basis with interest. As of December 31, 2024, over-collections in both the Arizona and Nevada service territories resulted in a liability of approximately $242.3 million and under-collections in California resulted in an asset of approximately $13.9 million on the Company’s and Southwest Gas’ Consolidated Balance Sheets. The substantial reduction in balances between periods in the table below reflects a combination of specific recovery rates in place to collect the build-up of earlier balances as a result of the cost paid for gas in those earlier periods, and recent conditions whereby base rates under the mechanisms have exceeded the cost of recent gas supply purchases by Southwest Gas. See also Deferred Purchased Gas Costs in Note 1 - Background, Organization, and Summary of Significant Accounting Policies.

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 operating margin. However, gas cost deferrals and recoveries can impact comparisons between periods of individual consolidated income statement components. These include Regulated operations revenues, Net cost of gas sold, Net interest deductions, and Other income (deductions).

The following table presents Southwest Gas’ outstanding PGA balances receivable/(payable) at the end of its two most recent fiscal years:

Arizona PGA Filings. In Arizona, Southwest Gas calculates the change in the gas cost component of customer rates monthly (to allow for timely refunds to/recoveries from customers), utilizing a rolling twelve-month average. During 2024, the GCBA continued with a surcharge through September in order to recover the then under-collected balance through the increased rate mechanism. With the recovery of the outstanding under-collected balance, the GCBA transitioned to a small surcredit rate consistent with the over-collected balance at December 31, 2024.

California Gas Cost Filings. In California, a monthly gas cost adjustment, based on forecasted monthly prices, is utilized. Monthly adjustments modeled in this fashion provide the timeliest recovery of gas costs in any Southwest Gas jurisdiction.

Nevada Gas Cost Filings. In November 2024, Southwest Gas filed to adjust its gas cost rates, which consist of two components, the Base Tariff Energy Rate and the Deferred Energy Account Adjustment rate. The new rates associated with the November 2024 filing became effective January 2025 and are intended to address the outstanding balances over a twelve-month period. Gas cost rates otherwise are updated on an ongoing basis quarterly, with changes effective each January, April, July, and October.

Gas Price Volatility and Mitigation

To mitigate price volatility to its customers, Southwest Gas periodically enters into fixed-price term contracts under its volatility mitigation programs for up to 25% of the California jurisdictions’ annual normal weather supply needs and to a limited extent, in the Arizona jurisdiction. For the 2024/2025 heating season, contracts contained in the fixed-price portion of the supply portfolio ranged from approximately $4.18 to approximately $6.53 per dekatherm. In consultation with its regulators, Southwest Gas does not currently plan to make any fixed-price term purchases other than in California, nor to enter into financial swap agreements. Southwest Gas’ natural gas purchases, not covered by fixed-price contracts, are under variable-price contracts with firm quantities, or on the spot market. The contract price for these contracts is either determined at the beginning of each month to reflect the published first-of-month index price, or at market prices based on a published daily price index. In each case, the index price is not published or known until the purchase period begins. Plans with regard to fixed-price portfolios or other hedging programs could change as Southwest Gas monitors conditions and collaborates with regulatory commissions over time.

Pipeline Safety Regulations

Effective January 1, 2023, the PUCN issued an order revising its regulations to require annual leak surveys (previously every three years) of all distribution pipelines transporting natural gas and/or liquefied petroleum in Nevada. In conjunction with this change, the PUCN authorized the establishment of a regulatory asset account to track the incremental cost of compliance related to the new regulation, for consideration in a future general rate case filing.

Effective October 2022, the PHMSA issued final rules that amended the federal pipeline safety regulations applicable to the valve installation and minimum rupture detection standards for gas transmission pipelines. Southwest Gas has integrated the requirements of this new rule into its operating procedures. In addition, in August 2022, PHMSA issued final rules that amended the federal pipeline safety regulations applicable to the integrity management of gas transmission pipelines, effective May 2023. Southwest Gas also integrated the requirements of this new rule into its operating procedures related to repair criteria, integrity management improvements, cathodic protection, management of change, and other gas transmission integrity related amendments.

PHMSA published two significant NPRMs in 2023. The first is the Pipeline Leak Detection and Repair NPRM, which aims to mandate methane emissions reductions through the revision of operations and maintenance procedures for natural gas operators, the promulgation of Advanced Leak Detection equipment, and accelerated leak repair criteria. The final rule was expected to be published in mid-2024; however, this has been delayed to early 2025. Southwest Gas continues to evaluate potential impacts from this NPRM.

The second item, the Safety of Gas Distribution NPRM, resulted from congressional mandates and National Transportation Safety Board recommendations stemming from a 2018 incident in the Merrimack Valley, in Massachusetts. This NPRM was expected to be finalized in late 2024; however, it is uncertain as to when a final rule will be published. The final rule is expected to include provisions that are primarily aimed at mitigating over pressurization incidents, particularly on utilization pressure systems. Southwest Gas does not own or operate any utilization pressure systems, but is monitoring the progress and potential impacts, if any, of this NPRM.

Southwest Gas continues to monitor changing pipeline safety legislation and participates, to the extent possible, in providing public comments and works with industry associations, such as the American Gas Association, in shaping regulatory language associated with these new mandates and reporting requirements. Additionally, management works with state and federal commissions to which Southwest Gas, including its subsidiaries, are subject, to develop customer rates that are responsive to incremental costs of compliance. However, due to the timing of when rates are implemented in response to new requirements, and as additional rules are developed, compliance requirements could impact expenses and the timing and amount of capital expenditures for Southwest Gas.

Capital Resources and Liquidity

Historically, cash on hand and cash flows from operations have provided a substantial portion of cash used in investing activities (primarily construction expenditures and property additions). In recent years, Southwest Gas has undertaken substantial pipe replacement activities to fortify system integrity and reliability, including on an accelerated basis in association with certain gas infrastructure replacement programs. In addition, certain national events, including several major storms in recent years affecting central portions of the U.S., contributed to the periodic run-up in gas supply costs, before commodity

costs significantly dropped following the events. This collective activity necessitated the issuance of both debt and equity securities to supplement cash flows from operations, before cash reserves were replenished at the utility in more recent periods, including from collections under the PGA mechanisms. Southwest Gas Holdings and Southwest Gas’ capitalization strategy is to maintain an appropriate balance of equity and debt to preserve investment-grade credit ratings, which helps minimize interest costs. Investment-grade credit ratings have been maintained by Southwest Gas Holdings and Southwest Gas.

Cash Flows

Southwest Gas Holdings, Inc.:

Operating Cash Flows. Cash flows provided by consolidated operating activities increased $847 million between 2024 and 2023. The increase was primarily driven by the collection of previously deferred purchased gas costs for Southwest Gas. As noted above, in previous periods rates billed to customers for gas supply costs were lower than actual expenditures. These differences were deferred and have since been collected, providing a significant source of available funds in the current period. The PGA balances overall are subject to rate establishment across the year, as discussed earlier, and are now in an overcollected status. The improvement in cash flows between periods also reflects the impacts of other changes, notably in other components of working capital overall, including the timing and amount of accounts receivable/payable and other current asset and liability balances. The increase additionally includes the $125 million proceeds related to Centuri’s Securitization Facility, which was net of an increase in certain receivable balances at Centuri due to the timing of billings and payments (see Note 3 - Revenue).

Investing Cash Flows. Cash flows from investing activities decreased $1.07 billion in 2024 as compared to 2023. The overall change was driven by $1.05 billion in proceeds received in connection with the MountainWest sale (net of cash sold) in 2023, partially offset by proceeds from the sale of other property in 2024. Furthermore, outflows for construction expenditures and property additions were higher in 2024 compared to 2023.

Financing Cash Flows. Cash flows from financing activities increased $524 million in 2024 as compared to 2023. The overall increase was primarily due to activity in 2023, including the repayment ($1.1 billion) in that year of the then remaining balance of the term loan, entered into by Southwest Gas Holdings in connection with the 2021 acquisition of MountainWest and the $225 million Southwest Gas term loan that originated in March 2021, offset by Southwest Gas’ issuance of $300 million in 5.45% senior notes in March 2023 that will mature in 2028, as well as Southwest Gas Holdings proceeds received in April 2023 from a $550 million term loan now maturing in July 2025, in addition to various other borrowing and repayment activity. Net financing activities in 2024 include net proceeds received from Centuri’s April 2024 IPO and private placement ($328 million), with the majority of the proceeds used by Centuri at that time to pay down portions of its revolving credit and term loan facility. Financing cash flows also include Centuri’s redemption of the previously remaining redeemable noncontrolling interest in Linetec for $92 million in 2024 (compared to $40 million of partial redemption in 2023), $125 million payment on Centuri’s term loan with proceeds from the Securitization Facility, in addition to utilization of its credit facility for this and other purposes. The prior year period also included proceeds received from the issuance of Company common stock in an underwritten public offering in March 2023, with no comparable issuance in the current year. Those proceeds were used at that time to pay down Company indebtedness. Other financing cash flows include other borrowings and repayments under the companies’ credit facilities, and an increase in dividends paid between periods due to an increase in the number of outstanding shares.

Corporate and administrative expenses/outflows for Southwest Gas Holdings in 2024 overall primarily include interest paid on outstanding borrowings and costs associated with the Centuri separation.

The capital requirements and resources of the Company generally are determined independently for the individual business segments. Each business segment is generally responsible for securing its own financing sources. However, the holding company may raise funds through stock issuances or other external financing sources in support of each business segment.

Southwest Gas Corporation:

Operating Cash Flows. Cash flows provided by operating activities increased $861 million between 2024 and 2023 primarily attributable to the collection of deferred purchased gas costs (as discussed above), as well as cash flows from other working capital changes overall.

Investing Cash Flows. Cash used in investing activities increased $61 million in 2024 as compared to 2023. While outflows for capital expenditures increased by $85 million in 2024, the increase was partially offset by proceeds from the sale of property for $21.4 million, as well as reduced outflows related to customer advances for construction. See also 2024 Construction Expenditures below.

Financing Cash Flows. Net cash from financing activities decreased $580 million in 2024 as compared to 2023. The decline was primarily due to parent contributions in 2023, with no comparable inflow in 2024. Separately, proceeds were received from $300 million of 5.45% senior notes in 2023, offset by the repayment of a March 2021 term loan that same year. A separate term

loan was both borrowed and repaid during 2023. Outflows for dividend payments increased in 2024 compared to 2023. Other impacts primarily relate to activity under Southwest Gas’ credit facility in 2023. See Note 8 - Debt.

2024 Construction Expenditures

During the three-year period ended December 31, 2024, total gas plant in service increased from $8.9 billion to $10.8 billion, or at an average annual rate of 7%. Replacement, new business, and reinforcement work was a substantial portion of the plant increase during the three-year period. Customer growth also impacted expenditures as Southwest Gas set approximately 122,000 meters during this time, which is reflected in new business.

During 2024, construction expenditures (through cash outlays) for Southwest Gas were $847 million. The majority of these expenditures represented costs associated with replacement of existing transmission and distribution plant to fortify system integrity and reliability, as well as general plant additions. Cash flows from operating activities of Southwest Gas were $1.25 billion, exceeding 2024 construction expenditures and dividend requirements of the natural gas operations segment.

2024 Financing Activity

As of December 31, 2024, the Company had up to $340 million of common stock available for sale under its ATM Program. No issuances have occurred under the ATM Program in 2024.

Net proceeds received under the Dividend Reinvestment and Stock Purchase Plan during 2024 were approximately $9 million, from the issuance of approximately 127,000 shares of Company common stock.

Natural Gas Distribution Segment Construction Expenditures, Debt Maturities, and Financing

Management estimates natural gas distribution segment construction expenditures during the three-year period ending December 31, 2027 will be approximately $2.6 billion. Of this amount, approximately $880 million is expected to be incurred in 2025. Southwest Gas plans to continue to request regulatory support to undertake projects, or to accelerate projects as necessary, for the improvement of system flexibility and reliability, or to expand, where relevant, to unserved or underserved areas. Southwest Gas may expand existing, or initiate new, programs. Significant replacement activities are expected to continue well beyond the next few years. During the three-year period ending December 31, 2027, cash flows from operating activities of Southwest Gas are expected to provide approximately 74% of the funding for gas operations of Southwest Gas and total construction expenditures and dividend requirements. Any additional cash requirements, including construction-related, and any paydown or refinancing of debt, are expected to be provided by credit facilities, equity contributions from the Company, and/or other external financing sources. During the three-year period, Southwest Gas will have $407.5 million of long-term debt maturing. The timing, types, and amounts of any additional external financings will be dependent on a number of factors, including the cost of gas purchases, conditions in the capital markets, timing and amounts of rate relief, timing and amounts of surcharge collections from or amounts returned to customers related to regulatory mechanisms including the PGA, maturities of long-term debt instruments, as well as growth levels in Southwest Gas’ service areas and earnings. External financings could include the issuance of debt securities, bank and other short-term borrowings, and other forms of financing.

Liquidity

Several factors (some of which are out of the control of the Company) that could significantly affect liquidity in future years include: activities from the planned separation of Centuri, variability of natural gas prices, changes in ratemaking policies of regulatory commissions, regulatory lag, customer growth in the natural gas distribution segment, the ability to access and obtain capital from external sources, the level of interest rates, changes in income tax laws, pension funding requirements, inflation, and the level of earnings. Natural gas prices and related gas cost recovery rates, as well as plant investment and ratemaking activities, have historically had the most significant impact on liquidity, aside from the Company’s recent strategic undertakings, including acquisition and disposition activity.

On an interim basis, Southwest Gas defers over- or under-collections of gas costs to PGA balancing accounts. In addition, Southwest Gas uses this mechanism to either refund amounts over-collected or recoup amounts under-collected as compared to the price paid for natural gas during the period since the last PGA rate change went into effect. At December 31, 2024, the balance in the PGA accounts included an under-collection of approximately $13.9 million pertaining to the California jurisdiction and an over-collection of $242.3 million pertaining to Arizona and Nevada. The substantial reduction from the receivable PGA balance existing as of the comparable period in 2023 is also highlighted by the substantial cash balance of $311 million existing as December 31, 2024, which reflects, among other things, customer collections related to the PGA. See PGA Filings for more information.

In April 2023, Southwest Gas Holdings entered into a $550 million Term Loan Credit Agreement that was set to mature in October 2024. The Company utilized a majority of the proceeds to make an equity contribution to Southwest Gas. In August 2024, Southwest Gas Holdings amended its Term Loan agreement, extending the maturity date to July 31, 2025 and changing the interest with reference to SOFR from an applicable margin of 1.300% to 1.125%, among other miscellaneous changes.

Southwest Gas Holdings has a credit facility with a borrowing capacity of $300 million that expires in December 2026. This facility is intended for short-term financing needs. At December 31, 2024, $130 million was outstanding under this facility. The maximum amount outstanding during 2024 occurred during the fourth quarter and was $130 million.

Southwest Gas has a credit facility with a borrowing capacity of $400 million, which was set to expire in April 2025, before it was replaced in August 2024, extending the maturity date to August 2029. Southwest Gas designates $150 million of the facility for long-term borrowing needs and the remaining $250 million for working capital purposes. There was no activity on either the long-term or short-term portions of the existing facility during 2024. As of December 31, 2024, no borrowings were outstanding on the long-term portion of the credit facility (including no borrowings outstanding under the commercial paper program), and no borrowings were outstanding on the short-term portion. The credit facility has been used as necessary to meet liquidity requirements, including temporarily financing under-collected PGA balances, meeting the refund needs of over-collected balances, or temporarily funding capital expenditures. The credit facility has generally been adequate for Southwest Gas’ needs outside of funds raised through operations and other types of external financing.

Southwest Gas has a $50 million commercial paper program. Any issuance under the commercial paper program is supported by the revolving credit facility and, therefore, does not represent additional borrowing capacity. Any borrowing under the commercial paper program is designated as long-term debt. Interest rates for the commercial paper program are calculated at the then current commercial paper rate. At December 31, 2024, there were no borrowings outstanding under this program.

Centuri has a $1.545 billion secured revolving credit and term loan multi-currency facility. The capacity of the line of credit is $400 million with related amounts borrowed and repaid available to be re-borrowed; the term loan portion of the facility has a limit of $1.145 billion. The term loan facility expires on August 27, 2028 and the revolving credit facility expires on August 27, 2026. This multi-currency facility allows the borrower to request loan advances in either Canadian dollars or U.S. dollars. The obligations under the credit agreement are secured by present and future ownership interests in substantially all direct and indirect subsidiaries of Centuri, substantially all of the tangible and intangible personal property of each borrower, certain of their direct and indirect subsidiaries, and all products, profits, and proceeds of the foregoing. Centuri assets securing the facility at December 31, 2024 totaled $2.4 billion. The maximum amount outstanding on the combined facility during 2024 was $1.117 billion, which occurred in the first quarter, at which point $1 billion was outstanding on the term loan facility. As of December 31, 2024, $113.5 million was outstanding on the revolving credit facility, in addition to $706.4 million outstanding on the term loan portion of the facility. Also at December 31, 2024, there was approximately $226 million, net of letters of credit, available for borrowing under the line of credit.

In April 2024, Centuri successfully completed an IPO of 14,260,000 shares of Centuri common stock at a price of $21.00 per share, in addition to a concurrent private placement of 2,591,929 shares at a price equal to the IPO price. The collective net proceeds to Centuri approximated $328 million. Centuri used $316 million of the proceeds to repay amounts outstanding under its revolving credit and term loan facility, with the remainder intended for general corporate purposes. Following the IPO, the Company owns approximately 81% of the outstanding shares of Centuri common stock. The Company intends to fully dispose of its ownership in Centuri in one or more disposition transactions, including by way of sales of the Company’s shares of Centuri common stock, one or more exchange offers for Company shares, or distributions, or any combination thereof.

Credit Ratings

Credit ratings apply to debt securities, which constitute a significant portion of total capitalization, such as bonds, notes, and other debt instruments and do not apply to equity securities such as common stock. Borrowing costs and the ability to raise funds are directly impacted by the credit ratings of the Company. Credit ratings issued by nationally recognized ratings agencies (Moody’s, S&P, and Fitch) provide a method for determining the creditworthiness of an issuer. These credit ratings are a factor considered by lenders when determining the cost of current and future debt for each debt obligor (i.e., generally the better the rating, the lower the cost to borrow funds). The current unsecured long-term debt ratings of the Company and Southwest Gas are considered investment grade, and Centuri’s ratings are considered non-investment grade.

A credit rating, including the foregoing, is not a recommendation to buy, sell, or hold a debt security, but is intended to provide an estimation of the relative level of credit risk of debt securities, and is subject to change or withdrawal at any time by the rating agency. Numerous factors, including many that are not within management’s control, are considered by the ratings agencies in connection with the assigning of credit ratings.

(1)Moody’s debt ratings range from Aaa (highest rating possible) to C (lowest quality, usually in default). A numerical modifier of 1 (high end of the category) through 3 (low end of the category) is included with the rating to indicate the approximate rank of a company within the range.

(2)S&P debt ratings range from AAA (highest rating possible) to D (obligation is in default). The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus “+” or minus “-” sign to show relative standing within the major rating categories.

(3)Fitch debt ratings range from AAA (highest credit quality) to D (defaulted debt obligation). The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating categories.

None of Southwest Gas’ debt instruments have credit triggers or other clauses that result in default if these bond ratings are lowered by rating agencies. Interest and fees on certain debt instruments are subject to adjustment depending on Southwest Gas’ bond ratings. Certain debt instruments are subject to a leverage ratio cap, and the 6.1% Notes due 2041 are also subject to a minimum net worth requirement. At December 31, 2024, Southwest Gas was in compliance with all of its covenants. Under the most restrictive of the financial covenants, approximately $4.1 billion in additional debt could be issued and the leverage ratio requirement would still be met. At least $2.7 billion of cushion in equity relating to the minimum net worth requirement exists at December 31, 2024. No specific limitations as to dividends exist under the collective covenants. None of the debt instruments contain material adverse change clauses.

At December 31, 2024, Southwest Gas Holdings was also in compliance with all of the covenants of its credit facility and Term Loan Credit Agreement. Interest and fees on its credit facility and term loan due July 31, 2025 are subject to adjustment depending on its senior debt ratings. The credit facility and term loan are subject to a leverage ratio cap. Under the most restrictive of the financial covenants, approximately $3.5 billion in additional debt could be issued while still meeting the leverage ratio requirement. No specific limitations as to dividends exist under the collective covenants. The credit facility and term loan agreements do not contain material adverse change clauses.

Certain Centuri debt instruments have leverage ratio caps and interest coverage ratio requirements. At December 31, 2024, Centuri was in compliance with all of its covenants. Under the most restrictive of the covenants, Centuri could issue approximately $151 million in additional debt and meet the leverage ratio requirement. Centuri has approximately $28 million of cushion relating to the minimum interest coverage ratio requirement. Centuri’s revolving credit and term loan facility is secured by underlying assets of the utility infrastructure services segment. Centuri also has restrictions on how much it could give to the Company in cash dividends, which is limited to a calculated available amount, generally defined as 50% of its rolling twelve-month consolidated net income adjusted for certain items, such as parent contributions inflows, Linetec redeemable noncontrolling interest payments, or dividend payments, among other adjustments, as applicable. Under these restrictions and the financial covenants of the amended revolving credit facility, however, Centuri’s ability to pay dividends to the Company is limited. Dividends from Centuri are not customarily relied upon in order for the Company to satisfy dividends declared for its stockholders.

Inflation

Inflation can impact results of operations for each of the Company’s business segments, and while the level of increase has waned over the past year, the level of improvement is only in relation to the multi-decade high inflation in 2022. Labor, employee benefits, fuel, natural gas, professional services, and construction costs are the categories most significantly impacted by inflation. Changes to the cost of gas are generally recovered through PGA mechanisms and do not directly impact earnings overall; indirect impacts primarily result from interest carrying charges on accumulated PGA balances, or through borrowing costs incurred to fund purchases or to repay overcollected PGA balances. Labor, employee benefits, and professional services are components of the cost of service, and gas infrastructure costs are the primary component of utility rate base. In order to

recover increased costs, and earn a fair return on rate base, general rate cases or other procedural filings are made by our regulated operations, when deemed necessary, for review and approval by regulatory authorities. Regulatory lag, that is, the time between the date increased costs are incurred and the time such increases are recovered through the ratemaking process, can negatively impact earnings. See Rates and Regulatory Proceedings for a discussion of recent rate case proceedings.

Contractual Obligations

Our largest contractual obligations as of December 31, 2024 consisted of:

•Debt-related obligations for scheduled principal payments, other borrowings, and interest payments over the life of the debt. Debt obligations are included in our consolidated balance sheets. See Note 8 - Debt for additional information.

•Centuri operating and finance leases are included in our consolidated balance sheets and represent multi-year obligations for buildings, land, equipment, and vehicles. See Note 2 - Regulated Operations Plant and Leases for additional information.

•Southwest Gas has gas purchase obligations that include fixed-price and variable-rate gas purchase contracts. Variable-rate contracts reflect minimum contractual obligations with estimation in pricing based on market information. Actual future variable-rate purchase commitments may vary depending on market prices at the time of delivery and values may change significantly from their estimated amounts. Certain other variable-rate contracts allow for variability in quantities for which associated demand charges are included in the gas purchase obligations based on the maximum daily quantities available under the contracts. As of December 31, 2024, gas purchase obligations of $178 million are payable within the next 12 months.

•Southwest Gas has pipeline capacity and storage contracts for firm transportation service, both on a short- and long-term basis with several companies in all of its service territories, some with terms extending to 2049. Southwest Gas also has interruptible contracts in place that allow additional capacity to be acquired should an unforeseen need arise. Costs associated with these pipeline capacity contracts, similar to gas purchase/supply arrangements, are a component of the cost of gas sold and are recovered from customers primarily through the PGA mechanisms. As of December 31, 2024 pipeline capacity and storage obligations of $88 million are payable within 12 months.

•Other commitments associated with noncancellable obligations consist primarily of software licensing, equipment, outsourced processing subscriptions, and operating and/or maintenance agreements, as applicable.

•Estimated funding for pension and other postretirement benefits during calendar year 2025 is $29 million. Funding amounts for years beyond 2025 are not currently known.

Recently Issued Accounting Standards Updates

The FASB routinely issues ASUs. See Note 1 - Background, Organization, and Summary of Significant Accounting Policies for more information regarding these ASUs and their potential impact on the Company’s and Southwest Gas’ financial position, results of operations, and disclosures.

Application of Critical Accounting Policies and Estimates

A critical accounting policy is one that is very important to the portrayal of the financial condition and results of a company, and requires the most difficult, subjective, or complex judgments of management. The need to make estimates about the effect of items that are uncertain is what makes these judgments difficult, subjective, and/or complex. Management makes subjective judgments about the accounting and regulatory treatment of many items and bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments. These estimates may change as new events occur, as more experience is acquired, as additional information is obtained, and as the operating environment changes. While management may make many estimates and judgments, many would not be materially altered, or provide a material impact to the financial statements taken as a whole, if different estimates, or means of estimation were employed. The following are accounting policies that are deemed critical to the financial statements. For more information regarding significant accounting policies, see notes to the consolidated financial statements.

Regulatory Accounting

Natural gas distribution operations are subject to the specific regulation of the ACC, PUCN, CPUC, or the FERC, as applicable. The accounting policies of the Company and Southwest Gas conform to U.S. GAAP applicable to rate-regulated entities and reflect the effects of the ratemaking process. As such, the Company and Southwest Gas are allowed to defer, as regulatory assets, costs that otherwise would be expensed, if it is probable that future recovery from customers (subject to our rate-regulated operations) will occur. Companies are also permitted to recognize, as regulatory assets, amounts associated with various revenue decoupling mechanisms, as long as the conditions for recognition of alternative revenue programs permitted under U.S. GAAP continue to be met. Management reviews the regulatory assets to assess their ultimate recoverability within the approved regulatory guidelines. If rate recovery is no longer probable, due to competition or the actions of regulators, write-off of the related regulatory asset (which would be recognized as current-period expense) is required. Regulatory liabilities are

recorded if it is probable that revenues will be reduced for amounts that will be refunded to customers through the ratemaking process. The timing and inclusion of costs in rates is often delayed (regulatory lag) and results in a reduction of current-period earnings. Discontinuing the application of this method of accounting for regulatory assets and liabilities or changes in the accounting for our various regulatory mechanisms could significantly increase our operating expenses as fewer costs would likely be capitalized or deferred on the balance sheet, which could reduce our net income. Factors influencing application of this policy include decisions of regulatory authorities, implementation of new regulations or regulatory mechanisms, assessing the probability of the recoverability of deferred costs, and continuing to meet the criteria of a rate regulated entity for accounting purposes. Refer also to Note 5 - Regulatory Assets and Liabilities.

Revenue Recognition - Utility Infrastructure Services

Centuri generally has two types of agreements with its customers: MSAs and bid contracts. Our MSAs and bid contracts are characterized as either fixed-price, unit-price, or T&M-based for revenue recognition purposes. Most of our contracts are considered to have a single performance obligation. Performance obligations related to fixed-price contracts are satisfied over time because our performance typically creates or enhances an asset that the customer controls. For fixed-price contracts, we recognize revenue as performance obligations are satisfied and control of the promised good and/or service is transferred to the customer by measuring the progress toward complete satisfaction of the performance obligation(s) using an input method. Input methods result in the recognition of revenue based on the entity’s effort to satisfy the performance obligation relative to the total expected effort to satisfy the performance obligation. Under the cost-to-cost method, costs incurred to-date are generally the best depiction of the transfer of control. For unit-price and T&M contracts, an output method is used to measure progress towards satisfaction of a performance obligation.

Actual revenue and project costs can vary, sometimes substantially, from previous estimates due to changes in a variety of factors, including unforeseen circumstances not originally contemplated. These factors, along with other risks inherent in performing fixed-price contracts, may cause actual revenue and gross profit for a project to differ from previous estimates and could result in reduced profitability or losses on projects. Changes in these factors may result in revisions to estimates of costs and earnings. Revisions to estimates of costs and earnings during the course of work are reflected in the accounting period in which the facts requiring revision become known. At the time a loss on a contract becomes known or is anticipated, the entire amount of the estimated ultimate loss is recognized in the financial statements. Once identified, these types of conditions continue to be evaluated for each project throughout the project term and ongoing revisions in management’s estimates of contract value, contract cost and contract profit are recognized as necessary in the period determined.

Accrued Utility Revenues

Revenues related to the sale and/or delivery of natural gas are generally recorded when natural gas is delivered to customers. However, the determination of natural gas sales to individual customers is based on the reading of their meters, which is performed on a systematic basis throughout the month. At the end of each month, operating margin associated with natural gas service that has been provided but not yet billed is accrued. This accrued utility revenue is estimated each month based primarily on applicable rates, number of customers, rate structure, analyses reflecting significant historical trends, seasonality, and experience. The interplay of these assumptions can impact the variability of the accrued utility revenue estimates. Additionally, all Southwest Gas rate jurisdictions have decoupled rate structures, limiting variability due to extreme weather conditions.

Accounting for Income Taxes

The Company is subject to income taxes in the U.S. and Canada. Income tax calculations require estimates due to known future tax rate changes, book to tax differences, and uncertainty with respect to regulatory treatment of certain property items. The asset and liability method of accounting is utilized for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Regulatory tax assets and liabilities are recorded to the extent management believes they will be recoverable from, or refunded to, customers in future rates. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Management regularly assesses financial statement tax provisions to identify any change in the regulatory treatment or tax-related estimates, assumptions, or enacted tax rates that could have a material impact on cash flows, financial position, and/or results of operations.

Accounting for Pensions and Other Postretirement Benefits

Southwest Gas has a noncontributory QRP with defined benefits covering substantially all employees hired on or before December 31, 2021. In addition, there is a separate unfunded supplemental retirement plan which is limited to officers hired on or before December 31, 2021. Pension obligations and costs for these plans are affected by the amount and timing of cash contributions to the plans, the return on plan assets, discount rates, and by employee demographics, including age,

compensation, and length of service. Changes made to the provisions of the plans may also impact current and future pension costs. Actuarial formulas are used in the determination of pension obligations and costs and are affected by actual plan experience and assumptions about future experience. Key actuarial assumptions include the expected return on plan assets, the discount rate used in determining the projected benefit obligation and pension costs, and the assumed rate of increase in employee compensation. Relatively small changes in these assumptions (particularly the discount rate) may significantly affect pension obligations and costs for these plans. For example, a change of 0.25% in the discount rate assumption would change the pension plan projected benefit obligation by approximately $35 million and pension expense by $3 million. A change of 0.25% in the employee compensation assumption would change the pension obligation by approximately $10 million and pension expense by $2 million. A 0.25% change in the expected asset return assumption would change the pension expense by approximately $3 million (but would have no impact on the pension obligation). Beginning in 2024, a treasury futures hedging overlay was implemented, intending to dampen the impact of changing discount rates over time, reduce the interest rate sensitivity of the pension plan, and reduce funded ratio volatility. However, there is no guarantee that the mechanism implemented will achieve these intentions.

Given the recent interest rate environment applicable to long-term high-quality corporate bonds, which are utilized by Southwest Gas in selecting a discount rate based on relevant provisions in U.S. GAAP, the discount rate applicable to the pension plan increased from 5.00% (at the end of 2023) to 5.75% as of December 31, 2024. The methodology utilized to determine the discount rate was consistent with prior years. An increase in the discount rate decreases the pension obligation in the current year and expense in the year ahead; funding levels, among other items, are also impactful. During the fourth quarter of 2023, the asset mix was adapted to a balanced portfolio between debt and equity securities. Southwest Gas modestly increased the return on assets expected over the long term to 7.00%, which was supported by available data. The salary escalation assumption was left unchanged at 3.50% given recent and expected salary changes and market conditions over a longer-term horizon. Southwest Gas plans to slightly increase its funding in 2025 compared to 2024, with the intention to provide a strong funded ratio overall for participants, while also striving to avoid a significantly overfunded position in the future. The pension is approximately 95% funded as of December 31, 2024, and due to the foregoing updated conditions, including amortization of actuarial gains/losses, pension expense is expected to be lower in 2025 (by approximately $4.5 million). The funded status improved in 2024 compared to 2023, including impacts from the change in the discount rate, and is forecasted to improve further in the future, using the current assumptions outlined above and management’s funding expectations. However, the funded status and expense levels in the future will continue to be influenced by, as applicable, long-term discount rates, the treasury futures hedging overlay, asset returns, and plan funding by Southwest Gas.

Certifications

The SEC requires the filing of certifications of the CEO and CFO of registrants regarding reporting accuracy, disclosure controls and procedures, and internal control over financial reporting as exhibits to periodic filings. The CEO and CFO certifications for the period ended December 31, 2024 are included as exhibits to this Annual Report on Form 10-K filed with the SEC.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

About Southwest Gas Holdings, Inc.

Southwest Gas Holdings, Inc. is a holding company that owns all of the shares of common stock of Southwest Gas Corporation (“Southwest” or the “natural gas distribution” segment), all of the shares of common stock of Centuri Group, Inc. (“Centuri” or the “utility infrastructure services” segment), and until February 14, 2023, all of the common stock of MountainWest Pipelines Holding Company (“MountainWest” or “pipeline and storage” segment). Southwest Gas Holdings, Inc. and its subsidiaries are collectively referred to as the “Company.”

In December 2022, the Company announced that its Board of Directors (the “Board”) unanimously determined to take strategic actions to simplify the Company’s portfolio of businesses. These actions included entering into a definitive agreement to sell 100% of MountainWest in an all-cash transaction to Williams Partners Operating LLC (“Williams”) for $1.5 billion in total enterprise value, subject to certain adjustments. The MountainWest transaction closed on February 14, 2023.

In December 2023, the Company announced its intent to pursue an initial public offering (the "Centuri Holdings IPO") of newly issued shares of Centuri Holdings, Inc. ("Centuri Holdings"). The Board has determined that the Centuri Holdings IPO is the optimal path to advance the separation of Centuri as an independent utility infrastructure services company to maximize value for stockholders. Centuri Holdings has confidentially submitted a draft Registration Statement on Form S-1 with the U.S. Securities and Exchange Commission (the "SEC"). The execution of the Centuri Holdings IPO is subject to market and other conditions, the completion of the SEC's review process, and final Board approval to proceed with the transaction.

Following the Centuri Holdings IPO, the Company intends to reduce its ownership in Centuri Holdings in one or more disposition transactions, including by way of distributions to Company stockholders, one or more distributions in exchange for Company shares or other securities, a sell-down of its remaining owned shares of Centuri Holdings common stock or any combination thereof. As of December 31, 2023, the Company had a U.S. federal net operating loss carryforward of $1.03 billion, which could be available to offset a taxable gain incurred by the Company in connection with a taxable disposition of the Centuri stock. The Company also retains strategic flexibility to separate Centuri through a tax-free spin-off of all or a part of Centuri in the event market conditions are not conducive to an IPO or secondary sales by the Company following an IPO.

On November 3, 2023, the Board authorized a dividend of one preferred stock purchase right (a “Right”) for each outstanding share of common stock, $1 par value per share, of the Company to stockholders on record at the close of business on November 17, 2023. The description and terms of the Rights are set forth in a Tax-Free Spin Protection Plan, dated as of November 5, 2023 (as may be amended from time to time, the “Plan”), between the Company and Equiniti Trust Company, LLC, as rights agent. Each right entitles the registered holder to purchase from the Company one ten-thousandth of a share of Series A Junior Participating Preferred Stock, no par value per share, of the Company, at a purchase price of $300.00 per one ten-thousandth of a share of Series A Preferred, subject to adjustment. By adopting the Plan, the Board is seeking to preserve the Company’s ability to effectuate a separation of Centuri Holdings that would be tax-free to the Company (the “Tax-Free Status”). The Board believes it is in the best interest of the Company and its stockholders to preserve the Company’s ability to effectuate a spin-off transaction with Tax-Free Status.

Our business includes Southwest, which is engaged in the business of purchasing, distributing, and transporting natural gas for customers in portions of Arizona, Nevada, and California. Southwest is the largest distributor of natural gas in Arizona and Nevada, and distributes and transports natural gas for customers in portions of California. Additionally, through its subsidiaries, Southwest operates two regulated interstate pipelines serving portions of Nevada and California. Southwest makes investments in infrastructure to support customer demand associated with population growth and economic development activity and the safe and reliable operation of its system through adherence to integrity management programs.

As of December 31, 2023, Southwest had 2,226,000 residential, commercial, industrial, and other natural gas customers, of which 1,192,000 customers were located in Arizona, 828,000 in Nevada, and 206,000 in California. First-time meter sets were approximately 40,000 in 2023, compared to 41,000 in 2022. Residential and commercial customers represented over 99% of the total customer base. During 2023, 55% of operating margin (gas operating revenues less the net cost of gas sold) was earned in Arizona, 33% in Nevada, and 12% in California. During this same period, Southwest earned 85% of its operating margin from residential and small commercial customers, 4% from other sales customers, and 11% from transportation customers. These general patterns are expected to remain materially consistent for the foreseeable future.

Southwest recognizes operating revenues from the distribution and transportation of natural gas (and related services) to customers. Operating margin is a financial measure defined by management as Regulated operations revenues less the net cost of gas sold. However, operating margin is not specifically defined in accounting principles generally accepted in the United States (“U.S. GAAP”). Thus, operating margin is considered a non-GAAP measure. Management uses this financial measure

because Regulated operations revenues include the net cost of gas sold, which is a tracked cost that is passed through to customers without markup under purchased gas adjustment (“PGA”) mechanisms. Fluctuations in the net cost of gas sold impact revenues on a dollar-for-dollar basis, but do not impact operating margin or operating income. Therefore, management believes operating margin provides investors and other interested parties with useful and relevant information to analyze Southwest’s financial performance in a rate-regulated environment. The principal factors affecting changes in operating margin are general rate relief (including impacts of infrastructure program recoveries) and customer growth. Commission decisions on the amount and timing of relief may impact our earnings. Refer to the Summary Operating Results table below for a reconciliation of gross margin to operating margin, and refer to Rates and Regulatory Proceedings in this Management’s Discussion and Analysis for details of various rate proceedings.

The demand for natural gas is seasonal, with greater demand in the colder winter months and decreased demand in the warmer summer months. All of Southwest’s service territories have decoupled rate structures (alternative revenue programs), which are designed to eliminate the direct link between volumetric sales and revenue, thereby mitigating the impacts of weather variability and conservation on operating margin, allowing Southwest to pursue energy efficiency initiatives. Nearly all of our customers, and resulting revenue and margin, are included as part of mechanisms that reduce the impact of weather and volume variability on our earnings.

Centuri is a strategic infrastructure services company that partners with regulated utilities to build and maintain the energy network that powers millions of homes and businesses across the U.S. and Canada. With a commitment to serve as long-term partners to customers and communities, Centuri’s employees enable regulated utilities to safely and reliably deliver natural gas and electricity, as well as achieve their goals for environmental sustainability. Centuri operates in 87 primary locations across 45 states and provinces in the U.S. and Canada. Centuri operates in the U.S., primarily as NPL, Neuco, Linetec, and Riggs Distler, and in Canada, primarily as NPL Canada.

Utility infrastructure services activity can be impacted by changes in infrastructure replacement programs of utilities, weather, and local and federal regulation (including tax rates and incentives). Utilities continue to implement or modify system integrity management programs to enhance safety pursuant to federal and state mandates. These programs have resulted in multi-year utility system replacement programs throughout the U.S. Likewise, there has been similar attention placed on electric grid modernization through national infrastructure legislation and related initiatives. The Department of Energy estimates more than 70% of the nation’s grid transmission lines and power transformers are over 25 years old, creating vulnerability exacerbated by seasonal storm and extreme weather events. This, along with continued gas pipeline replacements expected to be necessary across North America, result in management expectations that Centuri will continue to benefit from these collective electric and gas infrastructure replacement programs for the foreseeable future. The amount that may be awarded to Centuri compared to its industry competitors is not presently known. Generally, Centuri revenues are lowest during the first quarter of the year due to less favorable winter weather working conditions. Revenues typically improve as more favorable weather conditions occur during the summer and fall months. In cases of severe weather, such as following a regional storm, Centuri may be engaged to perform restoration activities related to above-ground utility infrastructure, and related results impacts are not solely within the control of management. In addition, in certain circumstances, such as with large bid contracts (especially those of a longer duration), or unit-price contracts with revenue caps, results may be impacted by differences between costs incurred and those anticipated when the work was originally bid. Work awarded, or failing to be awarded, by individual large customers can impact operating results.

All of our businesses may be impacted by economic conditions that impact businesses generally, such as inflationary impacts on goods and services consumed in the business, rising interest rates, labor markets and other costs (including in regard to contracted or professional services), and the availability of those resources. Certain of these impacts may be more predominant in certain of our operations, such as with regard to fuel costs for work equipment and skilled/trade labor costs at Centuri.

Executive Summary

The items discussed in this Executive Summary are intended to provide an overview of the results of the Company’s and Southwest’s operations and are covered in greater detail in later sections of management’s discussion and analysis.

Summary Operating Results

Overview

Southwest Gas Holdings:

•Issued 4.1 million shares of common stock for net proceeds of $238.4 million

•Completed the MountainWest sale and paid down the remaining balance of the term loan used to initially fund the MountainWest acquisition

•Confidentially submitted a draft Registration Statement on Form S-1 to the SEC relating to the Centuri Holdings IPO

•Corporate and administrative expenses include $42.8 million in interest expense related to borrowings and $11.1 million in Centuri separation costs, offset by certain tax benefits

Natural gas distribution:

•40,000 first-time meters sets (1.8% growth rate) added over the past 12 months

•Operating margin increased $107 million, or 9%, between 2023 and 2022

•Arizona rate case finalized with annualized revenue increase of $54 million, effective February 1, 2023

•Received approval to implement an increase in the Gas Cost Balancing Account rate to facilitate timely recovery of ~$358 million in Arizona purchase gas costs effective August 1, 2023

•Filed $70 million general rate case in Nevada in September 2023, and $126 million general rate case in Arizona in February 2024

•$762 million capital investment in 2023

•COLI results increased $15.5 million compared to the prior year

Utility infrastructure services:

•Record revenues of $2.9 billion in 2023, an increase of $139 million, or 5%, compared to 2022

•$86 million storm restoration services revenues in 2023, an increase of $17 million over 2022

•$215 million of revenues from sustainable wind energy projects in 2023 including the first U.S. commercial-scale offshore project to deliver generated electricity to the grid

•Executed a multi-year contract extension of a master services agreement with an existing gas utility customer in Ontario, Canada with anticipated revenues of ~$1 billion over the contract term

This section of Form 10-K provides comparison of 2023, 2022, and 2021 results and pertinent components. Also provided is a discussion of 2023 and 2022 and year-to-date comparisons between those years. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which incorporates by reference the Company’s annual report to stockholders filed as Exhibit 13 to that Annual Report on Form 10-K.

Results of Natural Gas Distribution

2023 vs. 2022

Contribution to consolidated net income from natural gas distribution operations increased $88 million between 2023 and 2022. The increase was primarily due to increases in Operating margin and Other income, offset by increases in Operations and maintenance expense, Net interest deductions, and Depreciation and amortization.

Operating margin increased $107 million between years. Customer growth provided approximately $14 million as 40,000 first-time meter sets were added in 2023, and combined rate relief (primarily in Arizona, as well as benefits of rate relief in Nevada through the first quarter of 2023 and the annual California attrition increase) provided approximately $56 million of incremental operating margin during the current year. Increases in recoveries associated with regulatory programs of $19 million also contributed to the increase; such amounts also increase amortization expense (discussed below). Additionally, an $8 million out-of-period adjusting entry was made in the first quarter of 2023, which reduced Net cost of gas sold (See Basis of Presentation in Note 1 - Background, Organization, and Summary of Significant Accounting Policies). Other increases include margin associated with customers outside the decoupling mechanisms.

Operations and maintenance (“O&M”) expense increased $20 million, or 4%, between 2023 and 2022. Increases occurred throughout the business, including in direct labor ($8 million), external contractor and professional services expenses ($10 million), notably related to a consulting arrangement for the identification, benchmarking, and assessment of utility business optimization opportunities, and for leak survey and line locating activities ($4 million), along with higher incentive compensation expense ($4 million), costs for fuel used in operations ($3 million), and others. Employee benefit costs decreased between periods (approximately $5 million reflected in O&M expense), primarily due to the lower service-related component of postretirement benefit costs offset by increases in employee medical and other costs; these employee benefit costs are part of an overhead/labor loading process for which approximately 80% is included in O&M expense, with the remainder primarily becoming part of capital projects. Legal/claim-related costs were also lower between periods ($7 million).

Depreciation and amortization expense increased $32 million, or 12%, between years including due to a $583 million, or 6%, increase in average gas plant in service in the current year. The increase in gas plant was attributable to pipeline capacity reinforcement work, franchise requirements, scheduled pipe replacement activities, and new infrastructure. An increase in amortization of regulatory account balances of $19 million, as discussed in regard to Operating margin above, also contributed to the increase.

Taxes other than income taxes increased $4.1 million, or 5%, between 2023 and 2022 primarily due to an increase in property taxes in Arizona, and to a lesser extent, in California.

Other income increased $78 million between 2023 and 2022. Interest income increased $35 million compared to the prior year, related to carrying charges associated with the elevated deferred purchased gas cost balance and interest on other regulatory

account balances, with another nearly $2 million associated with the equity portion of the allowance for funds used during construction. Additionally, non-service-related components of employee pension and other postretirement benefit costs decreased $21 million between years, thereby positively impacting results between periods. Southwest also recognized a $16 million increase in COLI results between years.

Net interest deductions increased $34 million between 2023 and 2022 primarily due to $300 million of Senior Notes issued in December 2022, $300 million of Senior Notes issued in March 2023, and in part to $600 million of Senior Notes issued in March 2022; as well as due to a term loan, entered into in January 2023 to support higher natural gas supply costs, which was repaid in April 2023. These increases were offset by the March 2023 repayment of the remaining $225 million balance associated with the March 2021 Term Loan.

Results of Utility Infrastructure Services

2023 vs. 2022

Contribution to consolidated net income from utility infrastructure services increased $17.6 million in 2023 compared to 2022. While net interest deductions increased $36.1 million due to higher interest rates, operating income increased $60.8 million due to an increase in revenue of $138.9 million and improvements in operating income overall due primarily to decreases in fuel prices and changes in mix of work.

The Utility infrastructure services revenue increase of $138.9 million, or 5%, was driven primarily by a $211.7 million increase in electric infrastructure services revenue, which included a $120.4 million increase in offshore wind revenue. Offshore wind revenue stems from several multi-year contracts, whereby Centuri provides materials, subcontracts manufacturing, and self performs fabrication and assembly of secondary steel components onshore, with delivery at a port facility. Also included in electric infrastructure revenue was $86.4 million from emergency restoration services following tornado and other storm damage to customers’ above-ground utility infrastructure in and around the Gulf Coast and eastern regions of the U.S., compared to $69.7 million in storm restoration work in the prior year. Centuri’s revenues derived from storm-related services vary from period to period due to the unpredictable nature of weather-related events, and when this type of work is performed, it typically generates a higher profit margin than core infrastructure services, due to improved operating efficiencies related to equipment utilization and absorption of fixed costs. The remaining increase in electric infrastructure services revenues was due to higher volumes under certain existing customer master service agreements. Gas infrastructure services revenue decreased $81.8 million overall from the prior year, driven primarily by a net reduction in volume under master services agreements with certain existing customers, primarily in Canada. That amount reflects the mitigated impact of increased revenue from bid work of $87.3 million with a U.S. customer. Other revenues increased $9 million, primarily due to completion of a large industrial bid project during the year. Centuri revenues from contracts with Southwest totaled $116.4 million in 2023 and $134.7 million in 2022. Centuri accounts for services provided to Southwest at contractual prices.

Utility infrastructure services expenses increased $88.1 million, or 3.5%, in 2023 when compared to 2022, primarily as a result of increased costs to complete a higher volume of work. Subcontractor costs increased during 2023 compared to the prior year notably due to increased revenue related to offshore wind projects. Despite continued inflationary pressures, margin on work completed in 2023 improved from the prior year due to changes in the mix of work and lower fuel prices. Also included in total Utility infrastructure services expenses were general and administrative costs, which increased approximately $1.3 million between years due to continued growth in the business. Gains on sale of equipment (reflected as an offset to Utility infrastructure services expenses) were approximately $4.5 million and $6.4 million in 2023 and 2022, respectively.

Depreciation and amortization expense remained largely consistent as a percentage of revenue between years. Amortization of intangible assets decreased in 2023 compared to 2022 due to Riggs Distler’s backlog intangible asset becoming fully amortized in 2022.

The increase in net interest deductions of $36.1 million was primarily due to higher interest rates on outstanding variable-rate borrowings, notably, the Centuri term loan and revolving credit facility, as amended.

Income tax expense increased $9 million between 2023 and 2022, primarily due to increased pre-tax income in 2023.

Results of Pipeline and Storage

Operating results for the pipeline and storage segment for 2023 reflects activity from January 1, 2023 through February 13, 2023 (the last full day of ownership by the Company), including residual goodwill impairment recognized during 2023. Operating expenses include $2.6 million during the first quarter related to integration/stand-up costs leading up to the sale date. Depreciation and amortization was not recorded in 2023 as MountainWest was classified as held for sale during the holding period. Income tax expense includes the impact of book versus tax basis differences related to the sale. For further impacts from the sale of MountainWest, refer to Note 15 - Acquisitions and Dispositions.

Rates and Regulatory Proceedings

Southwest is subject to the regulation of the Arizona Corporation Commission (the “ACC”), the Public Utilities Commission of Nevada (the “PUCN”), the California Public Utilities Commission (the “CPUC”), and two of Southwest’s subsidiaries are subject to regulation by the Federal Energy Regulatory Commission (the “FERC”).

General Rate Relief and Rate Design

Rates charged to customers vary according to customer class and rate jurisdiction and are set by the individual state and federal regulatory commissions that govern Southwest’s service territories. Southwest makes periodic filings for rate adjustments as the cost of providing service (including the cost of natural gas purchased) changes, and as additional investments in new or replacement pipeline and related facilities are made. Rates are intended to provide for recovery of all commission-approved costs and a reasonable return on investment. The mix of fixed and variable components in rates assigned to various customer classes (rate design) can significantly impact the operating margin actually realized by Southwest. Management has worked with its regulatory commissions in designing rate structures that support the timely recovery of our costs, including returns to investors, in providing safe, affordable, and reliable service to its customers while mitigating volatility in prices to customers and stabilizing returns to investors. Such rate structures were in place in all of Southwest’s operating areas during all periods for which results of natural gas distribution operations are disclosed above.

Arizona Jurisdiction

Arizona General Rate Case. Southwest filed a general rate case application in December 2021, primarily to reflect in rates the substantial capital investments that were made since the end of the test year associated with an earlier case, including investments in a customer information system implemented in May 2021. At a hearing held in September 2022, Southwest, the

Utilities Division Staff, and the Residential Utility Consumer Office jointly stipulated to several issues, including a target capital structure consisting of 50% equity and 50% debt; a 9.30% return on equity; and foregoing a premium related to the Graham County acquisition as well as the recovery of $12 million of waived late fees on customer account balances that would have otherwise applied to delinquent accounts in the absence of a COVID-19 moratorium on such fees. Approximately $12 million in costs related to the Liquefied Natural Gas facility deferred in an authorized regulatory asset was approved to be amortized over four years. The ACC’s final order authorized a $54.3 million increase, with new rates effective February 1, 2023.

Southwest filed its 2024 Arizona rate case application in early February 2024, proposing an increase in revenue of approximately $125.6 million to reflect the continued significant capital investments in the state and update rates to more closely align with Southwest’s current level of operations and maintenance expense. The request includes a return on common equity of 10.15% and a 0.81% fair value increment, relative to a 50% target equity ratio and a proposed 12-month post-test year plant adjustment for otherwise non-revenue producing plant. In addition to proposing the continuation of full revenue decoupling under the Delivery Charge Adjustment (“DCA”) mechanism, Southwest proposed the establishment of the System Improvement Benefit (“SIB”) mechanism, a capital tracker designed to support required code and regulatory-related infrastructure replacements in the state of Arizona. Southwest also proposed to set the carrying cost for the interest component of the DCA and Gas Cost Balancing Account (“GCBA”) rate adjustment mechanisms to equal the Commission-authorized Weighted Average Cost of Capital, and to establish the Unrecovered Gas Cost Expense Provision (“UGCE”), which represents gas cost-related portion of net write-offs of uncollectible customer accounts. The UGCE would allow Southwest to more timely recover the portion of such accounts that is related to purchased gas cost. Rates, following the conclusion of the rate case, are anticipated to become effective in the second quarter 2025.

Delivery Charge Adjustment. The DCA, or Arizona decoupling mechanism, as described above, includes a filing each April, which along with other reporting requirements, contemplates a rate to return/recover the over- or under-collected margin tracker (decoupling mechanism) balance. The most recent filing was made in April 2023 to request a rate to address the over-collected balance of $53.5 million existing as of March 31, 2023. The requested rate to return the over-collected balance was approved and new rates became effective August 1, 2023. The next filing is anticipated to be made no later than April 30, 2024, and will address the balance at the end of the first quarter 2024.

Tax Reform. A Tax Expense Adjustor Mechanism (“TEAM”) was approved in Southwest’s 2019 general rate case to timely recognize tax rate changes resulting from federal or state tax legislation following the TEAM implementation. In addition, the TEAM tracks and returns/recovers the revenue requirement impact of changes in amortization of excess accumulated deferred income taxes (“EADIT”), including that which resulted from 2017 U.S. federal tax reform, compared to the amount authorized in the most recently concluded rate case. Following the inaugural surcredit rate establishment under the TEAM mechanism in December 2022, Southwest filed subsequent TEAM rate applications, including the most recent filing, which proposes to update the TEAM surcredit to refund $5.03 million of estimated net EADIT savings. The adjusted rate is anticipated to be implemented in the second quarter 2024.

Customer-Owned Yard Line (“COYL”) Program. Southwest originally received approval, in connection with its 2010 Arizona general rate case, to implement a program to conduct leak surveys, and if leaks were present, to replace and relocate service lines and meters for Arizona customers whose meters were set off from the customer’s home, representing a non-traditional configuration. The COYL program has been subject to proceedings to recover investments since that time. In February 2023, Southwest requested approval to recover the outstanding revenue requirement of approximately $4.3 million associated with 2022 COYL investments, which increased the COYL recovery rate. The new rate became effective July 1, 2023. A filing to request recovery of the outstanding revenue requirement is anticipated in early 2024.

PGA Modification. On March 1, 2023, Southwest filed a request to adjust the interest rate applicable to the outstanding Purchased Gas Adjustment (“PGA”) balance to more closely match the interest expense incurred to finance the balance. In the alternative, the filing requested an expansion of the current GCBA adjustment to clear the then existing $351 million balance. In July, the ACC approved an increase to the GCBA rate (over a two-year period) effective August 1, 2023, to support the timely recovery of the approximately $358 million balance as of May 31, 2023. The increased GCBA rate will remain for up to two years or until the balance drops below $10 million, at which point the GCBA rate will be set to $0.00 per therm, where it will remain until the under- or over-collected balance exceeds $10 million. The ongoing deferred energy rates, separate from the GCBA rates, continue to be updated monthly.

Nevada Jurisdiction

Nevada General Rate Case. Southwest filed its most recent general rate case in September 2023 based on the test year ended May 2023. The initial request was updated with a certification filing primarily for plant placed in service and incremental annual leak survey costs through November 2023. Those updates resulted in an updated overall request of approximately $74 million, an increase over the initial request of $69.8 million. A stipulation was reached with Regulatory Operations Staff

and the Bureau of Consumer Protection, settling certain issues and agreeing to a black box settlement with a statewide increase of $65.6 million, prior to any adjustments related to the cost of capital (assumed capital structure and return on equity), which along with class cost of service and rate design items, remains unsettled. Included in the settled issues are a continuation of full revenue decoupling; authority to continue tracking incremental annual leak survey costs; and depreciation rates that would increase modestly overall from current levels. The request includes a proposed return on common equity of 10.0% relative to a 50% target equity ratio and is expected to be resolved at the hearing scheduled for the end of February 2024. New rates are anticipated in April 2024. Southwest’s previous general rate case concluded in February 2022, with rates effective April 1, 2022.

General Revenues Adjustment. The General Revenues Adjustment (“GRA”), or Nevada decoupling mechanism, was affirmed as part of Southwest’s most recently concluded general rate case with an expansion to include a large customer class (with average monthly throughput requirements greater than 15,000 therms), effective April 2022. Southwest makes Annual Rate Adjustment (“ARA”) filings to update rates to recover or return amounts associated with various regulatory mechanisms, including the GRA. Southwest made its most recent ARA filing in November 2023 related to the approximate $8.7 million over-collected balance as of September 30, 2022. Recovery of rates and adjustments thereto as part of the ARA primarily impact cash flows, but not net income overall. Updated rates for the GRA and other regulatory mechanisms included in the ARA will become effective July 1, 2024.

Nevada Leak Survey. In 2019, the PUCN opened an Investigation and Rulemaking action to consider certain amendments to the Nevada Administrative Code requiring annual leak surveys of distribution pipelines transporting natural gas or liquid petroleum. The increased survey activity was to focus on business districts and to be conducted generally on an annual basis (not exceeding 15-month survey intervals). The proposed regulations were permanently adopted with a January 1, 2023 effective date. Regulatory asset treatment was approved for the purpose of tracking incremental costs associated with implementing the increased leak surveys, recovery of which is requested in Southwest’s pending general rate case.

California Jurisdiction

California General Rate Case. Southwest’s most recent general rate case concluded following an agreement in principle with the Public Advocate’s Office, unanimously approved by the CPUC on March 25, 2021, including a $6.4 million total combined revenue increase with a 10% return on common equity, relative to a 52% equity ratio. The rate case decision maintained Southwest’s existing 2.75% annual attrition adjustments and the continuation of the pension balancing account. It also included cumulative expenditures totaling $119 million over the five-year rate cycle to implement risk-informed proposals, consisting of a school COYL replacement, meter protection, and pipe replacement programs. New rates resulting from the rate case were implemented in April 2021.

Attrition Filing. Following the 2021 implementation of rates approved as part of the recently concluded general rate case, the continuation of annual Post Test Year (“PTY”) margin attrition increases of 2.75% began in January 2022. The most recent annual margin attrition increase was also inclusive of adjustments related to the amortization of EADIT and the authorized rate base to adjust the rate of return consistent with the Automatic Trigger Mechanism. The cumulative adjustments resulted in an increase of $6.9 million effective January 2024 for Southwest’s southern California, northern California, and South Lake Tahoe rate jurisdictions.

FERC Jurisdiction

General Rate Case. Great Basin Gas Transmission Company (“Great Basin”), a wholly owned subsidiary of Southwest, reached an agreement in principle with the FERC Staff as part of its last rate case providing a 9.90% pre-tax rate of return. Rates were made effective February 2020. Great Basin plans to file its next general rate case no later than the first week of March 2024, proposing an increase of approximately $16 million and a return on equity of 13.05% relative to a 56% equity layer. A primary driver of the proposed increase is approximately $99 million of capital investments anticipated to be placed in service by the end of the August 31, 2024 test year. Motion rates, subject to refund, are anticipated to become effective in September 2024 with an initial decision during the second quarter of 2025.

MountainWest Overthrust Pipeline. On September 22, 2022, during the period of Southwest Gas Holdings’ ownership of the MountainWest entities, the FERC issued an order initiating an investigation, pursuant to section 5 of the Natural Gas Act, to determine whether rates charged by MountainWest Overthrust Pipeline, LLC, a subsidiary of MountainWest, were just and reasonable and setting the matter for hearing. A settlement was reached and the Company, in association with its agreement for the sale of MountainWest to Williams, and terms related to the resolution of this rate case matter, recorded a charge of $28.4 million in the first quarter of 2023, included in Goodwill impairment and loss on sale on the Company’s Consolidated Statements of Income. The rate case settlement was approved and the $28.4 million was paid in the third quarter of 2023.

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- or under-collections. Balances are recovered from or refunded to customers on an ongoing basis with interest. As of December 31, 2023, under-collections in each of Southwest’s service territories resulted in an asset of approximately $552.9 million on the Company’s and Southwest’s Consolidated Balance Sheets. In the latter part of 2022 and continuing into January 2023, the market price of natural gas spiked due to numerous market forces including historically low storage levels, unexpected upstream pipeline maintenance events, and cold weather conditions across the western region, increasing the balance further during that time as a result. See also Deferred Purchased Gas Costs in Note 1 - Background, Organization, and Summary of Significant Accounting Policies in Item 8.

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 operating margin. However, gas cost deferrals and recoveries can impact comparisons between periods of individual consolidated income statement components. These include Regulated operations revenues, Net cost of gas sold, Net interest deductions, and Other income (deductions).

The following table presents Southwest’s outstanding PGA balances receivable at the end of its two most recent fiscal years:

Arizona PGA Filings. In Arizona, Southwest calculates the change in the gas cost component of customer rates monthly (to allow for timely refunds to/recoveries from customers), utilizing a rolling twelve-month average. During 2023, the GCBA continued with a surcharge in order to recover the under-collected balance, including an increased rate mechanism that could continue for up to two years, as described above.

California Gas Cost Filings. In California, a monthly gas cost adjustment based on forecasted monthly prices is utilized. Monthly adjustments modeled in this fashion provide the timeliest recovery of gas costs in any Southwest jurisdiction.

Nevada Gas Cost Filings. In November 2023, Southwest filed to adjust its quarterly Deferred Energy Account Adjustment rate, which is based upon a twelve-month rolling average, in addition to requesting adjusted Base Tariff Energy rates, both of which were most recently approved effective October 2023. New rates associated with the November 2023 filing became effective January 2024. These new rates are intended to address the outstanding balances over a twelve-month period.

Gas Price Volatility and Mitigation

To mitigate price volatility to its customers, Southwest periodically enters into fixed-price term contracts under its volatility mitigation programs for up to 25% of the California jurisdictions’ annual normal weather supply needs and to a limited extent, in the Arizona jurisdiction. For the 2023/2024 heating season, contracts contained in the fixed-price portion of the supply portfolio ranged from approximately $5.60 to approximately $7.50 per dekatherm. In consultation with its regulators, Southwest does not currently plan to make any fixed-price term purchases in other than California, nor to enter into swap agreements. Southwest’s natural gas purchases, not covered by fixed-price contracts, are under variable-price contracts with firm quantities, or on the spot market. The contract price for these contracts is either determined at the beginning of each month to reflect the published first-of-month index price, or at market prices based on a published daily price index. In each case, the index price is not published or known until the purchase period begins. Plans with regard to fixed-price portfolios or other hedging programs could change as Southwest monitors conditions and collaborates with regulatory commissions over time.

Pipeline Safety Regulation

Effective January 1, 2023, the PUCN issued an order revising its regulations to require annual leak surveys (previously every three years) of all distribution pipelines transporting natural gas and/or liquefied petroleum. In conjunction with this change, the PUCN authorized the establishment of a regulatory asset account to track the incremental cost of compliance related to the new regulation, for consideration in a future general rate case filing.

Effective October 2022, the Pipeline and Hazardous Materials Safety Administration (“PHMSA”) issued final rules that amended the federal pipeline safety regulations applicable to the valve installation and minimum rupture detection standards for gas transmission pipelines. Southwest has integrated the requirements of this new rule into its operating procedures. In addition, in August 2022, PHMSA issued final rules that amended the federal pipeline safety regulations applicable to the integrity management of gas transmission pipelines, effective May 2023. Southwest also integrated the requirements of this new rule into its operating procedures related to repair criteria, integrity management improvements, cathodic protection, management of change, and other related gas transmission integrity related amendments.

PHMSA published two significant notices of proposed rulemaking (“NPRMs”) in 2023. The first is the Pipeline Leak Detection and Repair NPRM, which aims to mandate methane emissions reductions through the revision of natural gas operator operations and maintenance procedures, the promulgation of Advanced Leak Detection equipment, and accelerated leak repair criteria. The proposed rulemaking is expected to be published in mid-2024. Southwest is evaluating potential impacts from this NPRM.

The second item, the Safety of Gas Distribution NPRM, resulted from congressional mandates and National Transportation Safety Board safety recommendations from a 2018 incident in the Merrimack Valley, in Massachusetts. This NPRM is expected to be finalized in late 2024 and includes provisions that are primarily aimed at mitigating overpressurization incidents, particularly on utilization pressure systems. Southwest does not own or operate any utilization pressure systems and is monitoring the progress and potential impacts, if any, of this NPRM.

Southwest continues to monitor changing pipeline safety legislation and participates, to the extent possible, in providing public comments and works with industry associations, such as the American Gas Association, in shaping regulatory language associated with these new mandates and reporting requirements. Additionally, management works with state and federal commissions to which Southwest, including its subsidiaries, are subject, to develop customer rates that are responsive to incremental costs of compliance. However, due to the timing of when rates are implemented in response to new requirements, and as additional rules are developed, compliance requirements could impact expenses and the timing and amount of capital expenditures for Southwest.

Capital Resources and Liquidity

Historically, cash on hand and cash flows from operations have provided a substantial portion of cash used in investing activities (primarily construction expenditures and property additions). In recent years, Southwest has undertaken substantial pipe replacement activities to fortify system integrity and reliability, including on an accelerated basis in association with certain gas infrastructure replacement programs. This activity has necessitated the issuance of both debt and equity securities to supplement cash flows from operations. Southwest Gas Holdings, Inc. and Southwest’s capitalization strategy is to maintain an appropriate balance of equity and debt to preserve investment-grade credit ratings, which helps minimize interest costs. Investment-grade credit ratings have been maintained by Southwest Gas Holdings, Inc. and Southwest.

Cash Flows

Southwest Gas Holdings, Inc.:

Operating Cash Flows. Cash flows provided by consolidated operating activities increased $102 million between 2023 and 2022. Customarily, fluctuations in purchased gas cost, including amounts incurred and accrued or deferred, as well as impacts related to when amounts are incorporated into customer bills to recover or return deferred balances, have a significant influence on operating cash flows. Other changes in components of working capital also influenced operating cash flows, including the timing and amount of accounts payable and other current asset and liability balances, such as regulatory balances. While earnings were substantially higher in 2023, that change was notably influenced by noncash changes from a recognized goodwill impairment and loss on sale associated with MountainWest, primarily recognized in 2022, prior to the sale closing that took place in early 2023.

The corporate and administrative expenses/outflows for Southwest Gas Holdings, Inc. in 2023 include costs associated with the Centuri separation, and in 2022 include shareholder activism and strategic review costs, with the most significant individual amount being the interest/financing costs associated with the earlier MountainWest acquisition, collectively net of tax impacts.

Investing Cash Flows. Cash provided by consolidated investing activities increased $990 million in 2023 as compared to 2022. The overall increase was driven by $1.02 billion in proceeds received in connection with the MountainWest sale (which is net of cash sold), partially offset by an increase in capital expenditures in the natural gas distribution segment.

Financing Cash Flows. Net cash used in consolidated financing activities increased $1.1 billion in 2023 as compared to 2022. The overall increase was primarily due to the first quarter 2023 repayment ($1.1 billion) of the term loan originally entered into by Southwest Gas Holdings, Inc. in November 2021 in connection with the acquisition of MountainWest. Other impacts included proceeds from the issuance of common stock in underwritten public offerings in each period ($200 million lower in

the 2023 period than in the 2022 period), and a $550 million Term Loan Credit Agreement entered into by the Company in April 2023. A substantial portion of the term loan proceeds ($530 million) was contributed to Southwest as equity, which in turn was primarily used by Southwest to repay term loan indebtedness entered into to finance an escalation in purchased gas costs. Southwest also repaid the remaining balance ($225 million) associated with the March 2021 Term Loan. Other financing cash flows include borrowings and repayment under the companies’ credit facilities.

The capital requirements and resources of the Company generally are determined independently for the individual business segments. Each business segment is generally responsible for securing its own financing sources. However, the holding company may raise funds through stock issuances or other external financing sources in support of each business segment.

Southwest Gas Corporation:

Operating Cash Flows. Cash flows provided by operating activities increased $107 million between 2023 and 2022 primarily attributable to an increase in net income and changes in working capital, including the impacts related to purchased gas costs (amounts incurred and accrued or deferred, as well as recovered from customers through the billing process).

Investing Cash Flows. Cash used in investing activities increased $116 million in 2023 as compared to 2022, primarily due to an increase in capital expenditures, as well as a decrease in customer advances. See also 2023 Construction Expenditures below.

Financing Cash Flows. Net cash provided by financing activities increased $15 million in 2023 as compared to 2022. The modest increase included a number of mostly offsetting impacts, including $530 million in parent capital contributions during the second quarter of 2023, offset by the repayment of the $450 million term loan that was executed in January 2023 to finance the escalation in purchased gas costs. The $225 million March 2021 Term Loan was also repaid. Issuance of long-term debt during 2022 was approximately $900 million (including 4.05% notes due 2032 and 5.8% notes due 2027), while there was one new issuance in 2023 of $300 million in 5.45% notes due 2028. The prior year included the paydown/redemption of $275 million in maturing notes. Dividends paid and borrowing and repayment activity under the credit facility comprise the remaining activity between periods.

2023 Construction Expenditures

During the three-year period ended December 31, 2023, total gas plant in service increased from $8.4 billion to $10.1 billion, or at an average annual rate of 7%. Replacement, new business, and reinforcement work was a substantial portion of the plant increase during the three-year period. Customer growth also impacted expenditures as Southwest set approximately 119,000 meters during this time, which is reflected in new business.

During 2023, construction expenditures (through cash outlays) for Southwest were $762 million. The majority of these expenditures represented costs associated with replacement of existing transmission and distribution plant to fortify system integrity and reliability, as well as general plant additions. Cash flows from operating activities of Southwest were $392 million, providing approximately 43% of construction expenditures and dividend requirements of the natural gas operations segment. Other funding was provided by cash on hand, external financing activities, and funds from the existing credit facility.

2023 Financing Activity

In March 2023, the Company sold, through a prospectus supplement under its Prior Shelf Registration (as defined in Note 7 - Common Stock), an aggregate of 4.1 million shares of common stock, at an underwritten public offering price of $60.12 per share, resulting in proceeds to the Company of $238.4 million, net of the underwriters’ discount of $8.3 million. These net proceeds were used to repay a portion of the outstanding borrowings under the 364-day term loan credit agreement to earlier fund the MountainWest acquisition.

Net proceeds received under the Dividend Reinvestment and Stock Purchase Plan during 2023 were approximately $15.2 million, from the issuance of approximately 264,000 shares of Southwest Gas Holdings, Inc. common stock.

Natural Gas Distribution Segment Construction Expenditures, Debt Maturities, and Financing

Management estimates natural gas distribution segment construction expenditures during the three-year period ending December 31, 2026 will be approximately $2.4 billion. Of this amount, approximately $830 million is expected to be incurred in 2024. Southwest plans to continue to request regulatory support to undertake projects, or to accelerate projects as necessary, for the improvement of system flexibility and reliability, or to expand, where relevant, to unserved or underserved areas. Southwest may expand existing, or initiate new, programs. Significant replacement activities are expected to continue well beyond the next few years. During the three-year period ending December 31, 2026, cash flows from operating activities of Southwest are expected to provide approximately 78% of the funding for gas operations of Southwest and total construction expenditures and dividend requirements. Any additional cash requirements, including construction-related, and any paydown or

refinancing of debt, are expected to be provided by credit facilities, equity contributions from the Company, and/or other external financing sources. During the three-year period, Southwest will be required to renew or otherwise address its credit facility, but will otherwise only have $75 million of long-term debt maturing. The timing, types, and amounts of any additional external financings will be dependent on a number of factors, including the cost of gas purchases, conditions in the capital markets, timing and amounts of rate relief, timing and amounts of surcharge collections from or amounts returned to customers related to other regulatory mechanisms, as well as growth levels in Southwest’s service areas and earnings. External financings could include the issuance of debt securities, bank and other short-term borrowings, and other forms of financing.

Liquidity

Several factors (some of which are out of the control of the Company) that could significantly affect liquidity in future years include: activities from the planned separation of Centuri, variability of natural gas prices, changes in ratemaking policies of regulatory commissions, regulatory lag, customer growth in the natural gas distribution segment, the ability to access and obtain capital from external sources, the level of interest rates, changes in income tax laws, pension funding requirements, inflation, and the level of earnings. Natural gas prices and related gas cost recovery rates, as well as plant investment, have historically had the most significant impact on liquidity, aside from the Company’s recent strategic undertakings, including acquisition and disposition activity.

On an interim basis, Southwest defers over- or under-collections of gas costs to PGA balancing accounts. In addition, Southwest uses this mechanism to either refund amounts over-collected or recoup amounts under-collected as compared to the price paid for natural gas during the period since the last PGA rate change went into effect. At December 31, 2023, the combined balance in the PGA accounts totaled an under-collection of $552.9 million. The market price of natural gas spiked most recently as a result of numerous market forces including historically low storage levels, unexpected upstream pipeline maintenance events, and cold weather conditions across the western region in the latter part of 2022 and continuing into January 2023. We may be required to incur additional indebtedness in connection with future spikes in natural gas prices as a result of extreme weather events or otherwise. See PGA Filings for more information.

In March 2023, Southwest issued $300 million aggregate principal amount of 5.45% Senior Notes. The notes will mature in March 2028. Southwest used the net proceeds to repay amounts outstanding under Southwest’s credit facility and the remainder for general corporate purposes.

In April 2023, Southwest Gas Holdings, Inc. entered into a $550 million Term Loan Credit Agreement that matures in October 2024. Southwest Gas Holdings, Inc. utilized a majority of the proceeds to make an equity contribution to Southwest. On April 17, 2023, Southwest utilized the equity contribution to repay, in full, amounts outstanding under its $450 million 364-day term loan entered into in January 2023, with the remainder of the equity contribution used for working capital and general corporate purposes. The Company intends to refinance the Term Loan Credit Agreement at or prior to its maturity.

Southwest Gas Holdings, Inc. has a credit facility with a borrowing capacity of $300 million that expires in December 2026. This facility is intended for short-term financing needs. At December 31, 2023, $78.5 million was outstanding under this facility. The maximum amount outstanding during 2023 occurred during the first quarter and was $181 million.

Southwest has a credit facility with a borrowing capacity of $400 million, which expires in April 2025. Southwest designates $150 million of the facility for long-term borrowing needs and the remaining $250 million for working capital purposes. The maximum amount outstanding during 2023 occurred during the first quarter and was $225 million ($150 million outstanding on the long-term portion of the credit facility, none under the commercial paper program, and $75 million outstanding on the short-term portion). As of December 31, 2023, no borrowings were outstanding on the long-term portion of the credit facility (no borrowings were outstanding under the commercial paper program), and no borrowings were outstanding on the short-term portion. The credit facility has been used as necessary to meet liquidity requirements, including temporarily financing under-collected PGA balances, meeting the refund needs of over-collected balances, or temporarily funding capital expenditures. The credit facility has generally been adequate for Southwest’s working capital needs outside of funds raised through operations and other types of external financing.

Southwest has a $50 million commercial paper program. Any issuance under the commercial paper program is supported by the revolving credit facility and, therefore, does not represent additional borrowing capacity. Any borrowing under the commercial paper program is designated as long-term debt. Interest rates for the commercial paper program are calculated at the then current commercial paper rate. At December 31, 2023, there were no borrowings outstanding under this program.

Centuri has a $1.545 billion secured revolving credit and term loan multi-currency facility. The capacity of the line of credit is $400 million with related amounts borrowed and repaid available to be re-borrowed; the term loan portion of the facility has a limit of $1.145 billion. The term loan facility expires on August 27, 2028 and the revolving credit facility expires on August 27, 2026. This multi-currency facility allows the borrower to request loan advances in either Canadian dollars or U.S. dollars. The obligations under the credit agreement are secured by present and future ownership interests in substantially all direct and

indirect subsidiaries of Centuri, substantially all of the tangible and intangible personal property of each borrower, certain of their direct and indirect subsidiaries, and all products, profits, and proceeds of the foregoing. Centuri assets securing the facility at December 31, 2023 totaled $2.5 billion. The maximum amount outstanding on the combined facility during 2023 was $1.184 billion, which occurred in the second quarter, at which point $1 billion was outstanding on the term loan facility. As of December 31, 2023, $77 million was outstanding on the revolving credit facility, in addition to $994.2 million outstanding on the term loan portion of the facility. Also at December 31, 2023, there was approximately $246 million, net of letters of credit, available for borrowing under the line of credit.

In November 2023, Centuri amended the financial covenants of the revolving credit facility (the “Centuri Credit Facility Amendment”) to decrease the minimum interest coverage ratio during the fiscal quarters ending March 31, 2024 through December 31, 2024 to a ratio of 2.00 to 1.00. The Credit Facility Amendment also increases the maximum net leverage ratio financial covenant for the fiscal quarters ending March 31, 2024 through September 30, 2024 to a ratio of 5.50 to 1.00 and for the fiscal quarter ending December 31, 2024 to a ratio of 5.00 to 1.00. In addition, in the event that a “Qualified IPO” is consummated prior to March 31, 2025, the maximum net leverage ratio financial covenant will be reduced based on the amount of net proceeds received from such Qualified IPO. The Centuri Credit Facility Amendment did not modify any terms of the term loan facility. Under these restrictions and the financial covenants of the amended revolving credit facility, Centuri’s ability to pay dividends to Southwest Gas Holdings, Inc. is limited. However, such dividends are not customarily relied upon in order for Southwest Gas Holdings, Inc. to satisfy dividends declared for its stockholders.

In the first quarter of 2023, the Company paid off (primarily with proceeds from the MountainWest sale) the remaining balance on the $1.6 billion term loan entered into in November 2021 in connection with the acquisition of MountainWest.

Credit Ratings

Credit ratings apply to debt securities such as bonds, notes, and other debt instruments and do not apply to equity securities such as common stock. Borrowing costs and the ability to raise funds are directly impacted by the credit ratings of the Company. Credit ratings issued by nationally recognized ratings agencies (Moody’s Investors Service, Inc. (“Moody’s”), Standard & Poor’s Ratings Services (“Standard & Poor’s”), and Fitch Ratings (“Fitch”)) provide a method for determining the creditworthiness of an issuer. Credit ratings are important because long-term debt constitutes a significant portion of total capitalization. These credit ratings are a factor considered by lenders when determining the cost of current and future debt for each debt obligor (i.e., generally the better the rating, the lower the cost to borrow funds). The current unsecured long-term debt ratings of the Company and Southwest are considered investment grade, and Centuri’s ratings are considered non-investment grade.

(1)Moody’s debt ratings range from Aaa (highest rating possible) to C (lowest quality, usually in default). A numerical modifier of 1 (high end of the category) through 3 (low end of the category) is included with the rating to indicate the approximate rank of a company within the range.

(2)Standard & Poor’s (“S&P”) debt ratings range from AAA (highest rating possible) to D (obligation is in default). The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus “+” or minus “-” sign to show relative standing within the major rating categories.

(3)Fitch debt ratings range from AAA (highest credit quality) to D (defaulted debt obligation). The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating categories.

A credit rating, including the foregoing, is not a recommendation to buy, sell, or hold a debt security, but is intended to provide an estimation of the relative level of credit risk of debt securities, and is subject to change or withdrawal at any time by the rating agency. Numerous factors, including many that are not within management’s control, are considered by the ratings agencies in connection with the assigning of credit ratings.

None of Southwest’s debt instruments have credit triggers or other clauses that result in default if these bond ratings are lowered by rating agencies. Interest and fees on certain debt instruments are subject to adjustment depending on Southwest’s bond ratings. Certain debt instruments are subject to a leverage ratio cap, and the 6.1% Notes due 2041 are also subject to a minimum net worth requirement. At December 31, 2023, Southwest was in compliance with all of its covenants. Under the most restrictive of the financial covenants, approximately $3.9 billion in additional debt could be issued and the leverage ratio requirement would still be met. At least $2.6 billion of cushion in equity relating to the minimum net worth requirement exists at December 31, 2023. No specific limitations as to dividends exist under the collective covenants. None of the debt instruments contain material adverse change clauses.

At December 31, 2023, Southwest Gas Holdings, Inc. was also in compliance with all of the covenants of its credit facility and Term Loan Credit Agreement. Interest and fees on its credit facility and 364-day Term Loan are subject to adjustment depending on its senior debt ratings. The credit facility and 364-day Term Loan are subject to a leverage ratio cap. Under the most restrictive of the financial covenants, approximately $2.7 billion in additional debt could be issued while still meeting the leverage ratio requirement. No specific limitations as to dividends exist under the collective covenants. The credit facility and 364-day Term Loan do not contain material adverse change clauses.

Certain Centuri debt instruments have leverage ratio caps and interest coverage ratio requirements. At December 31, 2023, Centuri was in compliance with all of its covenants. Under the most restrictive of the covenants, Centuri could issue approximately $108 million in additional debt and meet the leverage ratio requirement. Centuri has approximately $15 million of cushion relating to the minimum interest coverage ratio requirement. Centuri’s revolving credit and term loan facility is secured by underlying assets of the utility infrastructure services segment. Centuri also has restrictions on how much it could give to the Company in cash dividends, which is limited to a calculated available amount, generally defined as 50% of its rolling twelve-month consolidated net income adjusted for certain items, such as parent contributions inflows, Linetec redeemable noncontrolling interest payments, or dividend payments, among other adjustments, as applicable. Under these restrictions and the financial covenants of the amended revolving credit facility, Centuri’s ability to pay dividends to Southwest Gas Holdings, Inc. is limited. However, such dividends are not customarily relied upon in order for Southwest Gas Holdings, Inc. to satisfy dividends declared for its stockholders.

Inflation

Inflation can impact results of operations for each of the Company’s business segments, and while the level of increase has waned over the past year, the level of improvement is only in relation to the multi-decade high inflation in 2022. Labor, employee benefits, fuel, natural gas, professional services, and construction costs are the categories most significantly impacted by inflation. Changes to the cost of gas are generally recovered through PGA mechanisms and do not directly impact earnings overall, and indirectly, primarily from interest carrying charges on accumulated balances. Labor, employee benefits, and professional services are components of the cost of service, and gas infrastructure costs are the primary component of utility rate base. In order to recover increased costs, and earn a fair return on rate base, general rate cases or other procedural filings are made by our regulated operations, when deemed necessary, for review and approval by regulatory authorities. Regulatory lag, that is, the time between the date increased costs are incurred and the time such increases are recovered through the ratemaking process, can negatively impact earnings. See Rates and Regulatory Proceedings for a discussion of recent rate case proceedings.

Contractual Obligations

Our largest contractual obligations as of December 31, 2023 consisted of:

•Debt-related obligations for scheduled principal payments, other borrowings, and interest payments over the life of the debt. Debt obligations are included in our consolidated balance sheets. See Note 8 - Debt for additional information.

•Centuri operating and finance leases are included in our consolidated balance sheets and represent multi-year obligations for buildings, land, equipment, and vehicles. See Note 2 - Regulated Operations Plant and Leases for additional information.

•Southwest has gas purchase obligations that include fixed-price and variable-rate gas purchase contracts. Variable-rate contracts reflect minimum contractual obligations with estimation in pricing based on market information. Actual future variable-rate purchase commitments may vary depending on market prices at the time of delivery and values may change significantly from their estimated amounts. Certain other variable-rate contracts allow for variability in quantities for which associated demand charges are included in the gas purchase obligations based on the maximum daily quantities available under the contracts. Renewable natural gas purchase obligations, in which the

commencement dates are not specifically determinable and the volumes and contract prices are inestimable until certain contract provisions are met, are excluded from gas purchase obligations. As of December 31, 2023, gas purchase obligations of $137 million are payable within the next 12 months.

•Southwest has pipeline capacity and storage contracts for firm transportation service, both on a short- and long-term basis with several companies in all of its service territories, some with terms extending to 2044. Southwest also has interruptible contracts in place that allow additional capacity to be acquired should an unforeseen need arise. Costs associated with these pipeline capacity contracts, similar to gas purchase/supply arrangements, are a component of the cost of gas sold and are recovered from customers primarily through the PGA mechanisms. As of December 31, 2023 pipeline capacity and storage obligations of $72.8 million are payable within 12 months.

•Other commitments associated with noncancellable obligations consist primarily of software licensing, equipment, outsourced processing subscriptions, and operating and/or maintenance agreements, as applicable.

•Estimated funding for pension and other postretirement benefits during calendar year 2024 is $23 million. Funding amounts for years beyond 2024 are not currently known.

Recently Issued Accounting Standards Updates

The Financial Accounting Standards Board routinely issues Accounting Standards Updates. See Note 1 - Background, Organization, and Summary of Significant Accounting Policies for more information regarding these Accounting Standards Updates and their potential impact on the Company’s and Southwest’s financial position, results of operations, and disclosures.

Application of Critical Accounting Policies and Estimates

A critical accounting policy is one that is very important to the portrayal of the financial condition and results of a company, and requires the most difficult, subjective, or complex judgments of management. The need to make estimates about the effect of items that are uncertain is what makes these judgments difficult, subjective, and/or complex. Management makes subjective judgments about the accounting and regulatory treatment of many items and bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments. These estimates may change as new events occur, as more experience is acquired, as additional information is obtained, and as the operating environment changes. While management may make many estimates and judgments, many would not be materially altered, or provide a material impact to the financial statements taken as a whole, if different estimates, or means of estimation were employed. The following are accounting policies that are deemed critical to the financial statements. For more information regarding significant accounting policies, see notes to the consolidated financial statements.

Regulatory Accounting

Natural gas distribution operations are subject to the specific regulation of the ACC, PUCN, CPUC, or the FERC, as applicable. The accounting policies of the Company and Southwest conform to U.S. GAAP applicable to rate-regulated entities and reflect the effects of the ratemaking process. As such, the Company and Southwest are allowed to defer, as regulatory assets, costs that otherwise would be expensed, if it is probable that future recovery from customers (subject to our rate-regulated operations) will occur. Companies are also permitted to recognize, as regulatory assets, amounts associated with various revenue decoupling mechanisms, as long as the requirements of alternative revenue programs permitted under U.S. GAAP continue to be met. Management reviews the regulatory assets to assess their ultimate recoverability within the approved regulatory guidelines. If rate recovery is no longer probable, due to competition or the actions of regulators, write-off of the related regulatory asset (which would be recognized as current-period expense) is required. Regulatory liabilities are recorded if it is probable that revenues will be reduced for amounts that will be refunded to customers through the ratemaking process. The timing and inclusion of costs in rates is often delayed (regulatory lag) and results in a reduction of current-period earnings. Discontinuing the application of this method of accounting for regulatory assets and liabilities or changes in the accounting for our various regulatory mechanisms could significantly increase our operating expenses as fewer costs would likely be capitalized or deferred on the balance sheet, which could reduce our net income. Factors influencing application of this policy include decisions of regulatory authorities, implementation of new regulations or regulatory mechanisms, assessing the probability of the recoverability of deferred costs, and continuing to meet the criteria of a rate regulated entity for accounting purposes. Refer also to Note 5 - Regulatory Assets and Liabilities.

Revenue Recognition - Utility Infrastructure Services

Centuri generally has two types of agreements with its customers: MSAs and bid contracts. Our MSAs and bid contracts are characterized as either fixed-price, unit-price, or time-and-materials (“T&M”) based for revenue recognition purposes. Most of our contracts are considered to have a single performance obligation. Performance obligations related to fixed-price contracts are satisfied over time because our performance typically creates or enhances an asset that the customer controls. For fixed-price contracts, we recognize revenue as performance obligations are satisfied and control of the promised good and/or service is transferred to the customer by measuring the progress toward complete satisfaction of the performance obligation(s) using an input method. Input methods result in the recognition of revenue based on the entity’s effort to satisfy the performance

obligation relative to the total expected effort to satisfy the performance obligation. Under the cost-to-cost method, costs incurred to-date are generally the best depiction of the transfer of control. For unit-price and T&M contracts, an output method is used to measure progress towards satisfaction of a performance obligation.

Actual revenue and project costs can vary, sometimes substantially, from previous estimates due to changes in a variety of factors, including unforeseen circumstances not originally contemplated. These factors, along with other risks inherent in performing fixed-price contracts, may cause actual revenue and gross profit for a project to differ from previous estimates and could result in reduced profitability or losses on projects. Changes in these factors may result in revisions to estimates of costs and earnings. Revisions to estimates of costs and earnings during the course of work are reflected in the accounting period in which the facts requiring revision become known. At the time a loss on a contract becomes known or is anticipated, the entire amount of the estimated ultimate loss is recognized in the financial statements. Once identified, these types of conditions continue to be evaluated for each project throughout the project term and ongoing revisions in management’s estimates of contract value, contract cost and contract profit are recognized as necessary in the period determined.

Accrued Utility Revenues

Revenues related to the sale and/or delivery of natural gas are generally recorded when natural gas is delivered to customers. However, the determination of natural gas sales to individual customers is based on the reading of their meters, which is performed on a systematic basis throughout the month. At the end of each month, operating margin associated with natural gas service that has been provided but not yet billed is accrued. This accrued utility revenue is estimated each month based primarily on applicable rates, number of customers, rate structure, analyses reflecting significant historical trends, seasonality, and experience. The interplay of these assumptions can impact the variability of the accrued utility revenue estimates. Additionally, all Southwest rate jurisdictions have decoupled rate structures, limiting variability due to extreme weather conditions.

Accounting for Income Taxes

The Company is subject to income taxes in the U.S. and Canada. Income tax calculations require estimates due to known future tax rate changes, book to tax differences, and uncertainty with respect to regulatory treatment of certain property items. The asset and liability method of accounting is utilized for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Regulatory tax assets and liabilities are recorded to the extent management believes they will be recoverable from, or refunded to, customers in future rates. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Management regularly assesses financial statement tax provisions to identify any change in the regulatory treatment or tax-related estimates, assumptions, or enacted tax rates that could have a material impact on cash flows, financial position, and/or results of operations.

Accounting for Pensions and Other Postretirement Benefits

Southwest has a noncontributory qualified retirement plan with defined benefits covering substantially all employees hired on or before December 31, 2021. In addition, there is a separate unfunded supplemental retirement plan which is limited to officers hired on or before December 31, 2021. Pension obligations and costs for these plans are affected by the amount and timing of cash contributions to the plans, the return on plan assets, discount rates, and by employee demographics, including age, compensation, and length of service. Changes made to the provisions of the plans may also impact current and future pension costs. Actuarial formulas are used in the determination of pension obligations and costs and are affected by actual plan experience and assumptions about future experience. Key actuarial assumptions include the expected return on plan assets, the discount rate used in determining the projected benefit obligation and pension costs, and the assumed rate of increase in employee compensation. Relatively small changes in these assumptions (particularly the discount rate) may significantly affect pension obligations and costs for these plans. For example, a change of 0.25% in the discount rate assumption would change the pension plan projected benefit obligation by approximately $34 million, with no impact on future pension expense. A change of 0.25% in the employee compensation assumption would change the pension obligation by approximately $10 million and expense by $2 million. A 0.25% change in the expected asset return assumption would change pension expense by approximately $3 million (but would have no impact on the pension obligation). Beginning in 2024, a treasury futures overlay associated with interest rates is being implemented, intended to be responsive to changing discount rates over time and to retain at least a 90% funded ratio; however, there is no guarantee that the mechanism implemented will achieve these intentions.

Given the recent interest rate environment, and despite escalations that took place earlier in the year, the discount rate applicable to the pension plan decreased from 5.25% (at the end of 2022) to 5.00% as of December 31, 2023. The methodology utilized to determine the discount rate was consistent with prior years. A decrease in the discount rate increases the pension obligation in the current year and expense in the year ahead. During the fourth quarter of 2023, the asset mix was adapted to a balanced portfolio between debt and equity securities. Southwest maintained the return on assets of 6.75% expected over the

long term supported by available data. The salary escalation assumption was modestly increased from 3.25% to 3.50% given recent and expected salary changes and market conditions over a longer-term horizon. Southwest plans to substantially decrease its funding in 2024 compared to historical funding levels, which were intended to fund along the trajectory of benefits paid out of the plan. However, Southwest monitors conditions overall, and no less frequently than annually, assesses funding to ensure a funded ratio overall exists for retirees currently receiving benefits and for eligible employees hired before 2022. The pension is approximately 94% funded as of December 31, 2023, and due to the foregoing updated conditions, pension expense is expected to be higher in 2024 (approximately $7 million in total). That amount is higher than in 2023, but substantially lower than in recent earlier years when the discount rate reflected a very low-rate environment. Future years’ expense level movements (up or down) will continue to be greatly influenced by long-term interest rates (and starting in 2024, the related functioning of the treasury interest futures overlay), asset returns, and funding levels.

Goodwill

Goodwill is assessed for impairment annually each October, or more frequently, if events or changes in circumstances indicate an impairment may have occurred before that time. As permitted under accounting guidance on testing goodwill for impairment, we perform either a qualitative assessment or a quantitative assessment of each of our reporting units based on management’s judgment. Adjustment of values would only occur if conditions of impairment were deemed to be permanent. With respect to our qualitative assessments, we consider events and circumstances specific to us, such as macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance, when evaluating whether it is more likely than not that the fair values of our reporting units are less than their respective carrying amounts.

For any required quantitative assessments of goodwill, we generally determine the fair value of our reporting units using a weighted combination of the income approach (discounted cash flow model) and market multiple valuation techniques (market guideline transaction and market guideline public company method). Under the discounted cash flow method, we determine fair value based on the estimated future cash flows for each reporting unit, discounted to present value using a risk-adjusted industry weighted average cost of capital, which reflects the overall level of inherent risk for each reporting unit and the rate of return an outside investor would expect to earn. Under the market guideline transaction and market guideline public company methods, we determine the estimated fair value for each reporting unit by applying transaction multiples and public company multiples, respectively, to each reporting unit’s historical and projected results. The transaction multiples are based on observed purchase transactions for similar businesses adjusted for size, volatility, and risk. The public company multiples are based on peer group multiples adjusted for size, volatility, and risk.

The assumptions we use in our quantitative assessments of goodwill (if required), including discount rates, market multiples, and estimates of terminal value, among others, are subject to uncertainty, and declines in the future performance of our reporting units and changing business conditions could result in the recognition of impairment charges, which could be significant. In our quantitative assessments, we generally perform a sensitivity analysis for discount rates and other factors, as applicable.

The Company’s reporting units are the same as its segments for purposes of impairment evaluation. In December 2022, the Company announced the planned sale of MountainWest. The Board determined to sell MountainWest in order to simplify the business. As the consideration to be received for the sale was below the equity interests in MountainWest, the Company recorded held for sale losses, including a pre-tax goodwill impairment loss of $449.6 million in the fourth quarter of 2022. During the first quarter of 2023, the Company identified an approximately $21 million misstatement related to its initial estimation of the loss recorded upon reclassifying MountainWest as an asset held for sale during the year ended December 31, 2022. Consequently, the impairment loss for the year ended December 31, 2022 was understated by that amount, which was corrected in the first quarter of 2023. See Note 15 - Acquisitions and Dispositions for additional information.

In connection with the annual goodwill assessment for 2023, we performed a qualitative impairment assessment of our reporting units, which indicated that the fair value of each reporting unit was greater than its carrying value, including goodwill. Accordingly, a quantitative goodwill impairment test was not required, and no goodwill impairment was recognized in 2023, other than the $21 million for the MountainWest sale, as noted above.

Held for Sale

The Company and Southwest recognize the assets and liabilities of a disposal group as held for sale in the period (i) they have approved and committed to a plan to sell the disposal group, (ii) the disposal group is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions to sell the disposal group have been initiated, (iv) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The disposal group that is classified as held for sale is initially measured at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Upon designation as held for sale, the Company stops recording depreciation expense and assesses the fair value of the disposal group less any costs to sell at each reporting period and until it is no longer classified as held for sale.

In December 2022, the Company entered into a definitive agreement to sell 100% of MountainWest in an all-cash transaction to Williams for $1.5 billion in total enterprise value, subject to certain adjustments, which closed on February 14, 2023. The Company determined that MountainWest met the criteria to be characterized as held for sale as of December 31, 2022. See Note 15 - Acquisitions and Dispositions for additional information.

In the first quarter of 2023, the Company and Southwest concluded that certain assets associated with its previous corporate headquarters met the criteria to be classified as held for sale. As a result, the Company and Southwest reclassified approximately $27 million from Other property and investments to Current assets held for sale on their respective Consolidated Balance Sheets at that time. During 2023, the Company and Southwest recorded total estimated losses of $5.2 million related to the former headquarters based upon an updated fair value less costs to sell, which is recorded in Other income (deductions). The sale was completed in January 2024.

Business Combinations

In accordance with U.S. GAAP, the assets acquired and liabilities assumed in an acquired business are recorded at their estimated fair values on the date of acquisition. The amount of goodwill initially recognized in a business combination is based on the excess of the purchase price of the acquired company over the fair value of the other assets acquired and liabilities assumed. The determination of these fair values requires management to make significant estimates and assumptions. For example, assumptions with respect to the timing and amount of future revenues and expenses associated with an asset are used to determine its fair value, but the actual timing and amount may differ materially, resulting in impairment of the asset’s recorded value. In some cases, the Company engages independent third-party valuation firms to assist in determining the fair values of acquired assets and liabilities assumed. Critical assumptions used to value the trade name and customer relationship intangibles include, but are not limited to, future expected cash flows of the acquired business, trademarks, trade names, customer relationships, technology obsolescence, attrition rates, royalty rates, and discount rates. In addition, uncertain tax positions and tax-related valuation allowances assumed in connection with a business combination are initially estimated at the acquisition date. These items are reevaluated quarterly, based upon facts and circumstances that existed at the acquisition date with any adjustments to the preliminary estimates being recorded to goodwill, provided that the Company is within the twelve-month measurement period allowed by authoritative guidance. Subsequent to the measurement period or the final determination of the estimated value of the tax allowance or contingency, changes to these uncertain tax positions and tax-related valuation allowances will affect the provision for income taxes in the Consolidated Statements of Income, and could have a material impact on the Company’s results of operations and financial position. Refer also to Note 15 - Acquisitions and Dispositions.

Certifications

The SEC requires the filing of certifications of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of registrants regarding reporting accuracy, disclosure controls and procedures, and internal control over financial reporting as exhibits to periodic filings. The CEO and CFO certifications for the period ended December 31, 2023 are included as exhibits to this Annual Report on Form 10-K filed with the SEC.

Forward-Looking Statements

This annual report contains statements which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“Reform Act”). All statements other than statements of historical fact included or incorporated by reference in this annual report are forward-looking statements, including, without limitation, statements regarding the Company’s plans, objectives, goals, intentions, projections, strategies, future events or performance, negotiations, and underlying assumptions. The words “may,” “if,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “continue,” “forecast,” “intend,” “endeavor,” “promote,” “seek,” “pursue,” and similar words and expressions are generally used and intended to identify forward-looking statements. For example, statements regarding plans to refinance near-term maturities or renew credit facilities, to separate from Centuri by means of an IPO or a spin-off from the Company, by sell-down or other means or at all, those regarding operating margin patterns, customer growth, the composition of our customer base, price volatility, seasonal patterns, the ability to pay debt, the Company’s COLI strategy, the magnitude of future acquisition or divestiture purchase price true-ups or post-closing payments and related impairments or losses related thereto, replacement market and new construction market, including opportunities believed to be available to Centuri in the utility infrastructure replacement market, the purpose and intentions regarding investment in replacement gas plant infrastructure by Southwest, expectation that customers will continue service once established, the frequency of filing rate cases, impacts from pandemics, including on our employees, customers, business, financial position, earnings, bad debt expense, work deployment and related uncertainties, expected impacts of valuation adjustments associated with any redeemable noncontrolling interests, the profitability of storm work, mix of work, or absorption of fixed costs by larger infrastructure services customers including Southwest, the impacts of U.S. tax reform including disposition in any regulatory proceeding and bonus depreciation tax deductions, expectations of a tax-free nature of a separation of Centuri to the Company or its stockholders, the impact of recent Pipeline and Hazardous Materials Safety Administration rulemaking or proposed rulemaking,

the amounts and timing for completion of estimated future construction expenditures, plans to pursue infrastructure programs and tracking mechanisms or programs under SB 151 legislation, forecasted operating cash flows and results of operations, net earnings impacts or recovery of costs from gas infrastructure replacements, mechanisms, or other mechanisms and surcharges, funding sources of cash requirements, amounts generally expected to be reflected in future period revenues from regulatory rate proceedings including amounts requested, stipulated or settled from recent and ongoing general rate cases or other regulatory proceedings, rates and surcharges, PGA administration, recovery and timing, and other rate adjustments, sufficiency of working capital and current credit facilities or the ability to cure negative working capital balances, bank lending practices, the Company’s views regarding its liquidity position, ability to raise funds and receive external financing capacity and the intent and ability to issue various financing instruments and stock under an at-the-market equity program or otherwise, future dividends or increases and the Board’s current payout strategy, pension and postretirement benefits, assumptions used and the expectations regarding the treasury futures overlay, certain impacts of tax acts, the effect of any other rate changes or regulatory proceedings, contract or construction change order negotiations, impacts of accounting standard updates, statements regarding future gas prices, gas purchase contracts and pipeline imbalance charges or claims related thereto, recoverability of regulatory assets, the impact of certain legal proceedings or claims, and the timing and results of future rate hearings, including any ongoing or future general rate cases and other proceedings, and statements regarding pending approvals are forward-looking statements. All forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act.

A number of important factors affecting the business and financial results of the Company could cause actual results to differ materially from those stated in the forward-looking statements. These factors include, but are not limited to, customer growth rates, conditions in the housing market, inflation, interest rates and related government actions, sufficiency of labor markets and ability to timely hire qualified employees or similar resources, acquisition and divestiture decisions including prices paid or received, adjustments, indemnifications, or commitments related thereto, and their impacts to impairments, write-downs, or losses or expenses generally, the impacts of pandemics including that which may result from a restriction by government officials or otherwise, including impacts on employment in our territories, the health impacts to our customers and employees, the ability to collect on customer accounts due to the suspension or lifted moratorium on late fees or service disconnection or escalation in customer rates or otherwise in any or all jurisdictions, the ability to obtain regulatory recovery of related costs, the ability of the infrastructure services business to conduct work and the impact of a delay or termination of work, and decisions of Centuri customers (including Southwest) as to whether to pursue capital projects due to economic impacts resulting from a pandemic or otherwise, or to engage Centuri or its competitors for new or replacement work, the ability to recover and timing thereof related to costs associated with the PGA mechanisms or other regulatory assets or programs, the effects of regulation/deregulation, governmental or regulatory policy regarding pipeline safety, greenhouse gas emissions, natural gas, including potential prohibitions on the use of natural gas by customers or potential customers, including related to electric generation or natural gas appliances, or regarding alternative energy, the regulatory support for ongoing infrastructure programs or expansions, the timing and amount of rate relief, the impact of other regulatory proceedings, the timing and methods determined by regulators to refund amounts to customers resulting from U.S. tax reform, changes in rate design, impacts of other tax regulations, including impacts to rate base or otherwise from IRS gas industry guidelines and the safe harbor method related to tax repairs, variability in volume of gas or transportation service sold to customers, changes in gas procurement practices, changes in capital requirements and funding, the impact of credit rating actions and conditions in the capital markets on financing costs, changes in construction expenditures and financing, levels of or changes in operations and maintenance expenses, or other costs, including fuel costs and other costs impacted by inflation or otherwise, geopolitical influences on the business or its costs, effects of pension or other postretirement benefit expense forecasts, including related to the treasury futures overlay mechanism, plan modifications, or other conditions, accounting changes and regulatory treatment related thereto, currently unresolved and future liability claims and disputes, changes in pipeline capacity for the transportation of gas and related costs, results of Centuri bid work, the impact of weather on Centuri’s operations, projections about acquired business’ earnings, or those that may be planned, future acquisition-related costs, differences between the actual experience and projections in costs to integrate or stand-up portions of newly acquired business operations, impacts of changes in the value of any redeemable noncontrolling interests if at other than fair value, Centuri utility infrastructure expenses, differences between actual and originally expected outcomes of Centuri bid or other fixed-price construction agreements, outcomes from contract and change order negotiations, ability to successfully procure new work and impacts from work awarded or failing to be awarded from significant customers (collectively, including from Southwest) or related to significant projects, the mix of work awarded, the result of productivity inefficiencies from regulatory requirements, customer supply chain challenges, or otherwise, delays or challenges in commissioning individual projects, acquisitions and management’s plans related thereto, the ability of management to successfully finance, close, and assimilate any acquired businesses, the timing, form, and ability of management to successfully consummate the Centuri separation, the impact on our stock price or our credit ratings due to undertaking or failing to undertake acquisition or divestiture activities or other strategic endeavors, the impact on our stock price, costs, actions or disruptions or continuation thereof related to significant stockholders and their activism, competition, our ability to raise capital in external financings, our ability to continue to remain within the ratios and other limits subject to our debt covenants, and ongoing evaluations in regard to goodwill, including any impacts from separation deployment or partial separation or any

other change impacting aggregation of reporting units in assessing goodwill for impairment, evaluations of other intangible assets, and of optimization initiatives or deployments or uncompleted deployments thereof. In addition, the Company can provide no assurance that its discussions regarding certain trends or plans relating to its financing and operating expenses will continue, proceed as planned, or cease to continue, or fail to be alleviated, in future periods. For additional information on the risks associated with the Company’s business, see Item 1A. Risk Factors and Item 7A. Quantitative and Qualitative Disclosures About Market Risk in this Annual Report on Form 10-K for the year ended December 31, 2023.

All forward-looking statements in this annual report are made as of the date hereof, based on information available to the Company and Southwest as of the date hereof, and the Company and Southwest assume no obligation to update or revise any of their forward-looking statements even if experience or future changes show that the indicated results or events will not be realized. We caution you to not rely unduly on any forward-looking statement(s).

Management’s Discussion and Analysis of Financial Condition and Results of Operations

About Southwest Gas Holdings, Inc.

Southwest Gas Holdings, Inc. is a holding company that owns all of the shares of common stock of Southwest Gas Corporation (“Southwest” or the “natural gas distribution” segment), all of the shares of common stock of Centuri Group, Inc. (“Centuri” or the “utility infrastructure services” segment), and as of December 31, 2022, all of the shares of common stock of MountainWest Pipelines Holding Company (“MountainWest” or “pipeline and storage” segment). Southwest Gas Holdings, Inc. and its subsidiaries are collectively referred to as the “Company.”

In December 2022, the Company announced that its Board of Directors (the “Board”) unanimously determined to take strategic actions to simplify the Company’s portfolio of businesses. These actions included entering into a definitive agreement (the “MountainWest Purchase Agreement”) to sell 100% of MountainWest in an all-cash transaction to Williams Partners Operating LLC (“Williams”) for $1.5 billion in total enterprise value, subject to certain adjustments. Additionally, the Company determined it will pursue a spin-off of Centuri (the “Centuri spin-off”), to form a new independent publicly traded utility infrastructure services company. The MountainWest transaction closed on February 14, 2023. The Company is to provide certain services to Williams under a transition services agreement for a brief period, generally not beyond six months. As a result of entry into the agreement, the Company recorded a loss, composed of a goodwill impairment of $449.6 million plus $5.8 million in estimated selling costs. A customary post-closing true-up will occur but is not currently expected to be material to the financial statements as a whole. The Centuri spin-off is expected to be completed in the fourth quarter of 2023 or the first quarter of 2024 and to be tax free to the Company and its stockholders for U.S. federal income tax purposes. The Centuri spin-off will be subject to, among other things, finalizing the transaction structure, final approval by the Board, approval by the Arizona Corporation Commission, the receipt of a favorable Internal Revenue Service private letter ruling relating to the tax-free nature of the transaction, and the effectiveness of a registration statement that will be filed with the U.S. Securities and Exchange Commission. See Note 15 - Acquisitions and Dispositions for additional information.

As described in Note 1 - Background, Organization, and Summary of Significant Accounting Policies, on May 6, 2022, the Company entered into a Cooperation Agreement (“Cooperation Agreement”) with Carl C. Icahn and the persons and entities named therein (the “Icahn Group”). Pursuant to the Initial Cooperation Agreement, the Company, among other things, made certain previously disclosed changes to the Board and management team. On October 24, 2022, the Company and the Icahn Group entered into the Amended Cooperation Agreement, which amended, restated, superseded, and replaced in its entirety the Initial Cooperation Agreement. Under the Amended Cooperation Agreement, certain of the standstill provisions in the Initial Cooperation Agreement were extended, the Icahn Group’s governance rights were amended, and the Company agreed to certain actions in connection with the 2023 Annual Meeting. Additional information about the Amended Cooperation Agreement can be found in the Company's Current Report on Form 8-K, filed with the SEC on October 26, 2022.

Our business includes Southwest, which is engaged in the business of purchasing, distributing, and transporting natural gas for customers in portions of Arizona, Nevada, and California. Southwest is the largest distributor of natural gas in Arizona and Nevada, and distributes and transports natural gas for customers in portions of California. Additionally, through its subsidiaries, Southwest operates two regulated interstate pipelines serving portions of the northern territories of Nevada and California.

As of December 31, 2022, Southwest had 2,197,000 residential, commercial, industrial, and other natural gas customers, of which 1,176,000 customers were located in Arizona, 816,000 in Nevada, and 205,000 in California. In January 2022, approximately 5,300 customers became part of Southwest’s gas distribution operations that were formerly served by Graham County Utilities. First-time meter sets were approximately 41,000 in 2022, compared to 37,000 in 2021. Residential and commercial customers represented over 99% of the total customer base. During 2022, 54% of operating margin (gas operating revenues less the net cost of gas sold) was earned in Arizona, 34% in Nevada, and 12% in California. During this same period, Southwest earned 85% of its operating margin from residential and small commercial customers, 4% from other sales customers, and 11% from transportation customers. These general patterns are expected to remain materially consistent for the foreseeable future.

Southwest recognizes operating revenues from the distribution and transportation of natural gas (and related services) to customers. Operating margin is a financial measure defined by management as Regulated operations revenues less the net cost of gas sold. However, operating margin is not specifically defined in accounting principles generally accepted in the United States (“U.S. GAAP”). Thus, operating margin is considered a non-GAAP measure. Management uses this financial measure because Regulated operations revenues include the net cost of gas sold, which is a tracked cost that is passed through to customers without markup under purchased gas adjustment (“PGA”) mechanisms. Fluctuations in the net cost of gas sold impact revenues on a dollar-for-dollar basis, but do not impact operating margin or operating income. Therefore, management believes operating margin provides investors and other interested parties with useful and relevant information to analyze Southwest’s financial performance in a rate-regulated environment. The principal factors affecting changes in operating margin

are general rate relief (including impacts of infrastructure program recoveries) and customer growth. Commission decisions on the amount and timing of relief may impact our earnings. Refer to the Summary Operating Results table below for a reconciliation of gross margin to operating margin, and refer to Rates and Regulatory Proceedings in this Management’s Discussion and Analysis for details of various rate proceedings.

The demand for natural gas is seasonal, with greater demand in the colder winter months and decreased demand in the warmer summer months. All of Southwest’s service territories have decoupled rate structures (alternative revenue programs), which are designed to eliminate the direct link between volumetric sales and revenue, thereby mitigating the impacts of weather variability and conservation on operating margin, allowing Southwest to pursue energy efficiency initiatives.

Centuri is a strategic infrastructure services company that partners with regulated utilities to build and maintain the energy network that powers millions of homes and businesses across the United States (“U.S.”) and Canada. With an unwavering commitment to serve as long-term partners to customers and communities, Centuri’s employees enable regulated utilities to safely and reliably deliver natural gas and electricity, as well as achieve their goals for environmental sustainability. Centuri operates in 73 primary locations across 45 states and provinces in the U.S. and Canada. Centuri operates in the U.S., primarily as NPL, Neuco, Linetec, and Riggs Distler, and in Canada, primarily as NPL Canada.

Utility infrastructure services activity can be impacted by changes in infrastructure replacement programs of utilities, weather, and local and federal regulation (including tax rates and incentives). Utilities continue to implement or modify system integrity management programs to enhance safety pursuant to federal and state mandates. These programs have resulted in multi-year utility system replacement programs throughout the U.S. Generally, Centuri revenues are lowest during the first quarter of the year due to less favorable winter weather working conditions. Revenues typically improve as more favorable weather conditions occur during the summer and fall months. In cases of severe weather, such as following a regional storm, Centuri may be engaged to perform restoration activities related to above-ground utility infrastructure, and related results impacts are not solely within the control of management. In addition, in certain circumstances, such as with large bid contracts (especially those of a longer duration), or unit-price contracts with revenue caps, results may be impacted by differences between costs incurred and those anticipated when the work was originally bid. Work awarded, or failing to be awarded, by individual large customers can impact operating results.

MountainWest is an interstate natural gas transmission pipeline company that provides transportation and underground storage services to customers in Utah, Wyoming, and Colorado. A substantial portion of its revenue results from reservation charges, but variable rates are also included as part of its primarily rate-regulated rate structures.

All of our businesses may be impacted by economic conditions that impact businesses generally, such as inflationary impacts on goods and services consumed in the business, rising interest rates, labor markets and costs (including in regard to contracted or professional services), and the availability of those resources. Certain of these impacts may be more predominant in certain of our operations, such as with regard to fuel costs for work equipment and skilled/trade labor costs at Centuri.

Executive Summary

The items discussed in this Executive Summary are intended to provide an overview of the results of the Company’s and Southwest’s operations and are covered in greater detail in later sections of management’s discussion and analysis.

Summary Operating Results

Overview

Southwest Gas Holdings:

•MountainWest sale completed in February 2023 and Centuri spin-off plans are ongoing

•Issued 6,325,000 shares of common stock, raising $452 million in net proceeds

•Corporate and administrative expenses include impact of interest on remaining $1.15 billion term loan, as well as stockholder activism/settlement and strategic review costs

•In February 2023, paid down $1.075 billion of the Term Loan Facility upon close of the sale of MountainWest, leaving approximately $72 million in aggregate principal amount outstanding under such loan

Natural gas distribution:

•41,000 first-time meters sets (1.9% growth rate) occurred over the past 12 months

•Operating margin increased $55 million, or 5%, between 2022 and 2021

•Issued $600 million in 4.05% 10-year Notes and $300 million in 5.80% 5-year Notes

•$683 million capital investment in 2022

•COLI results declined $14 million compared to the prior year

•Nevada general rate case finalized with rate relief effective April 2022

•Arizona general rate case finalized with revenue increase of $54.3 million and new rates effective February 1, 2023

Utility infrastructure services:

•Record revenues of $2.8 billion in 2022, an increase of $602 million, or 28%, compared to 2021

•$94 million in Clean Energy Offshore Wind Projects for 2022

•Costs impacted by inflation, including higher fuel, subcontractor, interest, and equipment rental costs

•Negative impact on work mix and volume due to certain customers' supply chain challenges in procuring necessary materials

Pipeline and storage:

•Recognized revenue of $265 million in 2022

•Recognized goodwill impairment loss of $449.6 million as a result of the MountainWest sale

This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2021 and 2020. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which incorporates by reference the Company’s annual report to stockholders filed as Exhibit 13 to the Annual Report on Form 10-K.

Results of Natural Gas Distribution

2022 vs. 2021

Contribution to consolidated net income from natural gas distribution operations decreased $33 million between 2022 and 2021. The decline was primarily due to increases in Operations and maintenance expense, Depreciation and amortization, and Net interest deductions, offset by an increase in Operating margin and Other income.

Operating margin increased $55 million between years. Customer growth provided approximately $17 million as 41,000 first-time meter sets were added in 2022, and combined rate relief provided approximately $14 million of incremental operating margin during the current year. Also contributing to the increase were customer late fees that were $4.4 million greater in the current year due to the lifting, in 2021, of a moratorium on such fees. Approved revenue in Arizona related to recoveries associated with Vintage Steel Pipe and Customer-Owned Yard Line programs also contributed to the improvements between periods ($22 million). Offsetting these increases were lower recoveries associated with other regulatory programs ($4 million), for which the effects are mitigated by a comparable decrease in amortization expense between periods (discussed below).

Operations and maintenance expense increased $53 million, or 12%, between 2022 and 2021. While management worked to mitigate the impacts of historic inflation and labor market challenges, specific increases in costs were nonetheless experienced, including, among others, pipeline integrity, reliability, line location and engineering services costs ($8 million), an increase in the reserve for customer accounts deemed uncollectible following the 2021 lifting of the moratorium on disconnections and inflation/economic conditions on our customers ($7 million), employee labor (including incremental overtime pay) ($7 million), travel, training, recruitment, and medical screening costs ($6 million), legal and claim-related costs ($5 million), temporary/contractor services for customer support ($4 million) and division operations ($2 million), increased cost of fuel used in our operations ($4 million), and pension-related service cost ($3 million), as well as higher allocated corporate/Board costs ($1 million).

Depreciation and amortization expense increased $10 million, or 4%, between years primarily due to a $537 million, or 6%, increase in average gas plant in service for the current year, offset by a reduction ($4 million) in amortization of regulatory account balances, as discussed in regard to Operating margin above. The increase in gas plant was attributable to pipeline capacity reinforcement work, franchise requirements, scheduled pipe replacement activities, and new infrastructure.

Taxes other than income taxes increased $2.9 million, or 4%, between 2022 and 2021 primarily due to an increase in property taxes in Arizona, and to a lesser extent, in Nevada.

Other income decreased $2 million between 2022 and 2021. Non-service-related components of employee pension and postretirement benefit cost in this category decreased $13 million between years. The current year also includes an $11 million increase in interest income compared to the prior year, including related to carrying charges associated with regulatory account balances, including the Purchased Gas Adjustment (“PGA”) mechanisms. Interest income is earned when these balances are in asset positions and interest expense is incurred when balances are in liability positions. Offsetting these impacts was a $14 million decline in COLI results between years, a $9 million reserve for a software project deemed non-recoverable from utility operations, and a $3 million market adjustment on other property in 2022.

Net interest deductions increased $18.3 million between 2022 and 2021, primarily due to increased interest associated with $300 million of Senior Notes issued in August 2021 and $600 million of Senior Notes issued in March 2022. Other impacts include increased interest associated with a higher amount of short-term debt in 2022 compared to 2021. Equity financing from Southwest’s parent entity, which often occurs, did not occur during 2022.

Tax amounts include the amortization of Excess Accumulated Deferred Income Taxes (“EADIT”), which following 2017 U.S. tax reform, reduces income tax expense as amounts are returned to customers.

Results of Utility Infrastructure Services

2022 vs. 2021

Contribution to consolidated net income from utility infrastructure services decreased $38.4 million in 2022 compared to 2021. While top-line revenues increased substantially in 2022 compared to 2021, Centuri’s performance overall was impacted by inflation, customer supply chain challenges affecting mix of work, and increased amortization and interest related to Riggs Distler, which was acquired in August 2021.

Utility infrastructure services revenues increased $601.7 million, or 28%, including $440.2 million related to Riggs Distler, which was acquired by Centuri on August 30, 2021. Revenues from electric infrastructure services increased $252.9 million in 2022 when compared to the prior year, of which $172.4 million was associated with Riggs Distler. Included in electric infrastructure services revenues overall during 2022 was $69.7 million from emergency restoration services performed by Linetec, Riggs Distler, and National Powerline following storm damage to customers’ above-ground utility infrastructure in and around the Gulf Coast and eastern regions of the U.S. and Canada, compared to $65.3 million in the prior year. Centuri’s revenues derived from storm-related services vary from period to period due to the unpredictable nature of weather-related events, and when this type of work is performed, it typically generates a higher profit margin than core infrastructure services, due to improved operating efficiencies related to equipment utilization and absorption of fixed costs. The current year also includes approximately $229.5 million in incremental revenues, including $47.6 million from Riggs Distler, and from continued growth with gas infrastructure services customers under master service and bid agreements. Other revenues increased

$119.3 million, primarily due to $94.2 million of offshore wind revenue at Riggs Distler. This is stemming from two multi-year jobs that began in 2022 whereby Riggs Distler provides materials, subcontracted manufacturing, fabrication, and assembly of secondary steel components on shore, with delivery at a port facility for the offshore projects. Centuri revenues from contracts with Southwest totaled $134.7 million in 2022 and $102.3 million in 2021. Centuri accounts for services provided to Southwest at contractual prices.

Utility infrastructure services expenses increased $573.9 million, or 29%, between 2022 and 2021. The overall increase includes $405.1 million from Riggs Distler, and incremental costs related to the higher volume of work otherwise. Changes in mix of work caused in part by customers’ supply chain challenges, as well as inflation, led to higher input costs including fuel and subcontractor expenses, as well as increased project-related travel and equipment rental costs incurred to fulfill electric infrastructure services. Fuel costs alone increased $32.7 million, including $7.3 million related to Riggs Distler, and project-related travel expenses increased $12.7 million in 2022. A loss of $7.5 million was incurred on a gas infrastructure bid project during the year due to higher costs than anticipated and scheduling delays. This project is anticipated to reach substantial completion in the first quarter of 2023. Also included in total Utility infrastructure services expenses were general and administrative costs, which increased approximately $4 million between years, primarily attributable to higher costs incurred by Riggs Distler of $7 million, in addition to strategic review and severance costs of $6.1 million (combined), as well as other administrative costs due to the continued growth in the business. These were partially offset by lower incentive compensation costs in 2022 and $14 million in professional fees in connection with the acquisition of Riggs Distler in 2021, which did not recur. Gains on sale of equipment (reflected as an offset to Utility infrastructure services expenses) were approximately $6.4 million and $6.9 million in 2022 and 2021, respectively.

Depreciation and amortization expense increased $37.7 million between 2022 and 2021, of which $34.9 million relates to Riggs Distler. The remaining increase was attributable to equipment and computer systems purchased to support the growing volume of infrastructure work overall. Depreciation expense, relative to the revenues recorded, was generally consistent during 2022 compared to 2021.

The increase in net interest deductions of $40.4 million was primarily due to incremental outstanding borrowings in connection with the 2021 acquisition of Riggs Distler under Centuri’s $1.445 billion amended and restated secured revolving credit and term loan facility, in addition to higher interest rates on outstanding variable-rate borrowings.

Income tax expense decreased $13 million between 2022 and 2021, primarily due to reduced profitability in 2022.

Results of Pipeline and Storage

The pipeline and storage entities of MountainWest were part of an acquisition on December 31, 2021, which have since been sold to Williams (closed on February 14, 2023). Operating results for the Pipeline and Storage segment during 2022 included rate-regulated transmission and subscription storage revenues of $248.3 million. Results include a goodwill impairment loss of $449.6 million as a result of the sale of MountainWest at a price less than the equity interests in MountainWest. Operating expenses also include approximately $26 million related to the stand-up of processes and systems which, following the earlier

acquisition, were under a Transition Services Agreement with the previous seller, in addition to certain employee retention payments.

Rates and Regulatory Proceedings

Southwest is subject to the regulation of the Arizona Corporation Commission (the “ACC”), the Public Utilities Commission of Nevada (the “PUCN”), the California Public Utilities Commission (the “CPUC”), and the Federal Energy Regulatory Commission (the “FERC”). Due to the size of Southwest’s regulated operations and the frequency of rate cases and other procedural activities with its commissions, the following discussion focuses primarily on the proceedings within its natural gas distribution operations.

General Rate Relief and Rate Design

Rates charged to customers vary according to customer class and rate jurisdiction and are set by the individual state and federal regulatory commissions that govern Southwest’s service territories. Southwest makes periodic filings for rate adjustments as the cost of providing service (including the cost of natural gas purchased) changes, and as additional investments in new or replacement pipeline and related facilities are made. Rates are intended to provide for recovery of all commission-approved costs and a reasonable return on investment. The mix of fixed and variable components in rates assigned to various customer classes (rate design) can significantly impact the operating margin actually realized by Southwest. Management has worked with its regulatory commissions in designing rate structures that strive to provide affordable and reliable service to its customers while mitigating volatility in prices to customers and stabilizing returns to investors. Such rate structures were in place in all of Southwest’s operating areas during all periods for which results of natural gas distribution operations are disclosed above.

Arizona Jurisdiction

Arizona General Rate Case. In December 2021, Southwest filed a general rate case application proposing a revenue increase of approximately $90.7 million. Although updated rates related to the previous rate case became effective in January 2021, the most significant driver for the December 2021 request was the necessity to reflect in rates the substantial capital investments that have been made since the end of the test year in the previous case, including the customer information system implemented in May 2021. The filing was based on a test year ended August 31, 2021 and proposed a return on common equity of 9.90% relative to a target equity ratio of 51%. Southwest also proposed a twelve-month post-test year adjustment to reflect otherwise non-revenue producing plant in service as of August 31, 2022 and certain expense adjustments. Recovery (over three years) of the approximately $12 million related to the outstanding deferral balance associated with the LNG facility (see below) was included in the request, along with the approximate $2.1 million (also over three years) in late payment charges that were suppressed from customer accounts during the COVID-19 pandemic. A request to continue the Delivery Charge Adjustment (“DCA”), Southwest’s full-revenue decoupling mechanism, was also included, while the only proposed change to Southwest’s existing rate design contemplated the year-round offering of the Low Income Ratepayer Assistance program.

At a hearing held in September 2022, Southwest, the Utilities Division Staff (the “Staff”), and the Residential Utility Consumer Office jointly stipulated to several issues, including a target capital structure consisting of 50% equity and 50% debt; a 9.30% return on equity; and foregoing recovery of the requested COVID-19 moratorium waived late fees, as well as an acquisition premium related to the recent Graham County acquisition. Among the uncontested issues identified prior to the hearing were the continuation of the DCA mechanism, the continuation of the existing rate design, and Southwest’s alternate property tax expense calculation, reflecting actual incurred property tax expense in 2021, instead of a pro forma adjustment reflecting forecasted property tax expense. The Administrative Law Judge issued the Recommended Opinion and Order in mid-December 2022, and the ACC approved a modified final order at their January 10, 2023 open meeting, authorizing a $54.3 million increase. New rates were effective February 1, 2023.

Delivery Charge Adjustment. The DCA is filed each April, which along with other reporting requirements, contemplates a rate to recover the over- or under-collected margin tracker (decoupling mechanism) balance. An April 2022 request proposed a rate to return $10.5 million, the over-collected balance existing at the end of the first quarter 2022, which was approved effective July 1, 2022. A filing will be made prior to the end of April 2023 to request a rate to address the outstanding balance at March 31, 2023.

Tax Reform. A Tax Expense Adjustor Mechanism (“TEAM”) was approved in Southwest’s 2019 general rate case to timely recognize tax rate changes resulting from federal or state tax legislation following the TEAM implementation. In addition, the TEAM tracks and returns/recovers the revenue requirement impact of changes in amortization of EADIT (including that which resulted from 2017 U.S. federal tax reform) compared to the amount authorized in the most recently concluded rate case. In December 2021, Southwest filed its inaugural TEAM rate application, which proposed a $4.7 million refund, comprised of an approximate $9 million decrease in revenue requirement offset by an under-collected balance of $4.3 million. Staff issued a proposed order supporting the TEAM credit, which was approved by the ACC with rates effective November 1, 2022. In

December 2022, Southwest filed its second TEAM rate application, which proposes to update the TEAM surcredit effective April 2023 to incorporate a base revenue reduction of $6.6 million. A decision is anticipated in the second quarter of 2023.

Liquefied Natural Gas (“LNG”) Facility. In 2014, Southwest sought ACC preapproval to construct, operate, and maintain a 233,000 dekatherm LNG facility in southern Arizona. This facility is intended to enhance service reliability and flexibility related to natural gas deliveries in the southern Arizona area by providing a local storage option, connecting directly to Southwest’s distribution system. Southwest was ultimately granted approval for construction and deferral of costs. The facility was placed in service in December 2019. The capital costs and operating expenses associated with plant operation were approved and considered as part of Southwest’s 2019 general rate case. Approximately $12 million in costs, incurred following the in-service date of the facility and after the period considered as part of the 2019 general rate case, were deferred in the authorized regulatory asset. These costs will be amortized over four years consistent with the ACC’s decision in the most recent general rate case.

Customer-Owned Yard Line (“COYL”) Program. Southwest originally received approval, in connection with its 2010 Arizona general rate case, to implement a program to conduct leak surveys, and if leaks were present, to replace and relocate service lines and meters for Arizona customers whose meters were set off from the customer’s home, representing a non-traditional configuration. A filing in May 2021 proposed the recovery of previously unrecovered surcharge revenue from 2019 and 2020 (collectively, $13.7 million) over a one-year period. Such amounts related to plant investments that were made in advance of those periods. In November 2021, the ACC approved full recovery within the proposed timeline, the rate for which was implemented the same month. In a February 2022 filing, Southwest requested and received approval to increase its surcharge revenue by $3.4 million to recover the revenue requirement associated with investments made since August 2020 and through calendar year 2021. The rate was implemented in June 2022. A decrease in the COYL rate became effective in November 2022 to reflect the expiration of the collection period associated with the 2019 and 2020 COYL program revenue referred to above. Recovery of the remaining investments is ongoing.

Vintage Steel Pipe Program (“VSP”). Southwest received approval, in connection with its 2016 Arizona general rate case, to implement a VSP replacement program, due to having a substantial amount of pre-1970s vintage steel pipe in Arizona. However, as part of Southwest’s 2020 rate case decision, the ACC ultimately decided to discontinue the accelerated VSP program. A filing in May 2021 proposed the recovery of previously unrecovered surcharge revenue relating to investments during 2019 and 2020, with approximately $60 million to be recovered over a three-year period. In November 2021, the ACC approved full recovery over the proposed three-year timeline with updated rates, which became effective in March 2022.

Graham County Utilities. In April 2021, Southwest and Graham County Utilities, Inc. (“GCU”) filed a joint application with the ACC for approval to transfer assets of GCU to Southwest and extend Southwest’s Certificate of Public Convenience and Necessity to serve the more than 5,000 associated customers, for a purchase price of $3.5 million. Approval of the application by the ACC was received in December 2021, with final transfer in mid-January 2022. Former GCU customers retained their existing rates while Southwest’s most recent rate case was processed; however, the customers will move to Southwest’s rates February 1, 2023, consistent with the effective date of new rates associated with Southwest’s most recent general rate case.

California Jurisdiction

California General Rate Case. Southwest’s most recent general rate case concluded following an agreement in principle with the Public Advocate’s Office, unanimously approved by the CPUC on March 25, 2021, including a $6.4 million total combined revenue increase with a 10% return on common equity, relative to a 52% equity ratio. Approximately $4 million of the original proposed increase was associated with a North Lake Tahoe project that would not ultimately be completed by the beginning of 2021; consequently, the parties agreed to provide for recovery of the cost of service impacts of the project through the annual attrition filing. The rate case decision maintains Southwest’s existing 2.75% annual attrition adjustments and the continuation of the pension balancing account. It also includes cumulative expenditures totaling $119 million over the five-year rate cycle to implement risk-informed proposals, consisting of a school COYL replacement, meter protection, and pipe replacement programs. New rates were ultimately implemented April 1, 2021, with Southwest permitted to establish a general rate case memorandum account to track the impacts of a delay in the implementation of new rates (between January 1, 2021 and the date rates were implementation) for purposes of later recovery.

Attrition Filing. Following the 2021 implementation of new rates approved as part of the recently concluded general rate case, Southwest is also authorized to continue annual Post Test Year (“PTY”) attrition increases of 2.75%, the first of which began in January 2022, with the latest such increase effective in January 2023.

Customer Data Modernization Initiative (“CDMI”). In April 2019, Southwest filed an application with the CPUC seeking authority to establish a two-way, interest-bearing balancing account to record costs associated with the CDMI to mitigate adverse financial implications related to the multi-year project (including a new customer information system, ultimately implemented in May 2021). Effective October 2019, the CPUC granted a memorandum account, which allowed Southwest to track costs, including operations and maintenance costs and capital-related costs, such as depreciation, taxes, and return

associated with California’s portion of the CDMI (initially estimated at $19 million). The balance tracked in the memorandum account was transferred to the two-way balancing account in July 2020. A rate to begin recovering the balance accumulated through June 30, 2020 was established and made effective September 1, 2020, and updated multiple times since, including in January 2023, with ongoing updates expected at least annually.

Carbon Offset Program. In March 2022, Southwest filed an application to seek approval to offer a voluntary program to California customers to purchase carbon offsets in an effort to provide customers additional options to reduce their respective GHG emissions. A request to establish a two-way balancing account to track program-related costs and revenues was included as part of the application. The CPUC issued Decision 22-09-010 dismissing Southwest’s application without prejudice. Southwest intends to file a new application in the second quarter 2023 addressing the concerns raised by third parties, which included a request to demonstrate that purchased offsets would result in GHG emissions reductions.

Building Decarbonization. A CPUC decision was issued regarding the elimination of monetary allowances for gas line extensions, a 10-year refundable payment option, and the 50% discount payment option for both residential and non-residential customers of all California gas utilities. This applies to new applications for gas line extensions submitted on or after July 1, 2023. Although this decision eliminates the various allowances related to line extensions, it does not preclude extending natural gas service to customers in California.

Residential Disconnection Protections. A decision was issued by the CPUC establishing disconnection protections for residential customers of small and multi-jurisdictional utilities, including Southwest. A similar decision was adopted for four large California utilities in 2020. This decision prohibits the utility from assessing credit deposits for residential customers in establishing or re-establishing service, and prohibits the assessment of reconnection fees for residential customers, among other provisions. The decision, however, also provides authorization to establish a two-way balancing account to track residential uncollectible charges for future recovery in a general rate case, subject to a relevant cap.

Nevada Jurisdiction

Nevada General Rate Case. Southwest filed its most recently concluded Nevada general rate case in August 2021, which was further updated by a certification filing in December 2021. The request proposed a combined revenue increase of approximately $28.7 million (as of the certification date); the most significant driver for which was the substantial capital investments that were made since the end of the test year in the previous case, including the customer information system implemented in May 2021. The filing included a proposed return on common equity of 9.90% with a target equity ratio of 51%; recovery of previously deferred late payment charges related to a regulatory asset associated with COVID-19; and continuation of full revenue decoupling under the General Revenues Adjustment (“GRA”) mechanism. On February 7, 2022, the parties filed a stipulation with the PUCN, providing for a statewide revenue increase of $14.05 million, a return on common equity of 9.40% relative to a 50% target equity ratio, and continuation of Southwest’s full revenue decoupling mechanism. The stipulation was approved by the PUCN, and new rates became effective April 1, 2022. The PUCN’s order did not include recovery of the approximate $6.6 million in deferred late payment charges related to a regulatory asset associated with COVID-19, which had previously been reserved.

General Revenues Adjustment. As noted above, the continuation of the GRA was affirmed as part of Southwest’s most recent general rate case with an expansion to include a large customer class (with average monthly throughput requirements greater than 15,000 therms), effective April 2022. Southwest makes Annual Rate Adjustment (“ARA”) filings to update rates to recover or return amounts associated with various regulatory mechanisms, including the GRA. Southwest made its most recent ARA filing in November 2022 related to balances as of September 30, 2022, with new rates expected to become effective July 1, 2023. While there is no impact to net income overall from adjustments to recovery rates associated with the related regulatory balances, operating cash flows are impacted by such changes.

COYL Program. In August 2021, Southwest filed a joint petition with the Regulatory Operations Staff of the PUCN proposing a Nevada COYL replacement program to include residential COYLs, public school COYLs, and any other COYLs that are identified to be a safety concern. The petition was approved in January 2022 and provides for capital investments up to $5 million per year for five years and the establishment of a regulatory asset to track the capital-related costs. After five years, the program will be reassessed to determine if it should be continued.

Infrastructure Replacement Mechanism. In 2014, the PUCN approved final rules for the Gas Infrastructure Replacement (“GIR”) mechanism, which provided for the deferral and recovery of certain costs associated with accelerated replacement of qualifying infrastructure that would not otherwise provide incremental revenues between general rate cases. Associated with the replacement of various types of pipe infrastructure under the mechanism (Early Vintage Plastic Pipe, COYL, and VSP), the related regulations provide Southwest with the opportunity to file a GIR “Advance Application” annually to seek preapproval of qualifying replacement projects.

In cases where preapproval of projects is requested and granted, a GIR rate application is separately filed to reset the GIR recovery surcharge rate related to previously approved and completed projects. On September 27, 2022, Southwest filed its latest rate application to reset the recovery surcharge in January 2023 to include cumulative deferrals through August 31, 2022. However, in November 2022, Southwest reached a settlement with parties to discontinue the GIR, and determined it would not plan to seek further ratemaking recovery, related to which, it wrote off the immaterial remaining balance.

Conservation and Energy Efficiency. The PUCN allows deferral (and later recovery) of approved conservation and energy efficiency costs, recovery rates for which are adjusted in association with ARA filings. In its November 2022 ARA filing, Southwest proposed an annualized margin increase of $139,000 and a decrease of $290,000 for southern and northern Nevada, respectively. A PUCN decision is anticipated in the second quarter 2023 with rates expected to become effective July 2023. Separately, in May 2022, Southwest filed an application seeking approval of its annual Conservation and Energy Efficiency Plan Report for 2021, with no proposed modifications to the previously approved $1.3 million annual budget for years 2022-2024. The parties reached a stipulation that was approved by the PUCN in July 2022.

Expansion and Economic Development Legislation. In January 2016, final regulations were approved by the PUCN associated with legislation (“SB 151”) previously introduced and signed into law in Nevada. The legislation authorized natural gas utilities to expand their infrastructure to provide service to unserved and underserved areas in Nevada.

In November 2017, Southwest filed for preapproval of a project to extend service to Mesquite, Nevada, in accordance with the SB 151 regulations, which was ultimately approved. Southwest provides periodic updates, and requests adjustment of recovery rates (as part of ARA filings and other rate proceedings) for the revenue requirement associated with the investments to serve customers. As of December 2022, approximately 49 miles of natural gas infrastructure have been installed throughout the Mesquite expansion area.

In June 2019, Southwest filed for preapproval to construct the infrastructure necessary to expand natural gas service to Spring Creek, near Elko, Nevada, and to implement a cost recovery methodology to recover the associated revenue requirement consistent with the SB 151 regulations. The expansion facilities consist of a high-pressure approach main and associated regulator stations, an interior backbone, and an extension of the distribution system from the interior backbone. The total capital investment was estimated to be $61.9 million. A stipulation was reached with the parties and approved by the PUCN in December 2019, including a rate recovery allocation amongst northern Nevada, Elko, and Spring Creek expansion customers. Construction began in the third quarter of 2020, with service to customers starting in December 2020. As of December 2022, approximately 60 miles of natural gas infrastructure have been installed throughout the Spring Creek expansion area, with completion anticipated in 2026.

Carbon Offset Program. In June 2021, Southwest filed an application to seek approval to offer a voluntary program to northern and southern Nevada customers to purchase carbon offsets in an effort to provide customers additional options to reduce their GHG emissions. A request to establish a regulatory asset to track program-related costs and revenues was included as part of the application. The parties reached a stipulation that was approved by the PUCN in December 2021, approving Southwest’s proposal. The program opened for participation in the fourth quarter of 2022.

FERC Jurisdiction

General Rate Case. Great Basin Gas Transmission Company (“Great Basin”), a wholly owned subsidiary of Southwest, reached an agreement in principle with the FERC Staff providing that its three largest transportation customers and all storage customers would be required to have primary service agreement terms of at least five years, that term-differentiated rates would continue generally, and included a 9.90% pre-tax rate of return. Interim rates were made effective February 2020. As part of the settlement, Great Basin will not file a rate case later than May 31, 2025.

MountainWest Overthrust Pipeline. On September 22, 2022, the FERC issued an order initiating an investigation, pursuant to section 5 of the Natural Gas Act, to determine whether rates currently charged by MountainWest Overthrust Pipeline, LLC, a subsidiary of MountainWest, are just and reasonable and setting the matter for hearing (the “Section 5 Rate Case”). Unless earlier settled by the parties, a hearing on the matter is to commence on August 1, 2023 with an initial decision from the presiding administrative law judge due by November 14, 2023. Under the terms of the MountainWest Purchase Agreement, the Company is obligated, for a period of four years following the closing of the sale of MountainWest, to indemnify Williams and MountainWest for any damages and liabilities resulting from the Section 5 Rate Case, including any reduction to the current applicable rate, up to a cap of $75 million. Williams has agreed that it will not enter into any settlement of the Section 5 Rate Case that will result in any damages being paid by the Company under such indemnity without the prior written consent of the Company (and such consent shall not be unreasonably withheld). The range of loss, if any, that could result from this matter cannot currently be estimated.

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- or under-collections. Balances are recovered from or refunded to customers on an ongoing basis with interest. As of December 31, 2022, under-collections in each of Southwest’s service territories resulted in an asset of approximately $450.1 million on the Company’s and Southwest’s Consolidated Balance Sheets. The market price of natural gas spiked due to numerous market forces including historically low storage levels, unexpected upstream pipeline maintenance events, and cold weather conditions across the western region in the latter part of 2022 and continuing into January 2023. As a result of this increase in pricing, Southwest entered into a $450 million term loan in order to fund the incremental cost. We may be required to incur additional indebtedness in connection with future spikes in natural gas prices as a result of extreme weather events or otherwise. See also Deferred Purchased Gas Costs in Note 1 - Background, Organization, and Summary of Significant Accounting Policies.

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 operating margin. However, gas cost deferrals and recoveries can impact comparisons between periods of individual consolidated income statement components. These include Regulated operations revenues, Net cost of gas sold, Net interest deductions, and Other income (deductions).

The following table presents Southwest’s outstanding PGA balances receivable/(payable) at the end of its two most recent fiscal years:

Arizona PGA Filings. In Arizona, Southwest calculates the change in the gas cost component of customer rates monthly (to allow for timely refunds to/recoveries from customers), utilizing a rolling twelve-month average. During 2022, the Gas Cost Balancing Account continued with a surcharge in order to recover the under-collected balance.

California Gas Cost Filings. In California, a monthly gas cost adjustment based on forecasted monthly prices is utilized. Monthly adjustments modeled in this fashion provide the timeliest recovery of gas costs in any Southwest jurisdiction.

Nevada ARA Application. In November 2022, Southwest filed to adjust its quarterly Deferred Energy Account Adjustment rate, which is based upon a twelve-month rolling average, in addition to requesting adjusted Base Tariff Energy rates, both of which were most recently approved effective July 2022. These new rates are intended to address the outstanding balances over a twelve-month period.

Gas Price Volatility and Mitigation

To mitigate price volatility to its customers, Southwest periodically enters into fixed-price term contracts under its volatility mitigation programs for up to 25% of the California jurisdictions’ annual normal weather supply needs and to a limited extent, in the Arizona jurisdiction. For the 2022/2023 heating season, contracts contained in the fixed-price portion of the supply portfolio ranged from approximately $4.59 to approximately $9.89 per dekatherm. In consultation with its regulators, for periods beyond October 2020, Southwest currently does not plan to make any fixed-price term purchases in other than California (as set above), nor to enter into swap agreements. Southwest’s natural gas purchases, not covered by fixed-price contracts, are under variable-price contracts with firm quantities, or on the spot market. The contract price for these contracts is either determined at the beginning of each month to reflect the published first-of-month index price, or at market prices based on a published daily price index. In each case, the index price is not published or known until the purchase period begins.

Pipeline Safety Regulation

In July 2021, the PUCN issued an order revising its regulations to require annual leak surveys (previously every three years) of all distribution pipelines transporting natural gas and/or liquefied petroleum, effective January 1, 2023. In conjunction with this change, the PUCN authorized the establishment of a regulatory asset account to track the incremental cost of compliance related to the new regulation, for consideration in a future general rate case filing.

In March 2022, the Pipeline and Hazardous Materials Safety Administration (“PHMSA”) issued final rules that amended the federal pipeline safety regulations applicable to the valve installation and minimum rupture detection standards for gas transmission pipelines (effective October 2022). Southwest has integrated the requirements of this new rule into its operating procedures. In addition, in August 2022, PHMSA issued final rules that amended the federal pipeline safety regulations applicable to the integrity management of gas transmission pipelines (effective May 2023). Southwest is integrating the requirements of this new rule into its operating procedures related to repair criteria, integrity management improvements, cathodic protection, management of change, and other related gas transmission integrity related amendments.

Southwest continues to monitor changing pipeline safety legislation and participates, to the extent possible, in providing public comments and working with industry associations, such as the American Gas Association, in shaping regulatory language associated with these new mandates and reporting requirements. Additionally, management works with its state and federal commissions to develop customer rates that are responsive to incremental costs of compliance. However, due to the timing of when rates are implemented in response to new requirements, and as additional rules are developed, compliance requirements could impact expenses and the timing and amount of capital expenditures for Southwest.

Capital Resources and Liquidity

Historically, cash on hand and cash flows from operations have provided a substantial portion of cash used in investing activities (primarily construction expenditures and property additions). In recent years, Southwest has accelerated pipe replacement activities to fortify system integrity and reliability, including on an accelerated basis in association with certain gas infrastructure replacement programs. This activity has necessitated the issuance of both debt and equity securities to supplement cash flows from operations. The Company, in executing on its interim plans to fund the 2021 MountainWest acquisition, initially funded the transaction through short-term borrowings, which were expected to be refinanced through a multi-pronged permanent financing plan, part of which was executed during the first quarter of 2022 when the Company used $452 million in net proceeds from an underwritten offering of common stock to repay a portion of the short-term borrowings. Also, in September 2022, the Company amended the short-term borrowing arrangement related to the remaining acquisition indebtedness to extend the maturity date to December 2023 and replace the benchmark borrowing rates. Upon the close of the MountainWest sale in February 2023, the Company paid down $1.075 billion of the term loan associated with the earlier acquisition indebtedness. The Company’s capitalization strategy is to maintain an appropriate balance of equity and debt to preserve investment-grade credit ratings, which help minimize interest costs. Investment-grade credit ratings have been maintained by the Company.

Cash Flows

Southwest Gas Holdings, Inc.:

Operating Cash Flows. Cash flows provided by consolidated operating activities increased $296 million between 2022 and 2021. The improvement in operating cash flows primarily resulted from the change in purchased gas costs in the PGA mechanism, including amounts incurred and deferred, as well as impacts related to when amounts are incorporated in customer bills to recover or return deferred balances. Amounts were greatly impacted due to the higher than expected natural gas costs during the winter period noted above in PGA Filings. Other impacts include a decrease in net income, and the impact of changes in components of working capital overall. Depreciation and amortization impact earnings, but not cash flows directly. As described above, an impairment was recognized related to the negotiated sale price associated with MountainWest, also impacting earnings, but did not impact cash flows directly in 2022.

The corporate and administrative expenses/outflows for Southwest Gas Holdings, Inc. include outlays related to stockholder activism and the strategic review, in addition to financing costs for debt used to fund the MountainWest acquisition.

Investing Cash Flows. Cash used in consolidated investing activities decreased $2.2 billion in 2022 as compared to 2021. The change was primarily due to the acquisitions of Riggs Distler by Centuri and MountainWest by Southwest Gas Holdings, Inc., in 2021, including post-closing true-up amounts under the agreements. The overall decrease was partly offset by an increase in capital expenditures in both the natural gas distribution and utility infrastructure services segments.

Financing Cash Flows. Net cash provided by consolidated financing activities decreased $2.7 billion in 2022 as compared to 2021. The change was primarily due to financing the acquisitions of MountainWest and Riggs Distler. The Company entered into a 364-day $1.6 billion Term Loan Facility to temporarily fund the MountainWest acquisition in 2021, and Centuri entered into an amended and restated credit agreement providing for a $1.145 billion secured term loan facility and a $400 million secured revolving credit facility, which in addition to funding the Riggs Distler acquisition, refinanced its previous $590 million loan facility in 2021.

The Company reduced its 364-day Term Loan facility through net proceeds of $452 million from the issuance of common stock in an underwritten public offering in 2022. Furthermore, debt proceeds were received by Southwest from a March 2022 issuance of $600 million in notes and an additional December 2022 issuance of $300 million in notes, offset by a pay down in

February 2022 of $25 million in 7.78% series Medium-term notes then maturing, as well as $250 million in notes maturing in April 2022.

The capital requirements and resources of the Company generally are determined independently for the individual business segments. Each business segment is generally responsible for securing its own financing sources. However, the holding company may raise funds through stock issuances or other external financing sources in support of each business segment.

Southwest Gas Corporation:

Operating Cash Flows. Cash flows provided by operating activities increased $259 million between 2022 and 2021. The improvement in operating cash flows was primarily attributable to the impacts related to deferred purchased gas costs and the related regulatory mechanism (described above), as well as changes in other working capital components overall.

Investing Cash Flows. Cash used in investing activities increased $69 million in 2022 as compared to 2021, primarily due to the increase in cash outlays for construction expenditures. See also 2022 Construction Expenditures below.

Financing Cash Flows. Net cash provided by financing activities decreased $175 million in 2022 as compared to 2021. During 2022 no parent capital was contributed to Southwest, but in 2021, over $200 million was contributed to Southwest. Southwest issued $600 million in notes in March 2022 used to pay down amounts then outstanding under its credit facility, paid down $25 million in maturing notes in February 2022, redeemed $250 million in notes maturing in April 2022, and issued an additional $300 million in notes in December 2022. In 2021, Southwest borrowed $250 million in a term loan for financing a gas cost run-up surrounding Winter Storm Uri and issued $300 million in notes. Other financing activity related to borrowing and repayments under Southwest’s credit facility.

2022 Construction Expenditures

During the three-year period ended December 31, 2022, total gas plant in service increased from $7.8 billion to $9.5 billion, or at an average annual rate of 7%. Replacement, new business, and reinforcement work was a substantial portion of the plant increase during the three-year noted. Customer growth impacted expenditures as Southwest set approximately 116,000 meters during this time, which is reflected in new business.

During 2022, construction expenditures (through cash outlays) for the natural gas distribution segment were $683 million. The majority of these expenditures represented costs associated with replacement of existing transmission and distribution plant to fortify system integrity and reliability, as well as general plant additions. Cash flows from operating activities of Southwest were $284 million, providing approximately 35% of construction expenditures and dividend requirements of the natural gas operations segment. Other funding was provided by cash on hand, external financing activities, and funds from the existing credit facility.

2022 Financing Activity

In March 2022, the Company sold, through a prospectus supplement under its Universal Shelf (as defined below), an aggregate of 6.325 million shares of common stock, with an underwritten public offering price of $74.00 per share, resulting in proceeds to the Company of $452.3 million, net of the underwriters discount of $15.8 million. These net proceeds were used to repay a portion of the outstanding borrowings under the 364-day term loan credit agreement to earlier fund the MountainWest acquisition.

As of December 31, 2022, the Company had up to $342 million of common stock available for sale under its Equity Shelf Program (as defined below). See Note 7 - Common Stock for more information.

Net proceeds received under the Dividend Reinvestment and Stock Purchase Plan during 2022 was approximately $10.5 million, from the issuance of approximately 142,000 shares of Southwest Gas Holdings, Inc. common stock.

Gas Segment Construction Expenditures, Debt Maturities, and Financing

Management estimates natural gas distribution segment construction expenditures during the three-year period ending December 31, 2025 will be approximately $2.0 billion. Of this amount, approximately $665 million to $685 million is expected to be incurred in 2023. Southwest plans to continue to request regulatory support to undertake projects, or to accelerate projects as necessary, for the improvement of system flexibility and reliability, or to expand, where relevant, to unserved or underserved areas. Southwest may expand existing, or initiate new, programs. Significant replacement activities are expected to continue well beyond the next few years. During the three-year period ending December 31, 2025, cash flows from operating activities of Southwest are expected to provide approximately 77% of the funding for gas operations of Southwest and total construction expenditures and dividend requirements. From a debt maturity standpoint, Southwest has a $225 million Term Loan due in March 2023. Any additional cash requirements, including construction-related, and any paydown or refinancing of debt, are expected to be provided by existing credit facilities, equity contributions from the Company, and/or other external financing sources. The timing, types, and amounts of any additional external financings will be dependent on a number of factors,

including the cost of gas purchases, conditions in the capital markets, timing and amounts of rate relief, timing and amounts of surcharge collections from, or amounts returned to, customers related to other regulatory mechanisms, as well as growth levels in Southwest’s service areas and earnings. External financings could include the issuance of debt securities, bank and other short-term borrowings, and other forms of financing.

Liquidity

Several factors (some of which are out of the control of the Company) that could significantly affect liquidity in future years include: variability of natural gas prices, changes in ratemaking policies of regulatory commissions, regulatory lag, customer growth in the natural gas distribution segment, the ability to access and obtain capital from external sources, interest rates, changes in income tax laws, pension funding requirements, inflation, and the level of earnings. Natural gas prices and related gas cost recovery rates, as well as plant investment, have historically had the most significant impact on liquidity, aside from the Company’s recent strategic undertakings, including acquisition and disposition undertakings.

On an interim basis, Southwest defers over- or under-collections of gas costs to PGA balancing accounts. In addition, Southwest uses this mechanism to either refund amounts over-collected or recoup amounts under-collected as compared to the price paid for natural gas during the period since the last PGA rate change went into effect. At December 31, 2022, the combined balance in the PGA accounts totaled an under-collection of $450.1 million. As described earlier, the market price of natural gas spiked as a result of numerous market forces including historically low storage levels, unexpected upstream pipeline maintenance events, and cold weather conditions across the western region in the latter part of 2022 and continuing into January 2023. As a result of this increase in pricing, in January 2023, Southwest entered into a 364-day $450 million term loan in order to fund the incremental cost. We may be required to incur additional indebtedness in connection with future spikes in natural gas prices as a result of extreme weather events or otherwise. See PGA Filings for more information.

In March 2022, Southwest amended its $250 million Term Loan (first borrowed in March 2021), extending the maturity date to March 21, 2023. The proceeds were originally used to fund the increased cost of natural gas supply during the month of February 2021 caused by extreme weather conditions in the central U.S. during Winter Storm Uri. The March 2021 Term Loan was extended as a result of the current gas cost environment and management’s funding plans for other gas purchases. At December 31, 2022, there was $225 million outstanding under the amended March 2021 Term Loan.

In March 2022, Southwest issued $600 million aggregate principal amount of 4.05% Senior Notes. The notes will mature in March 2032. Southwest used the net proceeds to redeem $250 million 3.875% notes due in April 2022 and to repay amounts then outstanding under its credit facility, with the remaining net proceeds used for general corporate purposes.

In December 2022, Southwest issued $300 million aggregate principal amount of 5.80% Senior Notes. The notes will mature in December 2027. Southwest used the net proceeds to repay amounts then outstanding under its credit facility, with the remaining net proceeds used for general corporate purposes.

Southwest Gas Holdings, Inc. has a credit facility with a borrowing capacity of $300 million that expires in December 2026. The total commitment amount available under the credit facility was increased by $100 million from $200 million to $300 million in December 2022. This facility is intended for short-term financing needs. At December 31, 2022, $173 million was outstanding under this facility, which was also the maximum amount outstanding during 2022.

Southwest has a credit facility with a borrowing capacity of $400 million, which expires in April 2025. Southwest designates $150 million of the facility for long-term borrowing needs and the remaining $250 million for working capital purposes. The maximum amount outstanding during 2022 occurred during the fourth quarter and was $285 million ($150 million outstanding on the long-term portion of the credit facility, none under the commercial paper program, in addition to $135 million outstanding on the short-term portion). As of December 31, 2022, $50 million was outstanding on the long-term portion of the credit facility (no borrowings were outstanding under the commercial paper program), and no borrowings were outstanding on the short-term portion. The credit facility has been used as necessary to meet liquidity requirements, including temporarily financing under-collected PGA balances, meeting the refund needs of over-collected balances, or temporarily funding capital expenditures. The credit facility has generally been adequate for Southwest’s working capital needs outside of funds raised through operations and other types of external financing.

Southwest has a $50 million commercial paper program. Any issuance under the commercial paper program is supported by the revolving credit facility and, therefore, does not represent additional borrowing capacity. Any borrowing under the commercial paper program is designated as long-term debt. Interest rates for the commercial paper program are calculated at the then current commercial paper rate. At December 31, 2022, there were no borrowings outstanding under this program.

Centuri has a senior secured revolving credit and term loan multi-currency facility. The line of credit portion comprises $400 million; associated amounts borrowed and repaid are available to be re-borrowed. The term loan facility portion provided approximately $1.145 billion in financing. The term loan facility expires on August 27, 2028 and the revolving credit facility expires on August 27, 2026. This multi-currency facility allows the borrower to request loan advances in either Canadian

dollars or U.S. dollars. The obligations under the credit agreement are secured by present and future ownership interests in substantially all direct and indirect subsidiaries of Centuri, substantially all of the tangible and intangible personal property of each borrower, certain of their direct and indirect subsidiaries, and all products, profits, and proceeds of the foregoing. Centuri assets securing the facility at December 31, 2022 totaled $2.5 billion. The maximum amount outstanding on the combined facility during 2022 was $1.221 billion, which occurred in the first quarter, at which point $1.117 billion was outstanding on the term loan facility. As of December 31, 2022, $82 million was outstanding on the revolving credit facility, in addition to $1.009 billion that was outstanding on the term loan portion of the facility. Also at December 31, 2022, there was approximately $254 million, net of letters of credit, available for borrowing under the line of credit.

In November 2022, Centuri amended the financial covenants of the revolving credit facility (the “Centuri Credit Facility Amendment”) to increase the maximum total net leverage ratio during the period from December 31, 2022 through December 31, 2023. The Credit Facility Amendment also transitioned the interest rate benchmark for the revolving credit facility from LIBOR to SOFR. The applicable margin for the revolving credit facility now ranges from 1.0% to 2.5% for SOFR loans and from 0.0% to 1.5% for CDOR and “base rate” loans, depending on Centuri’s total net leverage ratio. Further, the Centuri Credit Facility Amendment increases a letter of credit sub-facility from $100 million to $125 million. The Centuri Credit Facility Amendment did not modify any terms of the term loan facility.

In November 2021, the Company entered into a $1.6 billion delayed-draw Term Loan Facility that was funded on December 31, 2021 in connection with the acquisition of MountainWest. In March 2022, the Company used net proceeds from the issuance of common stock to repay a portion of borrowings under the Term Loan Facility. In September 2022, the Company entered into Amendment No. 1 to the Term Loan Facility. The amendment, among other things, (1) extended the maturity date of the Term Loan to December 30, 2023, and (2) replaced LIBOR interest rate benchmarks with SOFR interest rate benchmarks. There was $1.15 billion outstanding under this Term Loan Facility as of December 31, 2022. Upon the close of the MountainWest sale (February 14, 2023), the Company paid down $1.075 billion, resulting in an outstanding balance of $72 million as of the date of the date of closing the sale.

In April 2021, the Company entered into a Sales Agency Agreement between it and BNY Mellon Capital Markets, LLC and J.P. Morgan Securities LLC (the “Equity Shelf Program”) for the offer and sale of up to $500 million of common stock from time to time in an at-the-market offering program. There was no activity under this multi-year program in 2022. Net proceeds from the sales of shares of common stock under the Equity Shelf Program are intended for general corporate purposes, including the acquisition of property for the construction, completion, extension, or improvement of pipeline systems and facilities located in and around the communities served by Southwest, as well as for repayment or repurchase of indebtedness (including amounts outstanding from time to time under the credit facilities, senior notes, term loan or future credit facilities), and to provide for working capital. See Note 7 - Common Stock.

Interest rates for Centuri’s term loan contain LIBOR-based rates. Certain LIBOR-based rates were discontinued as a benchmark or reference rate after 2021, while other LIBOR-based rates are scheduled to be discontinued after June 2023. As of December 31, 2022, the Company had $1.009 billion in aggregate outstanding borrowings under Centuri’s term loan facility. The conversion to an alternate rate is not expected to have a material impact on its financial condition or results of operations; however, the alternative rate may be less predictable or less attractive than LIBOR.

Credit Ratings

Credit ratings apply to debt securities such as bonds, notes, and other debt instruments and do not apply to equity securities such as common stock. Borrowing costs and the ability to raise funds are directly impacted by the credit ratings of the Company. Credit ratings issued by nationally recognized ratings agencies (Moody’s Investors Service, Inc. (“Moody’s”), Standard & Poor’s Ratings Services (“Standard & Poor’s”), and Fitch Ratings (“Fitch”)) provide a method for determining the creditworthiness of an issuer. Credit ratings are important because long-term debt constitutes a significant portion of total capitalization. These credit ratings are a factor considered by lenders when determining the cost of current and future debt for each debt obligor (i.e., generally the better the rating, the lower the cost to borrow funds). The current unsecured long-term debt ratings of the companies are considered investment grade.

(1)Moody’s debt ratings range from Aaa (highest rating possible) to C (lowest quality, usually in default). A numerical modifier of 1 (high end of the category) through 3 (low end of the category) is included with the rating to indicate the approximate rank of a company within the range.

(2)Standard & Poor’s (“S&P”) debt ratings range from AAA (highest rating possible) to D (obligation is in default). The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus “+” or minus “-” sign to show relative standing within the major rating categories.

(3)Fitch debt ratings range from AAA (highest credit quality) to D (defaulted debt obligation). The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating categories.

A credit rating, including the foregoing, is not a recommendation to buy, sell, or hold a debt security, but is intended to provide an estimation of the relative level of credit risk of debt securities, and is subject to change or withdrawal at any time by the rating agency. Numerous factors, including many that are not within management’s control, are considered by the ratings agencies in connection with the assigning of credit ratings.

None of Southwest’s debt instruments have credit triggers or other clauses that result in default if these bond ratings are lowered by rating agencies. Interest and fees on certain debt instruments are subject to adjustment depending on Southwest’s bond ratings. Certain debt instruments are subject to a leverage ratio cap, and the 6.1% Notes due 2041 are also subject to a minimum net worth requirement. At December 31, 2022, Southwest was in compliance with all of its covenants. Under the most restrictive of the financial covenants, approximately $2.5 billion in additional debt could be issued and the leverage ratio requirement would still be met. At least $2 billion of cushion in equity relating to the minimum net worth requirement exists at December 31, 2022. No specific limitations as to dividends exist under the collective covenants. None of the debt instruments contain material adverse change clauses.

At December 31, 2022, Southwest Gas Holdings, Inc. was also in compliance with all of the covenants of its credit facility and 364-day Term Loan. Interest and fees on its credit facility and 364-day Term Loan are subject to adjustment depending on its senior debt ratings. The credit facility and 364-day Term Loan are subject to a leverage ratio cap. Under the most restrictive of the financial covenants, approximately $1 billion in additional debt could be issued while still meeting the leverage ratio requirement. No specific limitations as to dividends exist under the collective covenants. The credit facility and 364-day Term Loan do not contain material adverse change clauses.

Certain Centuri debt instruments have leverage ratio caps and interest coverage ratio requirements. At December 31, 2022, Centuri was in compliance with all of its covenants. Under the most restrictive of the covenants, Centuri could issue approximately $222 million in additional debt and meet the leverage ratio requirement. Centuri has approximately $33 million of cushion relating to the minimum interest coverage ratio requirement. Centuri’s revolving credit and term loan facility is secured by underlying assets of the utility infrastructure services segment. Centuri also has restrictions on how much it could give to the Company in cash dividends, which is limited to a calculated available amount, generally defined as 50% of its rolling twelve-month consolidated net income adjusted for certain items, such as parent contributions inflows, Linetec redeemable noncontrolling interest payments, or dividend payments, among other adjustments, as applicable.

Inflation

Inflation can impact results of operations for each of the Company’s business segments, and it has increased substantially over the past year. Labor, employee benefits, fuel, natural gas, professional services, and construction costs are the categories most significantly impacted by inflation. Changes to the cost of gas are generally recovered through PGA mechanisms and do not

significantly impact net earnings. Labor, employee benefits, and professional services are components of the cost of service, and gas infrastructure costs are the primary component of utility rate base. In order to recover increased costs, and earn a fair return on rate base, general rate cases or other procedural filings are made by our regulated operations, when deemed necessary, for review and approval by regulatory authorities. Regulatory lag, that is, the time between the date increased costs are incurred and the time such increases are recovered through the ratemaking process, can impact earnings. See Rates and Regulatory Proceedings for a discussion of recent rate case proceedings.

Contractual Obligations

Our largest contractual obligations as of December 31, 2022 consisted of:

•Debt-related obligations for scheduled principal payments, other borrowings, and interest payments over the life of the debt. Debt obligations are included in our consolidated balance sheets. See Note 8 - Debt for additional information.

•Centuri operating and finance leases are included in our consolidated balance sheets and represent multi-year obligations for buildings, land, equipment, and vehicles. Southwest and MountainWest operating and finance leases are immaterial. See Note 2 - Regulated Operations Plant and Leases for additional information.

•Southwest has gas purchase obligations that include fixed-price and variable-rate gas purchase contracts. Variable-rate contracts reflect minimum contractual obligations with estimation in pricing based on market information. Actual future variable-rate purchase commitments may vary depending on market prices at the time of delivery and values may change significantly from their estimated amounts. Certain other variable-rate contracts allow for variability in quantities for which associated demand charges are included in the gas purchase obligations based on the maximum daily quantities available under the contracts. Renewable natural gas purchase obligations, in which the commencement dates are not specifically determinable and the volumes and contract prices are inestimable until certain contract provisions are met, are excluded from gas purchase obligations. As of December 31, 2022, gas purchase obligations of $907 million are payable within the next 12 months.

•Southwest has pipeline capacity and storage contracts for firm transportation service, both on a short- and long-term basis with several companies in all of its service territories, some with terms extending to 2044. Southwest also has interruptible contracts in place that allow additional capacity to be acquired should an unforeseen need arise. Costs associated with these pipeline capacity contracts are a component of the cost of gas sold and are recovered from customers primarily through the PGA mechanisms. As of December 31, 2022 pipeline capacity and storage obligations of $89.8 million are payable within 12 months.

•Other commitments associated with noncancellable obligations consist primarily of software licensing, equipment, outsourced processing subscriptions, and operating and/or maintenance agreements, as applicable.

•Estimated funding for pension and other postretirement benefits during calendar year 2023 is $59.3 million. Funding amounts for years beyond 2023 are not currently known.

Recently Issued Accounting Standards Updates

The Financial Accounting Standards Board routinely issues Accounting Standards Updates. See Note 1 - Background, Organization, and Summary of Significant Accounting Policies for more information regarding these Accounting Standards Updates and their potential impact on the Company’s and Southwest’s financial position, results of operations, and disclosures.

Application of Critical Accounting Policies

A critical accounting policy is one that is very important to the portrayal of the financial condition and results of a company, and requires the most difficult, subjective, or complex judgments of management. The need to make estimates about the effect of items that are uncertain is what makes these judgments difficult, subjective, and/or complex. Management makes subjective judgments about the accounting and regulatory treatment of many items and bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments. These estimates may change as new events occur, as more experience is acquired, as additional information is obtained, and as the operating environment changes. While management may make many estimates and judgments, many would not be materially altered, or provide a material impact to the financial statements taken as a whole, if different estimates, or means of estimation were employed. The following are accounting policies that are deemed critical to the financial statements. For more information regarding significant accounting policies, see notes to the consolidated financial statements.

Regulatory Accounting

Natural gas distribution operations are subject to the specific regulation of the ACC, PUCN, CPUC, or the FERC, as applicable. The accounting policies of the Company and Southwest conform to U.S. GAAP applicable to rate-regulated entities and reflect the effects of the ratemaking process. As such, the Company and Southwest are allowed to defer, as regulatory assets, costs that otherwise would be expensed, if it is probable that future recovery from customers (subject to our rate-regulated operations) will occur. Companies are also permitted to recognize, as regulatory assets, amounts associated with various revenue

decoupling mechanisms, as long as the requirements of alternative revenue programs permitted under U.S. GAAP continue to be met. Management reviews the regulatory assets to assess their ultimate recoverability within the approved regulatory guidelines. If rate recovery is no longer probable, due to competition or the actions of regulators, write-off of the related regulatory asset (which would be recognized as current-period expense) is required. Regulatory liabilities are recorded if it is probable that revenues will be reduced for amounts that will be refunded to customers through the ratemaking process. The timing and inclusion of costs in rates is often delayed (regulatory lag) and results in a reduction of current-period earnings. Refer to Note 5 - Regulatory Assets and Liabilities.

Accrued Utility Revenues

Revenues related to the sale and/or delivery of natural gas are generally recorded when natural gas is delivered to customers. However, the determination of natural gas sales to individual customers is based on the reading of their meters, which is performed on a systematic basis throughout the month. At the end of each month, operating margin associated with natural gas service that has been provided but not yet billed is accrued. This accrued utility revenue is estimated each month based primarily on applicable rates, number of customers, rate structure, analyses reflecting significant historical trends, seasonality, and experience. The interplay of these assumptions can impact the variability of the accrued utility revenue estimates. All Southwest rate jurisdictions have decoupled rate structures, limiting variability due to extreme weather conditions.

Accounting for Income Taxes

The Company is subject to income taxes in the U.S. and Canada. Income tax calculations require estimates due to known future tax rate changes, book to tax differences, and uncertainty with respect to regulatory treatment of certain property items. The asset and liability method of accounting is utilized for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Regulatory tax assets and liabilities are recorded to the extent management believes they will be recoverable from, or refunded to, customers in future rates. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Management regularly assesses financial statement tax provisions to identify any change in the regulatory treatment or tax-related estimates, assumptions, or enacted tax rates that could have a material impact on cash flows, financial position, and/or results of operations.

Accounting for Pensions and Other Postretirement Benefits

Southwest has a noncontributory qualified retirement plan with defined benefits covering substantially all employees hired on or before December 31, 2021. In addition, there is a separate unfunded supplemental retirement plan which is limited to officers hired on or before December 31, 2021. Pension obligations and costs for these plans are affected by the amount and timing of cash contributions to the plans, the return on plan assets, discount rates, and by employee demographics, including age, compensation, and length of service. Changes made to the provisions of the plans may also impact current and future pension costs. Actuarial formulas are used in the determination of pension obligations and costs and are affected by actual plan experience and assumptions about future experience. Key actuarial assumptions include the expected return on plan assets, the discount rate used in determining the projected benefit obligation and pension costs, and the assumed rate of increase in employee compensation. Relatively small changes in these assumptions (particularly the discount rate) may significantly affect pension obligations and costs for these plans. For example, a change of 0.25% in the discount rate assumption would change the pension plan projected benefit obligation by approximately $39 million and future pension expense by $4 million. A change of 0.25% in the employee compensation assumption would change the pension obligation by approximately $10 million and expense by $2 million. A 0.25% change in the expected asset return assumption would change pension expense by approximately $3 million (but has no impact on the pension obligation).

At December 31, 2022, the discount rate was 5.25%, an increase from the 3.00% rate used at December 31, 2021. The methodology utilized to determine the discount rate was consistent with prior years. The weighted-average rate of compensation escalation remained at 3.25% at December 31, 2022, the same as the rate used at December 31, 2021. The asset return assumption is 6.75% to be used for 2023 expense, an increase from the 6.50% utilized for 2021. Pension costs for 2023 are estimated to decrease approximately $40 million as compared to that experienced in 2022. Future years’ expense level movements (up or down) will continue to be greatly influenced by long-term interest rates, asset returns, and funding levels.

Goodwill

Goodwill is assessed for impairment annually as of October, or more frequently, if events or changes in circumstances indicate an impairment may have occurred before that time. As permitted under accounting guidance on testing goodwill for impairment, we perform either a qualitative assessment or a quantitative assessment of each of our reporting units based on management’s judgment. Adjustment of values would only occur if conditions of impairment were deemed to be permanent. With respect to our qualitative assessments, we consider events and circumstances specific to us, such as macroeconomic

conditions, industry and market considerations, cost factors, and overall financial performance, when evaluating whether it is more likely than not that the fair values of our reporting units are less than their respective carrying amounts. The assumptions we use in our analysis, including discount rates, are subject to uncertainty, and declines in the future performance of our reporting units and changing business conditions could result in the recognition of impairment charges, which could be significant. The Company’s reporting units are the same as its segments for purposes of impairment evaluation. In December 2022, the Company announced the planned sale of MountainWest. The Board determined to sell MountainWest in order to simplify the business. As the consideration to be received for the sale was below the equity interests in MountainWest, the Company recorded held for sale losses, including a pre-tax goodwill impairment loss of $449.6 million in the fourth quarter of 2022. Further adjustments to this estimate are likely, as a result of post-closing true-up and validation processes contained in the sale agreement. See Note 15 - Acquisitions and Dispositions for additional information.

Held for Sale

The Company and Southwest recognize the assets and liabilities of a disposal group as held for sale in the period (i) they have approved and committed to a plan to sell the disposal group, (ii) the disposal group is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions to sell the disposal group have been initiated, (iv) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The disposal group that is classified as held for sale is initially measured at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Upon designation as held for sale, the Company stops recording depreciation expense and assesses the fair value of the disposal group less any costs to sell at each reporting period and until it is no longer classified as held for sale.

In December 2022, the Company entered into a definitive agreement to sell 100% of MountainWest in an all-cash transaction to Williams for $1.5 billion in total enterprise value, subject to certain adjustments, which closed on February 14, 2023. In addition to the loss attributable to goodwill impairment, as noted above, the Company recognized an additional loss of $5.8 million related to estimated costs to sell. We use judgment to estimate such costs to sell, including consulting with external advisors and attorneys and considering the level of such costs in prior transactions. See Note 15 - Acquisitions and Dispositions for additional information.

Business Combinations

In accordance with U.S. GAAP, the assets acquired and liabilities assumed in an acquired business are recorded at their estimated fair values on the date of acquisition. The amount of goodwill initially recognized in a business combination is based on the excess of the purchase price of the acquired company over the fair value of the other assets acquired and liabilities assumed. The determination of these fair values requires management to make significant estimates and assumptions. For example, assumptions with respect to the timing and amount of future revenues and expenses associated with an asset are used to determine its fair value, but the actual timing and amount may differ materially, resulting in impairment of the asset’s recorded value. In some cases, the Company engages independent third-party valuation firms to assist in determining the fair values of acquired assets and liabilities assumed. Critical assumptions used to value the trade name and customer relationship intangibles include, but are not limited to, future expected cash flows of the acquired business, trademarks, trade names, customer relationships, technology obsolescence, attrition rates, royalty rates, and discount rates. In addition, uncertain tax positions and tax-related valuation allowances assumed in connection with a business combination are initially estimated at the acquisition date. These items are reevaluated quarterly, based upon facts and circumstances that existed at the acquisition date with any adjustments to the preliminary estimates being recorded to goodwill, provided that the Company is within the twelve-month measurement period allowed by authoritative guidance. Subsequent to the measurement period or the final determination of the estimated value of the tax allowance or contingency, whichever comes first, changes to these uncertain tax positions and tax-related valuation allowances will affect the provision for income taxes in the Consolidated Statements of Income, and could have a material impact on the Company’s results of operations and financial position. Refer to Note 15 - Acquisitions and Dispositions.

Certifications

The SEC requires the filing of certifications of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of registrants regarding reporting accuracy, disclosure controls and procedures, and internal control over financial reporting as exhibits to periodic filings. The CEO and CFO certifications for the period ended December 31, 2022 are included as exhibits to the 2022 Annual Report on Form 10-K filed with the SEC.

Forward-Looking Statements

This annual report contains contains statements which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“Reform Act”). All statements other than statements of historical fact included or incorporated by reference in this annual report are forward-looking statements, including, without limitation,

statements regarding the Company’s plans, objectives, goals, intentions, projections, strategies, future events or performance, negotiations, and underlying assumptions. The words “may,” “if,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “continue,” “forecast,” “intend,” “endeavor,” “promote,” “seek,” and similar words and expressions are generally used and intended to identify forward-looking statements. For example, statements regarding plans to refinance near-term maturities, to spin-off Centuri from the Company, those regarding operating margin patterns, customer growth, the composition of our customer base, price volatility, seasonal patterns, the ability to pay debt, the Company’s COLI strategy, the magnitude of future acquisition or divestiture purchase price true-ups and related impairments or losses related thereto, replacement market and new construction market, impacts from pandemics, including on our employees, customers, business, financial position, earnings, bad debt expense, work deployment and related uncertainties, expected impacts of valuation adjustments associated with any redeemable noncontrolling interests, the profitability of storm work, mix of work, or absorption of fixed costs by larger infrastructure services customers including Southwest, the impacts of U.S. tax reform including disposition in any regulatory proceeding and bonus depreciation tax deductions, the impact of recent PHMSA rulemaking, the amounts and timing for completion of estimated future construction expenditures, plans to pursue infrastructure programs or programs under SB151 legislation, forecasted operating cash flows and results of operations, net earnings impacts or recovery of costs from gas infrastructure replacement and COYL programs and surcharges, funding sources of cash requirements, amounts generally expected to be reflected in future period revenues from regulatory rate proceedings including amounts requested or settled from recent and ongoing general rate cases or other regulatory proceedings, rates and surcharges, PGA administration, recovery and timing, and other rate adjustments, sufficiency of working capital and current credit facilities or the ability to cure negative working capital balances, bank lending practices, the Company’s views regarding its liquidity position, ability to raise funds and receive external financing capacity and the intent and ability to issue various financing instruments and stock under the existing at-the-market equity program or otherwise, if necessary, future dividends or increases and the Board’s current target dividend payout ratio, pension and postretirement benefits, certain impacts of tax acts, the effect of any other rate changes or regulatory proceedings, contract or construction change order negotiations, impacts of accounting standard updates, statements regarding future gas prices, gas purchase contracts and pipeline imbalance charges or claims related thereto, recoverability of regulatory assets, the impact of certain legal proceedings or claims, and the timing and results of future rate hearings, including any ongoing or future general rate cases and other proceedings, and statements regarding pending approvals are forward-looking statements. All forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act.

A number of important factors affecting the business and financial results of the Company could cause actual results to differ materially from those stated in the forward-looking statements. These factors include, but are not limited to, customer growth rates, conditions in the housing market, inflation, interest rates and related government actions, sufficiency of labor markets and ability to timely hire qualified employees or similar resources, acquisition and divestiture decisions including prices paid or received and their impacts to impairments, write-downs, or losses generally, the impacts of pandemics including that which may result from a restriction by government officials or otherwise, including impacts on employment in our territories, the health impacts to our customers and employees, the ability to collect on customer accounts due to the suspension or lifted moratorium on late fees or service disconnection in any or all jurisdictions, the ability to obtain regulatory recovery of related costs, the ability of the infrastructure services business to conduct work and the impact of a delay or termination of work, and decisions of Centuri customers (including Southwest) as to whether to pursue capital projects due to economic impacts resulting from a pandemic or otherwise, the ability to recover and timing thereof related to costs associated with the PGA mechanisms or other regulatory assets or programs, the effects of regulation/deregulation, governmental or regulatory policy regarding pipeline safety, greenhouse gas emissions, natural gas, including potential prohibitions on the use of natural gas appliances, or alternative energy, the regulatory support for ongoing infrastructure programs or expansions, the timing and amount of rate relief, the timing and methods determined by regulators to refund amounts to customers resulting from U.S. tax reform, changes in rate design, variability in volume of gas or transportation and storage service sold to customers, changes in gas procurement practices, changes in capital requirements and funding, the impact of credit rating actions and conditions in the capital markets on financing costs, the impact of variable rate indebtedness associated with a discontinuance of LIBOR including in relation to amounts of indebtedness then outstanding, changes in construction expenditures and financing, levels of or changes in operations and maintenance expenses, effects of pension or other postretirement benefit expense forecasts or plan modifications, accounting changes and regulatory treatment related thereto, currently unresolved and future liability claims and disputes, changes in pipeline capacity for the transportation of gas and related costs, results of Centuri bid work, the impact of weather on Centuri’s operations, projections about acquired business’ earnings, or those that may be planned, future acquisition-related costs, differences between actual experience and projections in costs to integrate or stand up portions of newly acquired business operations, impacts of changes in the value of any redeemable noncontrolling interests if at other than fair value, Centuri utility infrastructure expenses, differences between actual and originally expected outcomes of Centuri bid or other fixed-price construction agreements, outcomes from contract and change order negotiations, ability to successfully procure new work and impacts from work awarded or failing to be awarded from significant customers (collectively, including from Southwest), the mix of work awarded, the amount of work awarded to Centuri following work stoppages or reduction, the

result of productivity inefficiencies from regulatory requirements, customer supply chain challenges, or otherwise, delays in commissioning individual projects, acquisitions and management’s plans related thereto, the ability of management to successfully finance, close, and assimilate any acquired businesses, the timing and ability of management to successfully separate Centuri from the Company, the impact on our stock price or our credit ratings due to undertaking or failing to undertake acquisition or divestiture activities or other strategic endeavors, the impact on our stock price, costs, actions or disruptions or continuation thereof related to significant stockholders and their activism, competition, our ability to raise capital in external financings, our ability to continue to remain within the ratios and other limits subject to our debt covenants, and ongoing evaluations in regard to goodwill and other intangible assets. In addition, the Company can provide no assurance that its discussions regarding certain trends or plans relating to its financing and operating expenses will continue, proceed as planned, cease to continue, or fail to be alleviated, in future periods. For additional information on the risks associated with the Company’s business, see Item 1A. Risk Factors and Item 7A. Quantitative and Qualitative Disclosures About Market Risk in this Annual Report on Form 10-K for the year ended December 31, 2022.

All forward-looking statements in this annual report are made as of the date hereof, based on information available to the Company and Southwest as of the date hereof, and the Company and Southwest assume no obligation to update or revise any of their forward-looking statements even if experience or future changes show that the indicated results or events will not be realized. We caution you to not rely unduly on any forward-looking statement(s).

Common Stock Price and Dividend Information

The principal market on which the common stock of the Company is traded is the New York Stock Exchange and the ticker symbol of the stock is “SWX.” At February 15, 2023, there were 10,711 holders of record of common stock, and the market price of the common stock was $64.98.

Dividends are payable on the Company’s common stock at the discretion of the Board of Directors (the “Board”). In setting the dividend rate, the Board considers, among other factors, current and expected future earnings levels, our ongoing capital expenditure plans and expected external funding needs, our payout ratio, and our ability to maintain credit ratings and liquidity. The quarterly common stock dividend declared was $0.57 per share throughout 2020, $0.60 per share throughout 2021, and $0.62 per share throughout 2022. The Company has paid dividends on its common stock since 1956. In February 2023, the Board determined to keep the quarterly dividend at $0.62, effective with the June 2023 payment.

SOUTHWEST GAS HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Thousands of dollars, except par value)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

About Southwest Gas Holdings, Inc.

Southwest Gas Holdings, Inc. is a holding company that owns all of the shares of common stock of Southwest Gas Corporation (“Southwest” or the “natural gas distribution” segment), all of the shares of common stock of Centuri Group, Inc. (“Centuri” or the “utility infrastructure services” segment), as well as all of the membership interests in the newly formed MountainWest Pipelines Holding Company, which owns all recently acquired membership interests in Dominion Energy Questar Pipeline, LLC and related entities (herein referred to interchangeably as “Questar Pipelines” or “MountainWest”). MountainWest is operated as a third operating segment and accordingly, management will refer to this segment as the “pipeline and storage” segment. Southwest was previously referred to as the natural gas operations segment. Southwest Gas Holdings, Inc. and its subsidiaries are collectively referred to as the “Company.”

On December 31, 2021, the Company completed the acquisition of Questar Pipelines. The operations acquired further diversify the Company’s business including an essential Rocky Mountain energy hub with over 2,000 miles of highly contracted, FERC-regulated interstate natural gas pipelines providing transportation and underground storage services in Utah, Wyoming, and Colorado. See Note 15 - Business Acquisitions for additional information. The total consideration for the acquisition was $1.576 billion, including certain post-closing payments, financed through a $1.6 billion draw under a 364-day term loan entered into in November 2021, which we intend to replace with permanent financing during the course of 2022. See Note 8 - Debt for more information.

In August 2021, the Company, facilitated through Centuri, acquired the parent company of Riggs Distler, Inc. (“Riggs Distler”), thereby expanding the footprint of the utility infrastructure services segment, which is further discussed in Note 15 - Business Acquisitions.

On October 10, 2021, our Board of Directors (the “Board”) authorized and declared a dividend of one preferred stock purchase right for each share of common stock outstanding to stockholders of record at the close of business on October 21, 2021. See Note 7 - Common Stock.

On March 1, 2022, the Company announced that its Board determined to separate Centuri from Southwest Gas Holdings, Inc. and has authorized management to complete the separation within the next nine to twelve months. Management intends to evaluate various alternatives to determine the optimal structure to maximize stockholder value. Depending on the form the separation takes, it will likely be subject to a number of conditions. There can be no assurances that the Company will be able to successfully separate Centuri on the anticipated timeline or at all.

Southwest is engaged in the business of purchasing, distributing, and transporting natural gas for customers in portions of Arizona, Nevada, and California. Southwest is the largest distributor of natural gas 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 majority of southern Nevada, including the Las Vegas metropolitan area, and portions of northern Nevada. In addition, Southwest distributes and transports natural gas for customers in portions of California, including the Lake Tahoe area and the high desert and mountain areas in San Bernardino County. Through its subsidiaries, Southwest operates two federally regulated interstate pipelines serving portions of the foregoing northern territories of Nevada and California.

As of December 31, 2021, Southwest had 2,159,000 residential, commercial, industrial, and other natural gas customers, of which 1,153,000 customers were located in Arizona, 803,000 in Nevada, and 203,000 in California. First-time meter sets were approximately 37,000 in 2021 and 2020. In comparison to the December 31, 2020 total of 2,123,000 customers, there was an offsetting decrease related to management’s lifting its moratorium on disconnection of service for non-payment, which it previously implemented in March 2020 (in addition to customer late payment relief), due to the impact of the COVID-19 pandemic on customers. Southwest recommenced assessing late fees in Nevada and Arizona in April 2021, and in California in August 2021. The moratorium on disconnections for non-payment was lifted in September 2021 for Arizona and Nevada, and in November 2021 for California. Residential and commercial customers represented over 99% of the total customer base. During 2021, 54% of operating margin (gas operating revenues less the net cost of gas sold) was earned in Arizona, 34% in Nevada, and 12% in California. During this same period, Southwest earned 85% of its operating margin from residential and small commercial customers, 4% from other sales customers, and 11% from transportation customers. These general patterns are expected to remain materially consistent for the foreseeable future.

Southwest recognizes operating revenues from the distribution and transportation of natural gas (and related services) to customers. Operating margin is a financial measure defined by management as gas operating revenues less the net cost of gas sold. However, operating margin is not specifically defined in accounting principles generally accepted in the United States (“U.S. GAAP”). Thus, operating margin is considered a non-GAAP measure. Management uses this financial measure because

natural gas operating revenues include the net cost of gas sold, which is a tracked cost that is passed through to customers without markup under purchased gas adjustment (“PGA”) mechanisms. Fluctuations in the net cost of gas sold impact revenues on a dollar-for-dollar basis, but do not impact operating margin or operating income. Therefore, management believes operating margin provides investors and other interested parties with useful and relevant information to analyze Southwest’s financial performance in a rate-regulated environment. The principal factors affecting changes in operating margin are general rate relief (including impacts of infrastructure trackers) and customer growth. Commission decisions on the amount and timing of such relief may impact our earnings. Refer to the Summary Operating Results table below for a reconciliation of Gross margin to operating margin, and refer to Rates and Regulatory Proceedings in this Management’s Discussion and Analysis for details of various rate proceedings.

The demand for natural gas is seasonal, with greater demand in the colder winter months and decreased demand in the warmer summer months. All of Southwest’s service territories have decoupled rate structures (alternative revenue programs), which are designed to eliminate the direct link between volumetric sales and revenue, thereby mitigating the impacts of weather variability and conservation on operating margin, allowing Southwest to pursue energy efficiency initiatives.

Centuri is a strategic infrastructure services company that partners with regulated utilities to build and maintain the energy network that powers millions of homes and businesses across the United States (“U.S.”) and Canada. With an unwavering commitment to serve as long-term partners to customers and communities, Centuri’s employees enable regulated utilities to safely and reliably deliver natural gas and electricity as well as achieve their goals for environmental sustainability. Centuri operates in 68 primary locations across 45 states and provinces in the U.S. and Canada. Centuri operates in the U.S. primarily as NPL, Neuco, Linetec, Riggs Distler, and in Canada, primarily as NPL Canada.

Utility infrastructure services activity can be impacted by changes in infrastructure replacement programs of utilities, weather, and local and federal regulation (including tax rates and incentives). Utilities continue to implement or modify system integrity management programs to enhance safety pursuant to federal and state mandates. These programs have resulted in multi-year utility system replacement programs throughout the U.S. Generally, Centuri revenues are lowest during the first quarter of the year due to less favorable winter weather working conditions. Revenues typically improve as more favorable weather conditions occur during the summer and fall months. In cases of severe weather, such as following a regional storm, Centuri may be engaged to perform restoration activities related to above-ground utility infrastructure, and related results impacts are not solely within the control of management. In addition, in certain circumstances, such as with large bid contracts (especially those of a longer duration), or unit-price contracts with revenue caps, results may be impacted by differences between costs incurred and those anticipated when the work was originally bid. Work awarded, or failing to be awarded, by individual large customers can impact operating results.

MountainWest is an interstate natural gas transmission pipeline company that provides transportation and underground storage services to customers in Utah, Wyoming, and Colorado. A substantial portion of its revenue results from reservation charges, but variable rates are also included as part of its primarily rate-regulated rate structures.

COVID-19 Pandemic

While the novel coronavirus (“COVID-19”) pandemic has been ongoing since the first quarter of 2020, management has remained focused on the impacts to local and U.S. economies. Our utility operations, as essential services, have been ongoing during this time and Southwest has continued to provide services to meet the demand of its customers. Similarly, Centuri has continued nearly all operations from the outset of the pandemic in the U.S., and demand has not significantly diminished. Employees at some offices (including corporate headquarters) continue to work from home on a temporary basis, while Centuri employees have resumed work in the office. Management is also focused on the need for adaptability in an environment of virus variants and governmental actions related thereto. All segments continue to facilitate administration, communication, and all critical functions, supported by deployed technology whenever employees are working remotely. To date, there has not been a significant disruption in the Company’s supply chains, transportation network, or ability to serve customers.

As noted earlier, management had a moratorium on natural gas disconnections for non-payment that was lifted in our Nevada and Arizona jurisdictions in the third quarter of 2021, and in California in the fourth quarter of 2021. Southwest continues to work with customers experiencing financial hardship through flexible payment arrangements. Management also continues to coordinate with certain governmental and nonprofit entities for customer payment assistance. In the utility infrastructure services segment, a limited number of Centuri customers at the outset of the pandemic delayed some projects, and crews were temporarily reduced; however, most work continued, while following appropriate government protocols.

The extent to which COVID-19 may adversely impact the Company’s business depends on future developments, however, management does not expect such to be material to the Company’s liquidity or financial position overall. Continued uncertainty of economic and operational impacts means management cannot predict whether the related financial impact in future periods will be different from impacts reflected for the period ended December 31, 2021. Management will continue to monitor developments by government officials, and those affecting employees, customers, and operations, and will take additional steps as necessary to address impacts from the pandemic. Events and circumstances arising after December 31, 2021, including those resulting from COVID-19, will be reflected in management’s estimates for future periods.

Executive Summary

The items discussed in this Executive Summary are intended to provide an overview of the results of the Company’s and Southwest’s operations and are covered in greater detail in later sections of management’s discussion and analysis.

Summary Operating Results

2021 Overview

Southwest Gas Holdings highlights include the following:

•Completed the acquisition of Questar Pipelines for total consideration of $1.576 billion

•$24 million of Questar Pipelines acquisition related deal and financing commitment costs, and other one-time costs associated with the acquisition

•Drew on a $1.6 billion 364-day term loan on December 31, 2021 to initially fund the Questar Pipelines acquisition

•Colleen Larkin Bell named President of MountainWest (formerly Questar Pipelines)

•Amended and restated credit facility increasing borrowing capacity to $200 million and extending maturity date to December 2026

•Authorized a stockholder rights plan

Natural gas distribution highlights include the following:

•37,000 first-time meters sets (1.7% growth rate) occurred over the past 12 months

•Operating margin increased $83 million, or 8.2%, between 2021 and 2020

•Issued $300 million in 3.18% 30-year Notes

•California general rate case finalized with rate relief effective April 2021

•Received approval to recover $74 million in Arizona COYL/VSP program revenue requirement

•Implemented modernized customer service information system in May 2021

Utility infrastructure services highlights include the following:

•Record revenues of $2.2 billion in 2021, an increase of $210 million, or 11%, compared to 2020

•Emergency restoration services provided $65 million of revenue in 2021 compared to $82 million in 2020

•Completed the acquisition of Riggs Distler for $822.2 million in August 2021

•$14 million of acquisition costs incurred

•Amended and restated credit agreement in connection with the Riggs Distler acquisition; $1.145 billion secured term loan facility and $400 million secured revolving credit facility

Results of Natural Gas Distribution

2021 vs. 2020

Contribution to consolidated net income from natural gas distribution operations increased $28 million between 2021 and 2020. The increase was primarily due to increases in Operating margin and a decrease in Net interest deductions and Income tax expense, offset by increases in Operations and maintenance expense, Depreciation and amortization, and Taxes other than income taxes.

Operating margin increased $83 million between years. Customer growth provided $13 million as 37,000 first-time meter sets were added in 2021, and combined rate relief provided $61 million of incremental operating margin during the current year. Regulatory account balance returns and recoveries impacted both periods (offset in amortization expense below), in addition to margin from customers outside of decoupling mechanisms. Additionally, impacting the period was an increase in late fees due to the end of the pandemic-period moratorium on these fees that lasted from March 2020 to March 2021 for Arizona and Nevada and March 2020 to July 2021 in California.

Operations and maintenance expense increased $32 million, or 8%, between 2021 and 2020 primarily due to higher legal-claim related costs including a $5 million legal reserve (as described in Note 10 - Commitments and Contingencies), higher levels of service-related pension costs ($6.9 million), increases in customer service-related and information technology costs including staffing, training, and stabilization costs associated with a new customer information system implemented in May 2021 ($8.7 million), expenditures for pipeline damage prevention programs ($5.5 million) associated with a growing infrastructure and customer base, and higher reserves for customer accounts deemed uncollectible.

Depreciation and amortization expense increased $18 million, or 8%, between years primarily due to a $559 million, or 7%, increase in average gas plant in service for the current year. The increase in gas plant was attributable to pipeline capacity reinforcement work, franchise requirements, scheduled pipe replacement activities, and new infrastructure, as well as the implementation of the new customer information system, which was placed in production in the second quarter of 2021. Amortization related to regulatory account recoveries increased $3.5 million between years, which is offset by an increase in Operating margin above.

Taxes other than income taxes increased $16.9 million, or 27%, between 2021 and 2020 primarily due to an increase in property taxes in Arizona, and to a lesser extent, in Southwest’s California and Nevada jurisdictions.

Other income increased $2 million between 2021 and 2020. Non-service-related components of employee pension and postretirement benefit cost in this category decreased $6 million between years. The current year also includes a $1.1 million increase in interest income compared to the prior year. Offsetting these impacts were reductions ($4.7 million) in the equity portion of the allowance for funds used during construction (“AFUDC”) due to the impact short-term borrowings have on AFUDC. Both years experienced returns on Company Owned Life Insurance (“COLI”) policies that were significantly higher than expected ($8.8 million in 2021 and $9.2 million in 2020).

Net interest deductions decreased $3.6 million between 2021 and 2020, primarily due to the receivable position of the Purchased Gas Adjustment (“PGA”) in 2021, in addition to amortization of an interest-related regulatory balance in Arizona. These decreases were partially offset by the impacts of debt-related AFUDC in 2021.

The decrease in Income tax expense in 2021 compared to 2020 primarily reflects changes in Arizona and California state apportionment percentages and additional amortization of excess accumulated deferred income taxes (“EADIT”). Both years reflect that COLI-related earnings are recognized without tax consequences.

2020 vs. 2019

Contribution to consolidated net income from natural gas distribution decreased $4 million between 2020 and 2019. The decrease was primarily due to an increase in Depreciation and amortization and Net interest deductions and a decline in Other income (deductions), offset by higher operating margin and a decrease in Operations and maintenance expense.

Operating margin increased $24 million between years. Customer growth provided $14 million as 37,000 first-time meter sets were added in 2020 compared to 2019, and combined rate relief, primarily in Nevada and California, provided $7 million of incremental operating margin in 2020. Additionally, an increase in regulatory asset recoveries (offset in amortization expense below) contributed to the increase. During 2019, there was an approximate $5 million reduction in margin resulting from a one-time adjustment to reflect the impacts of U.S. tax reform on the Arizona decoupling mechanism. The remaining impacts included those from a temporary moratorium on late fees and connection/re-connection charges during the COVID-19 pandemic.

Operations and maintenance expense decreased $16 million, or 4%, between 2020 and 2019 primarily due to lower travel and in-person training costs due to the current COVID-19 environment, lower legal claims between related periods, as well as management cost saving initiatives. These were partially offset by incremental expenditures in 2020 for pipeline damage prevention programs associated with a growing infrastructure and customer base.

Depreciation and amortization expense increased $19.7 million, or 9%, between 2020 and 2019 primarily due to a $668 million, or 9%, increase in average gas plant in service in 2020. The increase in gas plant was attributable to pipeline capacity reinforcement work, franchise requirements, scheduled and accelerated pipe replacement activities, and new infrastructure. Amortization related to regulatory account recoveries, as referenced above, increased $1.4 million between years.

Other income decreased $16 million between 2020 and 2019. In 2020, there was a $9.2 million increase in COLI policy cash surrender values and recognized death benefits, compared to $17.4 million in 2019. Non-service-related components of employee pension and postretirement benefit cost, included in this category, increased $5 million between years. Additionally, lower interest earned on regulatory balances contributed to the decrease between years.

Net interest deductions increased $6.1 million between 2020 and 2019, primarily due to interest associated with the issuance of $300 million of Senior Notes in May 2019 and $450 million of Senior Notes in June 2020, offset by a reduction in outstanding borrowings under the credit facility between years.

Income tax expense in both 2020 and 2019 reflects the fact that COLI results are recognized without tax consequence and therefore, impact the effective tax rate.

Results of Utility Infrastructure Services

2021 vs. 2020

Contribution to consolidated net income from utility infrastructure services decreased $34.4 million in 2021 compared to 2020. Results reflect one-time professional fees related to the acquisition of Riggs Distler, incremental interest expense associated with the outstanding borrowings under Centuri’s $1.545 billion amended and restated secured revolving credit and term loan facility in conjunction with the acquisition, higher depreciation and amortization expense, and lower storm restoration work at Linetec in 2021 as compared to 2020.

Utility infrastructure services revenues increased $210.4 million, or 11%, including $163.8 million recorded by Riggs Distler subsequent to its acquisition on August 27, 2021. Revenues from electric infrastructure services increased $113.4 million in 2021 when compared to the prior year, of which $108 million was recorded by Riggs Distler. Included in electric infrastructure services revenues overall during 2021 was $65.3 million from emergency restoration services performed by Linetec and Riggs Distler following hurricane, tornado, and other storm damage to customers’ above-ground utility infrastructure in and around the Gulf Coast and eastern regions of the U.S., compared to $81.5 million in the prior year. Centuri’s revenues derived from storm-related services vary from period to period due to the unpredictable nature of weather-related events, and when this type of work is performed, it typically generates a higher profit margin than core infrastructure services, due to improved operating efficiencies related to equipment utilization and absorption of fixed costs. The current year also includes approximately $118 million in incremental revenues, including $20 million recorded by Riggs Distler, from continued growth with gas infrastructure services customers under master service and bid agreements, partially offset by reduced work with two significant customers during 2021 (totaling $76.9 million), due to the mix of projects under each customer’s multi-year capital spending programs. Centuri revenues from contracts with Southwest totaled $102.3 million in 2021 and $134.9 million in 2020. Centuri accounts for services provided to Southwest at contractual prices.

Utility infrastructure services expenses increased $226 million (including $14 million of professional fees related to the acquisition of Riggs Distler), or 13%, between 2021 and 2020. The increase overall includes $144.9 million incurred by Riggs Distler subsequent to the acquisition, as well as incremental costs related to electric infrastructure services work and costs necessary for the completion of additional gas infrastructure work. Higher fuel costs, equipment rental expense, and subcontractor expenses were also incurred due to the mix of work and in support of growth in our electric infrastructure business. Expenses in relation to revenues, and therefore, profit margins, can be impacted by inefficiencies from equipment and facility utilization and under-absorption of other fixed costs, which occurred due to the reduced work from the two large customers noted above. Also included in total Utility infrastructure services expenses were general and administrative costs, which increased approximately $22.6 million between comparative periods, including $14 million of acquisition-related professional fees previously noted and $9.3 million of general and administrative costs incurred by Riggs Distler subsequent to the acquisition. Other administrative costs increased due to the growth in the business, but were offset by lower incentive compensation expense in 2021 as compared to 2020. Gains on sale of equipment (reflected as an offset to Utility infrastructure services expenses) were approximately $6.9 million and $1.8 million in 2021 and 2020, respectively.

Depreciation and amortization expense increased $20.9 million between 2021 and 2020, of which $16.8 million was recorded by Riggs Distler subsequent to the acquisition. The remaining increase was attributable to equipment and computer systems purchased to support the growing volume of infrastructure work. Depreciation expense, relative to the revenues recorded, was generally consistent during 2021 compared to 2020.

Other income (deductions) increased $1.3 million in 2021 attributable to proceeds from life insurance policies of $1.8 million, partially offset by $0.7 million of unamortized loan fees that were expensed in connection with Centuri’s debt refinancing.

The increase in net interest deductions of $11.7 million is primarily due to incremental interest related to outstanding borrowings under Centuri’s $1.545 billion amended and restated secured revolving credit and term loan facility in conjunction with the acquisition of Riggs Distler.

Income tax expense decreased $12.4 million between 2021 and 2020, primarily due to reduced profitability in 2021. Certain costs related to the Riggs Distler acquisition were non-deductible for U.S. federal income tax purposes, which impacted the recorded income tax expense during 2021.

2020 vs. 2019

Contribution to consolidated net income from utility infrastructure services increased $22.5 million in 2020 compared to 2019. Results were positively impacted by emergency restoration services performed by Linetec in 2020 and increased volume under certain blanket and bid contracts, both in the U.S. and Canada.

Utility infrastructure services revenues increased $197.3 million, or 11%, in 2020 primarily due to incremental electric infrastructure revenues of $145.3 million from expansion of work with existing customers and securing work with new customers. Included in the incremental electric infrastructure revenues during 2020 was $81.5 million from emergency restoration services performed by Linetec, following hurricane and tornado damage to customers’ above-ground utility infrastructure in and around the Gulf Coast and eastern regions of the U.S., as compared to $13.2 million in similar services during 2019. Additionally, Centuri experienced continued growth with gas infrastructure customers under master service and bid agreements and benefited from generally favorable weather working conditions throughout 2020. Centuri achieved increases in revenues despite a temporary shut-down of certain crews, primarily in the second quarter of 2020, in response to local government requirements to postpone non-essential business services, and precautions to ensure employee safety during the COVID-19 outbreak. Centuri revenues from contracts with Southwest totaled $134.9 million in 2020 and $158.7 million in 2019.

Utility infrastructure services expenses increased $156.2 million, or 10%, between 2020 and 2019 largely due to incremental expenses related to electric infrastructure services of $109.3 million, including costs associated with storm restoration work, as well as costs to complete additional gas and electric infrastructure work. These costs were mitigated by increased productivity and efficiencies on electrical infrastructure projects and lower fuel costs as a percentage of revenues. Additionally, during 2020, Centuri received $4.1 million in wage subsidies from the Canadian government associated with COVID-19 relief programs, recorded as a reduction to wage expense. Ongoing efforts to complete an industrial construction project in Canada resulted in additional costs of approximately $3 million during 2020 compared to $8 million during 2019. General and administrative costs increased $24.4 million in 2020 when compared to 2019, due to higher payroll and operating costs associated with continued growth of the business and higher profit-based incentive compensation. Offsetting these increases were lower insurance costs from favorable claims experience under Centuri’s self-insurance programs. Gains on sale of equipment (reflected as an offset to Utility infrastructure services expenses) were approximately $1.8 million and $5.5 million in 2020 and 2019, respectively.

Depreciation and amortization expense increased $9.1 million between 2020 and 2019, primarily due to $5.8 million of incremental depreciation related to the continued growth of Linetec. Additional equipment purchased to support the growing volume of work being performed also contributed to the overall increase.

The decrease in net interest deductions was due primarily to lower incremental borrowing rates associated with outstanding borrowings under the then existing $590 million secured revolving credit and term loan facility.

The income tax expense increase in 2020 reflects the increased level of pre-tax earnings between years.

Rates and Regulatory Proceedings

Southwest is subject to the regulation of the Arizona Corporation Commission (the “ACC”), the Public Utilities Commission of Nevada (the “PUCN”), the California Public Utilities Commission (the “CPUC”), and the Federal Energy Regulatory Commission (the “FERC”).

General Rate Relief and Rate Design

Rates charged to customers vary according to customer class and rate jurisdiction and are set by the individual state and federal regulatory commissions that govern Southwest’s service territories. Southwest makes periodic filings for rate adjustments as the cost of providing service (including the cost of natural gas purchased) changes, and as additional investments in new or replacement pipeline and related facilities are made. Rates are intended to provide for recovery of all commission-approved costs and a reasonable return on investment. The mix of fixed and variable components in rates assigned to various customer classes (rate design) can significantly impact the operating margin actually realized by Southwest. Management has worked

with its regulatory commissions in designing rate structures that strive to provide affordable and reliable service to its customers while mitigating volatility in prices to customers and stabilizing returns to investors. Such rate structures were in place in all of Southwest’s operating areas during all periods for which results of natural gas distribution operations are disclosed above.

Arizona Jurisdiction

Arizona General Rate Case. In December 2021, Southwest filed a general rate case application proposing a revenue increase of approximately $90.7 million. Although updated rates related to the previous rate case became effective in January 2021, the most significant driver for the new request is the necessity to reflect in rates the substantial capital investments that have been made since the end of the test year in the previous case, including the recently implemented customer information system. The current filing is based on a test year ended August 31, 2021 and proposes a return on common equity of 9.90% relative to a target equity ratio of 51%. Recovery of the approximate $12 million (over three years) related to the outstanding deferral balance associated with the LNG facility (see below) is included in the request, along with the approximate $2.5 million (also over three years) in late payment charges that were suppressed from customer accounts during the COVID-19 pandemic. A request to continue the Delivery Charge Adjustment (“DCA”), Southwest’s full-revenue decoupling mechanism, is included, while no changes to Southwest’s existing rate design are proposed. A decision is anticipated by the end of 2022, with new rates expected to be effective in January 2023.

Delivery Charge Adjustment. The annual DCA is filed each April, which along with other reporting requirements, contemplates a rate to recover the over- or under-collected margin tracker amounts based on the balance at the end of the preceding calendar year. In the process to address the 2019 activity, in April 2020, Southwest filed a request to adjust the existing rate to consider the 14-month period of January 1, 2019 through February 29, 2020, proposing a rate of $0.00655 per therm based on an ending balance of approximately $3.5 million. Although the commission staff concurred with Southwest’s proposed rate, the ACC ultimately elected to reduce the rate to zero in an effort to provide some measure of customer relief in light of current issues related to the COVID-19 pandemic, and at the time of both the April filing and the ACC decision, the balance was a liability (in an over-recovered status). With Southwest’s April 2021 annual filing, management requested to maintain the existing zero rate based on similar conditions existing at the time. As of December 31, 2021, however, an under-collected balance of approximately $3.3 million exists, and is expected to be addressed in a future annual filing.

Tax Reform. Previously, management addressed changes from 2017 U.S. tax reform with the ACC, including the tracking and return to customers of amounts related to a lower cost of service compared to amounts embedded in customer rates existing prior to tax reform. Also, as part of tax reform, deferred tax balances were remeasured, resulting in Excess Accumulated Deferred Income Taxes (“EADIT”). In the most recently concluded Arizona general rate proceeding, a Tax Expense Adjustor Mechanism (“TEAM”) was approved to timely recognize any future tax rate changes resulting from federal or state tax legislation. In addition, the TEAM tracks and returns/recovers the revenue requirement impact of changes in EADIT amortization compared to the amount authorized in the most recently concluded rate case. In December 2021, Southwest filed its inaugural TEAM rate application for the recovery of approximately $4.3 million associated with the tax reform credit over-refunded in 2019 and 2020. The commission staff is expected to issue its report on the filing in the first quarter of 2022 for ACC consideration at a subsequent open meeting.

Liquefied Natural Gas (“LNG”) Facility. In 2014, Southwest sought ACC preapproval to construct, operate, and maintain a 233,000 dekatherm LNG facility in southern Arizona. This facility is intended to enhance service reliability and flexibility related to natural gas deliveries in the southern Arizona area by providing a local storage option, and to be connected directly to Southwest’s distribution system. Southwest was ultimately granted approval for construction and deferral of costs. The facility was placed in service in December 2019. The capital costs and operating expenses associated with plant operation were approved and considered as part of Southwest’s previous general rate case. Approximately $12 million in costs, incurred following the in-service date of the facility and after the period considered as part of the previous general case, were deferred in the previously authorized regulatory asset and are included for consideration in the current general rate case application.

Customer-Owned Yard Line (“COYL”) Program. Southwest received approval, in connection with its 2010 Arizona general rate case, to implement a program to conduct leak surveys, and if leaks were present, to replace and relocate service lines and meters for Arizona customers whose meters were set off from the customer’s home, representing a non-traditional configuration. In 2014, the ACC approved a “Phase II” of the COYL program, which included the replacement of non-leaking COYLs. The surcharge was designed to collect the annual revenue requirement as the program progressed. In the filing made in February 2019, Southwest requested to increase its surcharge to recover a revenue requirement of $6.7 million (an increase of $3.2 million) associated with $26.6 million in capital projects completed in 2018. The ACC ultimately issued an order in October 2019 authorizing Southwest to retain the then existing annual surcharge in place, with a review of the program to be part of Southwest’s general rate case pending at the time, including with regard to an estimated $21.1 million of 2019 COYL capital projects. Parties to the case stipulated to continue the COYL program and recommended recovery of this plant as part of Southwest’s filed post-test year plant adjustment, with inclusion of related amounts in base rates. Further consideration in the ultimate rate case decision limited the post-test year plant adjustment (inclusive of COYL plant) to six months, and limited

future COYL activity to the replacement of leaking COYLs, or in cases when other replacement activity is taking place in the vicinity. A filing in May 2021 proposed the recovery of the remaining 2019 and 2020 revenue requirement (collectively, $13.7 million) over a one-year period. In November 2021, the ACC approved full recovery within the proposed timeline, the rate for which was implemented the same month.

Vintage Steel Pipe Program (“VSP”). Southwest received approval, in connection with its 2016 Arizona general rate case, to implement a VSP replacement program, due to having a substantial amount of pre-1970s vintage steel pipe in Arizona. As part of the program, Southwest proposed to start replacing the pipe on an accelerated basis and to recover the costs through an annual surcharge filing. Surcharges related thereto were customarily designed to be revised annually as the program progressed, in order to collect the annual revenue requirement associated with the related capital expenditures. In the February 2019 VSP filing, Southwest requested to increase its surcharge revenue by $9.5 million (to $11.9 million) associated with the replacement of approximately $100 million in 2018 VSP capital projects. The ACC issued an order in October 2019 authorizing Southwest to retain the existing annual surcharge, and indicated it would review the program as part of the general rate case pending at the time. Southwest also proposed to have the ACC review an estimated $103.4 million of 2019 VSP capital projects as part of the same general rate case. The resolution of Southwest’s rate case (with rates effective January 2021) provided for the inclusion of post-test year plant (inclusive of VSP) placed in service during the six months following the test year. However, the ACC ultimately decided to discontinue the accelerated VSP program. A filing in May 2021 proposed the recovery of the remaining revenue requirement relating to investments during 2019 and 2020, approximately $60 million to be recovered over a three-year period. In November 2021, the ACC approved full recovery over the proposed three-year timeline, electing to permit the rate to be implemented in March 2022.

Graham County Utilities. In April 2021, Southwest and Graham County Utilities, Inc. (“GCU”) filed a joint application with the ACC for approval to transfer assets of GCU to Southwest and extend Southwest’s Certificate of Public Convenience and Necessity to serve the more than 5,000 associated customers, for a purchase price of $3.5 million. Approval of the application by the ACC was received in December 2021 with final transfer in mid-January 2022. Former GCU customers will continue to be served under existing GCU rates until such time as they are rolled into Southwest’s rates, which is proposed to take place in conjunction with the effective date of the rates resulting from the currently pending Arizona general rate case.

California Jurisdiction

California General Rate Case. In August 2019, Southwest filed a general rate case based on a 2021 test year, seeking authority to increase rates in its California rate jurisdictions, after being granted earlier permission to extend the rate case cycle by two years and continue its 2.75% previously approved Post-Test Year (“PTY”) attrition adjustments for 2019 and 2020. The proposed combined revenue increase of $12.8 million was net of a $10.9 million revenue reduction associated with changes from U.S. tax reform. The overall revenue request also included $1.6 million of EADIT proposed to be returned to customers each year until the amount is reset as part of a future rate case. Southwest’s proposal included a return on equity (“ROE”) of 10.5% relative to a 53% equity ratio; continuation of annual post-test year margin adjustments of 2.75%; implementation of various safety-related programs, including a targeted pipe replacement program and a meter protection program (with a combination of measures, such as snow sheds, excess flow valves, upgraded meter set piping and upgraded Encoder Receiver Transmitter protocol); as well as an expansion of the school COYL replacement program.

Southwest reached an agreement in principle with the Public Advocate’s Office, which was unanimously approved by the CPUC on March 25, 2021, including a $6.4 million total combined revenue increase with a 10% ROE, relative to a 52% equity ratio. Approximately $4 million of the original proposed increase was associated with a North Lake Tahoe project that would not ultimately be completed by the beginning of 2021; consequently, the parties agreed to provide for recovery of the cost of service impacts of the project through a future surcharge. The rate case decision maintains Southwest’s existing 2.75% annual attrition adjustments, the continuation of the pension balancing account, and a proposed increase in the residential basic service charge from the existing $5.00 to $5.75 per month. It also includes cumulative expenditures totaling $119 million over the five-year rate cycle to implement risk-informed proposals, consisting of the school COYL replacement, meter protection, and pipe replacement programs. Although new rates were originally anticipated to be in place by January 1, 2021, in light of an administrative delay, Southwest was granted authority to establish a general rate case memorandum account to track the impacts related to the delay in the implementation of new rates for purposes of later recovery. New rates were ultimately implemented April 1, 2021.

Attrition Filing. Following the 2021 implementation of new rates approved as part of the recently concluded general rate case, Southwest is also authorized to implement annual PTY attrition increases of 2.75% beginning in January 2022.

Greenhouse Gas (“GHG”) Compliance. California Assembly Bill Number 32 and regulations promulgated by the California Air Resources Board, require Southwest, as a covered entity, to comply with applicable requirements associated with California GHG emissions reporting and the California Cap and Trade Program. The CPUC issued a decision in 2018 adopting an allocation methodology to distribute the net revenues or costs. Southwest began amortizing its then existing net cost balance

over a 12-month period with recovery rates effective July 2018 for all applicable rate schedules. For years 2019-2020, the decision adopted an allocation methodology to distribute the revenue proceeds through a California Climate Credit to active residential customers in April of each year, which has since continued. GHG compliance costs recovered through rates have no impact on earnings.

Customer Data Modernization Initiative (“CDMI”). In April 2019, Southwest filed an application with the CPUC seeking authority to establish a two-way, interest bearing balancing account to record costs associated with the CDMI to mitigate adverse financial impacts associated with the multi-year project. Approximately $19 million of the estimated $174 million total for the CDMI would be allocable to the California rate jurisdiction. Southwest filed a separate request to establish a memorandum account while the CPUC considered its application request to establish the two-way balancing account. Effective October 2019, the CPUC granted Southwest’s memorandum account request, allowing Southwest to track costs, including operations and maintenance costs and capital-related costs, such as depreciation, taxes, and return associated with California’s portion of the CDMI. The balance tracked in the memorandum account was transferred to the two-way balancing account in July 2020. A rate to begin recovering the balance accumulated through June 30, 2020, was established and made effective September 1, 2020, and updated in January 2021, August 2021, and January 2022. This rate is expected to be updated at least annually. The customer information system, the largest of the two systems associated with the CDMI, was placed in service in May 2021.

Emergency Relief Program Related to COVID-19. In March 2020, Southwest filed an Advice Letter to establish a memorandum account to track costs related to customer protections under Emergency Relief regulations implemented in California in 2019 in the event of a state or federal declared emergency or disaster. The CPUC passed an emergency resolution on April 16, 2020 authorizing and directing utilities to implement customer protections and to establish memorandum accounts to track the financial impacts of complying with the resolution. On May 1, 2020, Southwest filed an Advice Letter to establish a COVID-19 Pandemic Protections Memorandum Account (“CPPMA”) to record incremental costs and lost revenues incurred by Southwest associated with its implementation of the COVID-19 customer protections as outlined in the CPUC resolution. The customer protections were retroactively applied to March 4, 2020, the date Governor Gavin Newsom declared a state of emergency related to COVID-19. The CPPMA was originally effective March 4, 2020 through April 16, 2021, but was extended through September 30, 2021. These customer protections focused on flexible payment plan options, additional protections for income-qualified customers, as well as the suspension of disconnections for non-payment and waiver of deposit and late fee requirements. Tracked amounts will be considered by the CPUC for future recovery.

Nevada Jurisdiction

Nevada General Rate Case. On August 31, 2021, Southwest filed its most recent general rate case, which was further updated by a certification filing on December 17, 2021. The request proposed a combined revenue increase of approximately $28.7 million (as of certification), the most significant driver for the new request is the necessity to reflect in rates the substantial capital investments that have been made since the end of the test year in the previous case, including the recently implemented customer information system. The filing included a proposed return on common equity of 9.90% with a target equity ratio of 51%; recovery over two years of approximately $6.6 million in previously deferred late payment charges related to a regulatory asset associated with COVID-19; and continuation of full revenue decoupling under the General Revenues Adjustment (“GRA”) mechanism. The filing utilized a test year ended May 31, 2021 with certification-period adjustments through November 30, 2021. On February 8, 2022 the parties filed a stipulation with the PUCN, providing for a statewide revenue increase of $14.05 million. The stipulation will be considered by the PUCN and is anticipated that an order will be issued prior to the end of the first quarter 2022, with new rates effective April 2022.

Southwest’s previous general rate case concluded with a final order in September 2020, which provided for an authorized combined revenue increase of approximately $23 million for northern and southern Nevada and continuation of the previously authorized 9.25% ROE, with a capital structure of 49.26% equity and 50.74% debt. Southwest’s GRA (see below) was authorized to continue without modification. Full cost recovery of the unamortized balance of software projects excluded from its 2018 general rate proceeding was authorized in this case, along with the inclusion of all proposed Gas Infrastructure Replacement (“GIR”) and Mesquite Expansion projects in rate base, and full recovery of test year and certification operations and maintenance expenses associated with the CDMI. Rates became effective in October 2020.

In association with an earlier Nevada rate case decision in December 2018, management requested reconsideration of several issues in the case; however, the PUCN ultimately granted no further relief. Management decided to seek judicial review of the PUCN’s rate order, which was considered in January 2020; however, the District Court Judge deferred to the PUCN’s original findings. In March 2020, Southwest filed an appeal with the Nevada Supreme Court, for which management initially estimated could take up to 24 months from the date of the appeal to resolve. The Nevada Supreme Court issued a decision in February 2022 denying Southwest’s request as it pertained to the 2018 rate proceeding.

General Revenues Adjustment. As noted above, the continuation of the GRA was affirmed as part of Southwest’s most recently concluded general rate case, effective October 2020. Further continuation of the mechanism has again been requested in the current general rate case with a proposed expansion to include a large customer class (with monthly throughput requirements greater than 15,000 therms). Continuation of the mechanism and the expansion are included in the agreement in principle for consideration and approval by the commission. Southwest makes Annual Rate Adjustment (“ARA”) filings to update rates to recover or return amounts associated with various regulatory mechanisms, including the GRA. With timing changes approved in the previous ARA, Southwest made its most recent ARA filing in November 2021 related to balances as of September 30, 2021. New rates related to that filing will be effective July 1, 2022. While there is no impact to net income overall from adjustments to recovery rates associated with the related regulatory balances, operating cash flows are impacted by such changes.

Infrastructure Replacement Mechanism. In 2014, the PUCN approved final rules for the GIR mechanism, which provided for the deferral and recovery of certain costs associated with accelerated replacement of qualifying infrastructure that would not otherwise provide incremental revenues between general rate cases. Associated with the replacement of various types of pipe infrastructure under the mechanism (Early Vintage Plastic Pipe, COYL, and VSP), the related regulations provide Southwest with the opportunity to file a GIR “Advance Application” annually to seek preapproval of qualifying replacement projects.

In cases where preapproval of projects is requested and granted, a GIR rate application is separately filed to reset the GIR recovery surcharge rate related to previously approved and completed projects. On September 30, 2021, Southwest filed its latest rate application to reset the recovery surcharge to include cumulative deferrals through August 31, 2021. The updated surcharge rate is expected to result in a reduction in annual revenue of approximately $1.4 million in southern Nevada and an annual revenue increase of $66,000 in northern Nevada. The parties reached a stipulation that was approved by the commission and new rates became effective January 1, 2022.

Conservation and Energy Efficiency. The PUCN allows deferral (and later recovery) of approved conservation and energy efficiency costs, recovery rates for which are adjusted in association with ARA filings. In its May 2020 ARA filing, Southwest proposed annualized margin decreases of $313,000 and $55,000 for southern and northern Nevada, respectively, which were approved and became effective January 2021. In May 2021, Southwest filed its proposed Conservation and Energy Efficiency plan for the years 2022 – 2024, with a proposed annual budget amount of approximately $3 million. A PUCN decision received in the fourth quarter 2021 authorized the continuation of Southwest’s currently authorized programs and an annual budget of approximately $1.3 million.

Expansion and Economic Development Legislation. In January 2016, final regulations were approved by the PUCN associated with legislation (“SB 151”) previously introduced and signed into law in Nevada. The legislation authorized natural gas utilities to expand their infrastructure to provide service to unserved and underserved areas in Nevada.

In November 2017, Southwest filed for preapproval of a project to extend service to Mesquite, Nevada, in accordance with the SB 151 regulations. Ultimately, the PUCN issued an order approving Southwest’s proposal for the expansion, and Southwest provides periodic updates and adjusts the rates to recover the revenue requirement associated with the investments to serve customers as part of the ARA filings and rate case proceedings. As of December 2021, approximately 40 miles of natural gas infrastructure has been installed throughout the Mesquite expansion area.

In June 2019, Southwest filed for preapproval to construct the infrastructure necessary to expand natural gas service to Spring Creek, (near Elko, Nevada), and to implement a cost recovery methodology to recover the associated revenue requirement consistent with the SB 151 regulations. The expansion facilities consist of a high-pressure approach main and associated regulator stations, an interior backbone, and an extension of the distribution system from the interior backbone. The total capital investment was estimated to be $61.9 million. A stipulation was reached with the parties and approved by the PUCN in December 2019, including in regard to the rate recovery allocation amongst northern Nevada, Elko, and Spring Creek expansion customers. Construction began in the third quarter of 2020, and service commenced to the first Spring Creek customers in December 2020. As of December 31, 2021, approximately 23 miles of natural gas infrastructure has been installed throughout the Spring Creek expansion area, and is anticipated to be completed in 2026.

Regulatory Asset Related to COVID-19. The PUCN issued an order directing utilities within the state to establish regulatory asset accounts, effective March 12, 2020, the date that Governor Steve Sisolak declared a state of emergency related to COVID-19, to track the financial impacts associated with maintaining service for customers affected by COVID-19, including those whose service would have been otherwise terminated/disconnected. These amounts, totaling approximately $6.6 million, were included as part of Southwest’s recent general rate case request, proposed to be recovered over a two-year period. The agreement in principle settling the general rate case proposes a four-year amortization, subject to the commission’s final order.

Carbon Offset Program. In June 2021, Southwest filed an application to seek approval to offer a voluntary program to northern and southern Nevada customers to purchase carbon offsets in an effort to provide customers additional options to reduce their GHG emissions. A request to establish a regulatory asset to track program-related costs and revenues was included as part of

the application. The PUCN issued a decision in December 2021 approving Southwest’s proposal. Implementation of the program is expected in the second quarter of 2022.

FERC Jurisdiction

General Rate Case. Great Basin Gas Transmission Company (“Great Basin”), formerly Paiute Pipeline Company, a wholly owned subsidiary of Southwest, filed a general rate case with the FERC in May 2019. The filing fulfilled an obligation from the settlement agreement reached in an earlier general rate case. In January 2020, an agreement in principle to settle the case was reached with the FERC Staff and intervenors, which would not significantly impact revenues overall. It provided that the three largest transportation customers and all storage customers would be required to have primary service agreement terms of at least five years, that term-differentiated rates would continue generally, and included a 9.90% pre-tax rate of return. Interim rates were made effective February 2020, and in August 2020 a FERC letter order approving the settlement became final. As part of the settlement, Great Basin will not file a rate case later than May 31, 2025.

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- or under-collections. As of December 31, 2021, under-collections in each of Southwest’s service territories resulted in an asset of approximately $291.1 million on the Company’s and Southwest’s Consolidated Balance Sheets. The significant change in the PGA balance during 2021 resulted from $800 million in commodity and transmission costs incurred during 2021, including incremental natural gas costs associated with an extreme weather event in the central U.S. in mid-February 2021 and higher commodity prices in the latter part of the year. See also Deferred Purchased Gas Costs in Note 1 - Background, Organization, and Summary of Significant Accounting Policies.

The following table presents Southwest’s outstanding PGA balances receivable/(payable) at the end of its two most recent fiscal years:

Not included in the PGA balances table above is a $5.7 million deferred purchased gas cost liability for Questar Pipelines.

Arizona PGA Filings. In Arizona, Southwest calculates the change in the gas cost component of customer rates monthly (to allow for timely refunds to/recoveries from customers), utilizing a rolling twelve-month average. During 2021, the Gas Cost Balancing Account continued providing a surcharge in order to recover the under-collected balance.

California Gas Cost Filings. In California, a monthly gas cost adjustment based on forecasted monthly prices is utilized. Monthly adjustments modeled in this fashion provide the timeliest recovery of gas costs in any Southwest jurisdiction.

Nevada ARA Application. In November 2021, Southwest filed to adjust its quarterly Deferred Energy Account Adjustment rate, which is based upon a twelve-month rolling average, in addition to requesting adjusted Base Tariff Energy rates, both of which were approved effective January 2022. These new rates are intended to address the outstanding balances over a twelve-month period.

Gas Price Volatility and Mitigation

To mitigate price volatility to its customers, Southwest has periodically entered into fixed-price term contracts and swaps under its volatility mitigation programs for up to 25% of the California jurisdictions’ annual normal weather supply needs. For the 2021/2022 heating season, contracts contained in the fixed-price portion of the supply portfolio ranged from approximately $3.90 to approximately $4.23 per dekatherm. In consultation with its regulators, for periods beyond October 2020, Southwest currently does not plan to make any fixed-price term purchases for the Arizona or Nevada jurisdictions, nor to enter into swap agreements; however, Southwest will continue to enter fixed-price purchases for the California jurisdiction. Southwest’s natural gas purchases, not covered by fixed-price contracts, are under variable-price contracts with firm quantities, or on the spot market. The contract price for these contracts is either determined at the beginning of each month to reflect the published first-of-month index price, or at market prices based on a published daily price index. In each case, the index price is not published or known until the purchase period begins.

In mid-February 2021, the central U.S. (from south Texas to North Dakota and the eastern Rocky Mountains) experienced extreme cold temperatures, which increased natural gas demand and caused temporary shortages due to wellhead freeze-offs, power outages, or other adverse operating conditions upstream of Southwest’s distribution systems. These conditions caused daily natural gas prices to reach unprecedented levels. During this time, Southwest secured natural gas supplies, albeit at substantially higher prices, maintaining service to its customers. The incremental cost for these supplies was approximately $250 million, funded using a 364-day $250 million Term Loan executed in March 2021. See Note 8 - Debt for additional information.

Pipeline Safety Regulation

In October 2019, the Pipeline and Hazardous Materials Safety Administration (“PHMSA”) issued final rules that amended the federal pipeline safety regulations applicable to gas transmission pipelines (effective July 2020). Southwest has integrated the requirements of this new rule into its operating procedures related to reconfirming maximum allowable operating pressure of gas transmission pipelines in certain circumstances and assessing pipeline integrity.

In addition, the bipartisan Protecting our Infrastructure of Pipelines and Enhancing Safety, or PIPES Act, of 2020 was signed by the President on December 27, 2020 as part of the broader federal spending and COVID-19 relief package. The final bill included a self-executing mandate for pipeline operators referenced as Section 114 – Leak Detection and Repair, amongst other recommendations, that primarily applied to the PHMSA. PHMSA published an advisory bulletin on the subject to all operators in June 2021 providing a reminder to update their inspection and maintenance plans to address eliminating hazardous leaks and minimizing releases of natural gas (including intentional venting during normal operations) from their pipeline facilities. Operators must also revise their plans to address the replacement or remediation of pipeline facilities that are known to leak based on their material, design, or past operating and maintenance history.

In July 2021, the PUCN issued an order revising its regulations to require annual leak surveys of all distribution pipelines transporting natural gas and/or liquefied petroleum, effective January 1, 2023. In conjunction with this change, the PUCN authorized the establishment of a regulatory asset account to track the incremental cost of compliance related to the new regulation, for consideration in a future general rate case filing.

Southwest continues to monitor changing pipeline safety legislation and participates, to the extent possible, in providing public comments and working with industry associations, such as the American Gas Association, in shaping regulatory language associated with these new mandates and reporting requirements. Additionally, management works with its state and federal commissions to develop customer rates that are responsive to incremental costs of compliance. However, due to the timing of when rates are implemented in response to new requirements, and as additional rules are developed, compliance requirements could impact expenses and the timing and amount of capital expenditures for Southwest and Questar Pipelines.

Capital Resources and Liquidity

Over the past three years, cash on hand and cash flows from operations have provided a substantial portion of cash used in investing activities (primarily construction expenditures and property additions). In recent years, Southwest has accelerated pipe replacement activities to fortify system integrity and reliability, notably in association with gas infrastructure replacement programs. This accelerated activity has necessitated the issuance of both debt and equity securities to supplement cash flows from operations. The Company, in executing on its interim plans to fund the Questar Pipelines acquisition, initially funded the transaction through short-term borrowings, which would be refinanced through a multi-pronged permanent financing plan by the 2nd quarter of 2022. In the interim, its working capital resources are necessarily low compared to its short-term obligations, which will be alleviated once management completes its execution on the remainder of its plan. The Company’s capitalization strategy is to maintain an appropriate balance of equity and debt to preserve investment-grade credit ratings, which help minimize interest costs. Investment-grade credit ratings have been maintained following the acquisition.

Cash Flows

Southwest Gas Holdings, Inc.:

Operating Cash Flows. Cash flows provided by consolidated operating activities decreased $515 million between 2021 and 2020. The decline in operating cash flows primarily resulted from amounts under purchased gas adjustment mechanisms ($344 million, compared to collections of $36 million in the prior year), including amounts resulting from the temporary escalation in gas commodity prices during the first quarter of 2021 associated with the extreme cold temperatures in the central U.S. and an increase in commodity pricing during the latter part of 2021 (see Note 1 - Background, Organization, and Summary of Significant Accounting Policies). Other impacts include a decrease ($45 million) in recoveries related to the Arizona decoupling mechanism balance between years, as well as a decrease in net income, and the impact of changes in components of working capital overall.

Corporate and administrative expenses/outflows of Southwest Gas Holdings, Inc. increased by $25.1 million between 2021 and 2020 primarily due to an increase in professional fees for the current year. The increase was primarily the result of professional fees incurred in relation to (i) the Company’s acquisition of Questar Pipelines (separately from $14 million in similar fees incurred directly by Centuri in association with the acquisition of Riggs), (ii) the Company’s successful defense against a lawsuit launched by certain funds affiliated with Carl Icahn and certain affiliates (collectively, “Icahn”) seeking to constrain the Company’s ability to raise permanent financing for the acquisition of Questar Pipelines, (iii) Icahn’s ongoing tender offer to purchase shares of the Company’s common stock, (iv) Icahn’s ongoing proxy contest with respect to the election of directors at the Company’s 2022 Annual Meeting of Stockholders and (v) the ongoing stockholder litigation related to the foregoing as described further in Note 10 - Commitments and Contingencies included in the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.

Investing Cash Flows. Cash used in consolidated investing activities increased $2.2 billion in 2021 as compared to 2020. The change was primarily due to the acquisitions of Riggs Distler by Centuri and Questar Pipelines, by Southwest Gas Holdings, Inc, (see Note 15 - Business Acquisitions). The overall outflows to execute on these strategic initiatives was modestly offset by a decrease in cash outlays for capital expenditures in the natural gas distribution segment. Certain additional expenditures for capital projects remained unpaid within accounts payable at the end of both 2020 and 2021 due to timing.

Financing Cash Flows. Net cash provided by consolidated financing activities increased $2.9 billion in 2021 as compared to 2020. The change was primarily due to financing the acquisitions of Questar Pipelines by Southwest Gas Holdings, Inc. and Riggs Distler, by Centuri. The Company entered into a 364-day $1.6 billion Term Loan Facility to temporarily fund the Questar Pipelines acquisition, until it deploys its permanent financing. Centuri entered into an amended and restated credit agreement providing for a $1.145 billion secured term loan facility and a $400 million secured revolving credit facility, which in addition to funding the Riggs Distler acquisition, refinanced its previous $590 million loan facility. Approximately $1.22 billion was outstanding under the combined Centuri facility as of December 31, 2021. Southwest entered into a 364-day Term Loan to fund the increased cost of natural gas supply during the extreme cold weather event of the 1st quarter of 2021, and borrowed otherwise under its credit facility. Separately, the Company issued $75 million more in common stock under the Equity Shelf Program in 2021 compared to 2020. Dividend payments increased in 2021 as compared to 2020 as a result of an increase in the quarterly dividend rate and an increase in the number of shares outstanding. See Note 7 - Common Stock and Note 8 - Debt.

Southwest Gas Corporation:

Operating Cash Flows. Cash flows provided by operating activities decreased $399 million between 2021 and 2020. The decrease in operating cash flows was primarily attributable to the impacts related to deferred purchased gas costs and the Arizona decoupling mechanism noted above, as well as changes in other working capital components overall.

Investing Cash Flows. Cash used in investing activities decreased $91 million in 2021 as compared to 2020, primarily due to the decrease in cash outlays for construction expenditures. See also 2021 Construction Expenditures below.

Financing Cash Flows. Net cash provided by financing activities increased $304 million in 2021 as compared to 2020. The increase was primarily due to Southwest’s $250 million Term Loan issued to fund the increased cost of natural gas supply during the winter weather event. Additionally, Southwest issued $300 million in notes 2021, compared to $450 million in notes issued and $125 million in notes redeemed in 2020. Net borrowings between periods under Southwest’s credit facility and capital contributions from Southwest Gas Holdings, Inc. largely comprised the remainder of the change. See Note 8 - Debt.

The capital requirements and resources of the Company generally are determined independently for the individual business segments. Each business activity is generally responsible for securing its own financing sources. However, the holding company may raise funds through stock issuance or other external financing sources in support of each business segment, as discussed above and in Note 7 - Common Stock.

2021 Construction Expenditures

During the three-year period ended December 31, 2021, total gas plant in service increased from $7.1 billion to $8.9 billion, or at an average annual rate of 8%. Replacement, new business, and reinforcement work was a substantial portion of the plant increase. Customer growth impacted expenditures as Southwest set approximately 109,000 meters during the three-year period, which is reflected in new business.

During 2021, construction expenditures (through cash outlays) for the natural gas distribution segment were $602 million. The majority of these expenditures represented costs associated with replacement of existing transmission, distribution, and general plant to fortify system integrity and reliability. Cash flows from operating activities of Southwest were $25 million, reduced due to the winter gas cost run-up. Other funding was provided by cash on hand, external financing activities (including the $250 million Term Loan issued in March 2021 and the $300 million notes issued in August 2021), in addition to capital contributed by Southwest Gas Holdings, Inc., and funds from the existing credit facility.

2021 Financing Activity

Net proceeds received under the preexisting and current Equity Shelf Programs in 2021 were $203 million, comprised of an aggregate of 3,008,364 shares of Southwest Gas Holdings, Inc. common stock, sold in the open market at a weighted average price of $68.02 per share, net of $2 million in agent commissions. These net proceeds were contributed to Southwest by the holding company. As of December 31, 2021, the Company had up to $342 million of common stock available for sale under the the current program. See Note 7 - Common Stock for more information.

Net proceeds received under the Dividend Reinvestment and Stock Purchase Plan during 2021 was approximately $12 million, from the issuance of approximately 173,000 shares of Southwest Gas Holdings, Inc. common stock.

Natural Gas Distribution Segment Three-Year Construction Expenditures, Debt Maturities, and Financing

Management estimates natural gas distribution segment construction expenditures during the three-year period ending December 31, 2024 will be approximately $2 billion. Of this amount, approximately $650 million to $700 million is expected to be incurred in 2022. Southwest plans to continue to request regulatory support to undertake projects, or to accelerate projects as necessary, for the improvement of system flexibility and reliability, or to expand, where relevant, to unserved or underserved areas. Southwest may expand existing, or initiate new, programs. Significant replacement activities are expected to continue well beyond the next few years. During the three-year period, cash flows from operating activities of Southwest are expected to provide approximately 69% of the funding for gas operations of Southwest and total construction expenditures and dividend requirements. From a debt maturity standpoint, Southwest has $250 million 3.875% notes, $25 million 7.78% medium-term notes, and a $250 million Term Loan due in 2022. Any additional cash requirements, including construction-related, and any paydown or refinancing of debt, are expected to be provided by existing credit facilities, equity contributions from the Company, and/or other external financing sources. The timing, types, and amounts of any additional external financings will be dependent on a number of factors, including the cost of gas purchases, conditions in the capital markets, timing and amounts of rate relief, timing and amounts of surcharge collections from, or amounts returned to, customers related to other regulatory mechanisms, as well as growth levels in Southwest’s service areas and earnings. External financings could include the issuance of debt securities, bank and other short-term borrowings, and other forms of financing.

Liquidity

Several general factors (some of which are out of the control of the Company) that could significantly affect liquidity in future years include: variability of natural gas prices, changes in the ratemaking policies of regulatory commissions, regulatory lag, customer growth in the natural gas distribution segment’s service territories, the ability to access and obtain capital from external sources, interest rates, changes in income tax laws, pension funding requirements, inflation, and the level of earnings. Natural gas prices and related gas cost recovery rates, as well as plant investment, have historically had the most significant impact on liquidity within the natural gas distribution segment.

On an interim basis, Southwest defers over- or under-collections of gas costs to PGA balancing accounts. In addition, Southwest uses this mechanism to either refund amounts over-collected or recoup amounts under-collected as compared to the price paid for natural gas during the period since the last PGA rate change went into effect. At December 31, 2021, the combined balance in the PGA accounts totaled an under-collection of $291.1 million. See PGA Filings for more information.

Southwest Gas Holdings, Inc. has a credit facility with a borrowing capacity of $200 million; in December 2021, the existing credit facility was amended to extend the maturity date to December 2026, increase the borrowing capacity from $100 million to $200 million, and increase the amount to which the total commitment may be increased from $200 million to $300 million. This facility is intended for short-term financing needs. At December 31, 2021, $59 million was outstanding under this facility, which was also the maximum amount outstanding during 2021.

Southwest has a credit facility with a borrowing capacity of $400 million; in December 2021, Southwest amended the credit facility agreement while maintaining the borrowing capacity at $400 million. Southwest designates $150 million of the facility for long-term borrowing needs and the remaining $250 million for working capital purposes. The maximum amount outstanding during 2021 occurred during the first quarter and was $275 million ($150 million outstanding on the long-term portion of the credit facility, including $50 million under the commercial paper program, in addition to $125 million outstanding on the short-term portion). As of December 31, 2021, $130 million was outstanding on the long-term portion of the credit facility (no borrowings were outstanding under the commercial paper program), and none was outstanding on the short-term portion. The maximum amount outstanding on the long-term portion of the credit facility (including the commercial paper program) during each quarter end of 2021 was $150 million; the maximum outstanding balance on the short-term portion for each of the first, second, third and fourth quarters was $125 million, $69 million, $85 million and $3 million, respectively. The credit facility has been used as necessary to meet liquidity requirements, including temporarily financing under-collected PGA balances, meeting the refund needs of over-collected balances, or temporarily funding capital expenditures.

Southwest has a $50 million commercial paper program as noted above. Any issuance under the commercial paper program is supported by the revolving credit facility and, therefore, does not represent additional borrowing capacity. Any borrowing under the commercial paper program is designated as long-term debt. Interest rates for the commercial paper program are calculated at the then current commercial paper rate. At December 31, 2021, there were no borrowings outstanding under this program.

In March 2021, Southwest issued a $250 million Term Loan that will mature in March 22, 2022, or 364 days after issuance. The proceeds were used to fund the increased cost of natural gas supply during the month of February 2021 caused by extreme weather conditions in the central U.S. Southwest is in discussions with the lenders with respect to this loan and expects to enter into an amendment to extend the maturity date.

In August 2021, Southwest issued $300 million aggregate principal amount of 3.18% Senior Notes at a discount of 0.019%. The notes will mature in August 2051. Southwest used the net proceeds from the offering to repay the outstanding balance then existing under its credit facility, with the remaining net proceeds used for general corporate purposes.

In November 2021, the Company entered into a $1.6 billion delayed-draw Term Loan Facility that was funded on December 31, 2021 in connection with the acquisition of Questar Pipelines. This term loan will mature on December 30, 2022, or 364 days after issuance. This contributed to a negative working capital position of $1.5 billion. As of March 1, 2022, the Company does not have sufficient liquidity or capital resources to repay this debt at maturity without issuing new debt or equity. Management intends to satisfy this obligation through (i) the issuance of equity and equity-linked instruments and (ii) the issuance of long-term debt. These compose the permanent refinancing of the Questar Pipelines acquisition (refer to Note 15 - Business Acquisitions). Management also plans to facilitate the issuance of approximately $600 million of bonds partially intended to refinance other existing obligations at Southwest and for other of its general corporate purposes. See Note 8 - Debt. However, management maintains the discretion to seek alternative sources to refinance its near-term maturities, and can provide no assurances as to its ability to refinance these maturities with the intended methods or on attractive terms. See Item 1A “Risk Factors - Financial, Economic, and Market Risks” in our Annual Report on Form 10-K for the year ended December 31, 2021.

In April 2021, the Company entered into a Sales Agency Agreement between it and BNY Mellon Capital Markets, LLC and J.P. Morgan Securities LLC (the “Equity Shelf Program”) for the offer and sale of up to $500 million of common stock from time to time in an at-the-market offering program. The Company issued $157 million under this multi-year program during 2021. Net proceeds from the sales of shares of common stock under the Equity Shelf Program are intended for general corporate purposes, including the acquisition of property for the construction, completion, extension, or improvement of pipeline systems and facilities located in and around the communities served by Southwest, as well as for repayment or repurchase of indebtedness (including amounts outstanding from time to time under the credit facilities, senior notes, Term Loan or future credit facilities), and to provide for working capital. See Note 7 - Common Stock.

In May 2019, the Company filed an earlier automatic shelf registration statement with the SEC for the offer and sale of up to $300 million of common stock from time to time in at-the-market offerings under the related prospectus and sales agency agreement. The Company issued the remaining capacity ($46 million) of this equity program during the quarter ended March 31, 2021.

In December 2021, as part of the acquisition of Questar Pipelines, the Company assumed existing unsecured long-term debt, including $430 million aggregate principal related to two private placement senior notes and public senior notes. For the three combined, interest rates vary from 3.53% to 4.875%, with the earliest maturity date relating to $100 million total amount due (in 2028).

In August 2021, Centuri, in association with the acquisition of Riggs Distler (refer to Note 15 - Business Acquisitions), entered into an amended and restated credit agreement. The agreement provided for a $1.145 billion secured term loan facility, at a discount of 1.00%, and a $400 million secured revolving credit facility, which in addition to funding the Riggs Distler acquisition, refinanced the previous $590 million loan facility. This multi-currency facility allows the borrower to request loan advances in either Canadian dollars or U.S. dollars. Amounts borrowed and repaid under the revolving line of credit portion of the facility are available to be re-borrowed. The obligations under the credit agreement are secured by present and future ownership interests in substantially all direct and indirect subsidiaries of Centuri, substantially all of the tangible and intangible personal property of each borrower, and certain of their direct and indirect subsidiaries, and all products, profits, and proceeds of the foregoing. The term loan facility matures on August 27, 2028 and the revolving credit facility matures on August 27, 2026. Centuri assets securing the facility at December 31, 2021 totaled $2.5 billion. The maximum amount outstanding on the combined facility during 2021 was $1.261 billion, which occurred in the fourth quarter, at which point $1.145 billion was outstanding on the term loan facility. At December 31, 2021, $103 million was outstanding on the revolving credit facility, and $1.117 billion that was outstanding on the term loan portion of the facility. Also at December 31, 2021, there was approximately $244 million, net of letters of credit, available for borrowing under the line of credit.

Interest rates for the holding company’s Term Loan Facility, Southwest’s Term Loan, and Centuri’s secured term loan facility contain LIBOR-based rates. Certain LIBOR-based rates are scheduled to be discontinued as a benchmark or reference rate after 2021, while other LIBOR-based rates are scheduled to be discontinued after June 2023. As of December 31, 2021, Southwest had $250 million in outstanding borrowings under its Term Loan and $130 million outstanding under its credit facility. At the same time, the Company had $3.2 billion in aggregate outstanding borrowings under both Centuri’s combined facility, the Company’s Term Loan Facility, Southwest’s Term Loan, and credit facilities that have interest rates with reference to LIBOR and maturity dates that extend beyond 2021. The Southwest and Southwest Gas Holdings credit facilities were amended on December 28, 2021 to replace LIBOR interest rate benchmarks with SOFR interest rate benchmarks; however, amounts outstanding at December 31, 2021 under these credit facilities were referenced to LIBOR and subsequently repaid shortly after year end. In order to mitigate the impact of a discontinuance on the Company’s and Southwest’s financial condition and results of operations, management will monitor developments and work with lenders, where relevant, to determine the appropriate replacement/alternative reference rate for variable rate debt. At this time the Company and Southwest can provide no assurances as to the impact a LIBOR discontinuance will have on their financial condition or results of operations. Any alternative rate may be less predictable or less attractive than LIBOR.

Credit Ratings

Credit ratings apply to debt securities such as bonds, notes, and other debt instruments and do not apply to equity securities such as common stock. Borrowing costs and the ability to raise funds are directly impacted by the credit ratings of the Company. Credit ratings issued by nationally recognized ratings agencies (Moody’s Investors Service, Inc. (“Moody’s”), Standard & Poor’s Ratings Services (“Standard & Poor’s”), and Fitch Ratings (“Fitch”)) provide a method for determining the creditworthiness of an issuer. Credit ratings are important because long-term debt constitutes a significant portion of total capitalization. These credit ratings are a factor considered by lenders when determining the cost of current and future debt for each debt obligor (i.e., generally the better the rating, the lower the cost to borrow funds). The current unsecured long-term debt ratings of the companies are considered investment grade.