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DATE
Wed, Nov. 4, 2026
CALL PARTICIPANTS
- Director of Investor Relations, Sustainability and Stakeholder Engagement - Tyler Franek
- President and Chief Executive Officer - Justin L. Brown
- Chief Financial Officer and Treasurer - Justin S. Forsberg
TAKEAWAYS
- Adjusted EPS -- $0.20 for the quarter, compared to $0.06 in the third quarter of 2025.
- Year-to-Date Adjusted EPS -- $2.69, representing an 18% increase year over year driven by regulatory outcomes and cost management.
- Full-Year 2026 Guidance -- $4.17 to $4.32 per share, reaffirmed by management based on current visibility.
- Long-Term EPS Growth Target -- 12% to 14% annually through 2030, supported by infrastructure investment and rate base growth.
- Nevada Regulatory Outcome -- $48 million in incremental annual revenue authorized in October 2026, including a 9.5% return on equity and a 51.35% equity ratio.
- California Regulatory Outcome -- $32.6 million in incremental annual revenue authorized, featuring a 10% return on equity and a 50% equity ratio.
- Arizona Rate Request -- $91.3 million in annual revenue requested, updated from an original $101 million to reflect revised post-test-year plan estimates.
- Great Basin Expansion Investment -- $2.3 billion estimated total investment, an increase from the previous $1.7 billion estimate used in long-term guidance.
- Great Basin Projected Margin -- $270 million to $300 million in incremental annual margin, expected to begin at the fourth quarter 2028 in-service date.
- Contracted Demand -- 1 billion cubic feet per day, supported by binding precedent agreements and surety for the Great Basin 2028 project.
- Additional Demand Interest -- 1.8 billion cubic feet per day in non-binding expressions of interest, targeted for in-service dates from 2029 to 2035.
- Utility Return on Equity -- 8.0% for the 12-month period ended Sept. 30, 2026.
- Capital Expenditures -- $806 million invested in infrastructure modernization and expansion during the first nine months of 2026.
- Liquidity -- nearly $700 million in available liquidity as of the end of the third quarter.
- Operating Margin -- $278.1 million for the quarter, compared to $274.2 million in the third quarter of 2025.
- Gas Plant in Service -- $788.2 million increase since the third quarter of 2025, representing a 7% rise driven by pipe replacement and capacity reinforcement.
- Operations and Maintenance Expense -- $2.0 million increase for the quarter, primarily due to higher employee-related labor costs of $2.7 million.
- Consolidated Net Debt -- approximately $3.7 billion at the end of the third quarter, including purchased gas adjustment balances payable to customers.
- Five-Year Capital Plan -- $6.3 billion total projected through 2030, which management expects will nearly double the utility rate base.
- Great Basin Expansion Spending Profile -- 15% in 2026, 25% in 2027, and 60% in 2028.
- ATM Program Capacity -- $340 million, which management intends to renew as a housekeeping item while expecting only modest external equity needs.
- Net Interest Deductions -- $4.9 million decrease at the utility for the quarter, reflecting lower over-collected purchased gas adjustment balances in Nevada.
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RISKS
- Forsberg noted that the reduction of the company's purchased gas adjustment balance has been slower than anticipated due to weather conditions and volumetric rates, particularly in Nevada.
- Brown stated, "RUCO opposes it [the formula rate proposal] in its entirety," referring to the Residential Utility Consumer Office's position on the proposed Arizona rate design changes.
SUMMARY
Southwest Gas Holdings, Inc. (NYSE:SWX) reported adjusted earnings growth for the third quarter, driven by constructive regulatory outcomes and cost management across its utility segments. Management reported the completion of rate cases in Nevada and California while advancing a multiyear expansion project at Great Basin. The company stated that its strategic focus remains on aligning cost recovery with the pace of infrastructure investment to reduce regulatory lag. Financial results reflected steady customer growth and disciplined operational efficiency despite a volatile interest rate environment.
- Management highlighted the scalability of the Great Basin expansion, noting the 48-inch pipeline could be expanded to approximately 4 billion cubic feet per day with additional compression.
- The company intends to include the full $2.3 billion Great Basin project estimate in its annual five-year plan roll-forward in Feb. 2027.
- CFO Forsberg indicated that the company intends to optimize the lowest cost source of funds, stating, "Our strong liquidity across the company provides us with flexibility to optimize internal and external financing sources across the enterprise."
- Management noted that the Arizona formula rate proposal includes a 20-basis-point dead band above and below the authorized return on equity, though staff proposed a 50-basis-point version.
- The company received a final decision on cost of capital in California during Aug. 2026, which completed the general rate case with rates effective back to Jan. 1, 2026.
INDUSTRY GLOSSARY
- FAST 41: A program to improve the transparency and predictability of the federal environmental review and authorization process for major infrastructure projects.
- FERC: Federal Energy Regulatory Commission, an independent agency that regulates the interstate transmission of natural gas, oil, and electricity.
- Bcf/day: Billion cubic feet per day, a unit of measurement for natural gas volume.
- CPCN: Certificate of Public Convenience and Necessity, a legal document required for the construction and operation of a public utility.
- AFUDC: Allowance for Funds Used During Construction, an accounting practice that allows utilities to capitalize the cost of financing for construction projects.
- PGA: Purchased Gas Adjustment, a regulatory mechanism that allows gas utilities to adjust rates to recover the actual costs of purchasing natural gas for customers.
- Formula Rates: A regulatory mechanism that automatically adjusts utility rates based on actual costs and investments rather than periodic full rate cases.
- Dead band: A specific range around an authorized return on equity where no rate adjustments occur under a formula rate mechanism.
- VIER: Variable Interest Expense Recovery, a mechanism used in certain jurisdictions to recover or credit interest expense variations.
Full Conference Call Transcript
Operator: Welcome to Southwest Gas Holdings Third Quarter 26 Earnings Conference Call. Today's call is being recorded and our webcast is live. A replay will be available later today and for the next 12 months on the Southwest Gas Holding website. All participants are currently in listen-only mode. A Q&A session will follow the prepared remarks. If you would like to ask a question at that time, please press 1 then the number 1 on the telephone keypad. If you would like to withdraw from your question, please press 2. I will now turn the call over to Mr. Tyler Franek, Director of Investor Relations. Sustainability and Stakeholder Engagement. Please go ahead.
Tyler Franek: Thank you, Kelsey, and good morning, everyone. We appreciate you joining the call this morning. This morning, we issued and post to Southwest Gas Holdings' website our third quarter 2026 earnings release and file the associated Form 10 Q The slides accompanying today's call are also available on Southwest Gas Holdings website. We will refer to those slides by number throughout the call today. Please note that on today's call, we will address certain factors that may impact 2026 earnings and discuss longer term guidance. Information that will be discussed today contains forward looking statements.
These statements are based on management's assumptions on what the future holds but are subject to several risks and uncertainties, including uncertainties surrounding the impact of future economic conditions, regulatory approvals, and capital projects. This cautionary note and a note regarding non GAAP measures are included on slide 2 and 3 of this presentation. In today's press release, and in our filings with the Securities and Exchange Commission. We encourage you to review each of these disclosures. These risks and uncertainties may cause actual results to differ materially from statements made today. We caution against placing undue reliance on any forward looking statements, and we assume no obligation to update any such statements.
As shown on slide 4 on today's call, we have Justin L. Brown, president and CEO, and Justin S. Forsberg, chief financial officer and treasurer. Other members of the man. Management team are also available to answer your questions during the Q&A portion of the call today. If necessary. I will now turn the call over to Justin L. Brown.
Justin L. Brown: Thanks, Will. Good morning, everyone, and thank you for joining us today. Beginning on Slide 5, we delivered strong third quarter and year to date results while continuing to execute on our regulatory and growth priorities. Reported adjusted earnings per share from continuing operations of $0.20 compared with $0.06 in the third quarter of 2025. And year to date adjusted earnings per share from continuing operations of $2.69 which is up 18% from the same period last year. The improvement was primarily driven by constructive regulatory outcomes and disciplined cost management as we remain focused on delivering on our 2026 strategic priorities and key initiatives.
Based on our current expectations, we are reaffirming our 2026 adjusted EPS guidance of $4.17 to $4.32 per share and our 12% to 14% long term adjusted EPS growth target. In Arizona and Nevada, we are working to better align cost recovery with the pace of our investments which benefits customers and investors alike Importantly, our plan does not depend on any single as we have multiple credible paths to our objectives regardless how individual cases may unfold.
We remain focused on delivering near term performance and long term value that starts with safe, reliable and affordable natural gas service for our customers and extends to supporting economic development across the communities we serve, all backed by disciplined capital investment and cost management. Turning to slide 6. We continue to execute on our 2026 strategic priorities and remain on track to deliver on each of our key initiatives. We received final orders in both our California and Nevada rate cases, which together authorized approximately $80 million of incremental annual revenue. In Arizona, staff testimony was constructive. I will cover it in more detail shortly.
At Great Basin, we submitted our FAST 41 draft application for the 2028 expansion project., and we remain on track for the FERC certificate application by year end for a targeted fourth quarter 2028 in-service date. On slide 7, at the utility, we delivered a 12-month ended return on equity of 8% and third quarter O&M expense remained relatively flat on a per customer basis. Consistent with our disciplined cost management efforts across the company. We ended the quarter with nearly $700 million of available liquidity after having invested more than $800 million in capital at South Gas and Great Basin so far this year.
We delivered these results before realizing the full benefits of our recent regulatory outcomes in Nevada and while Arizona remains pending, underscoring the strength of our underlying business. With new California and Nevada rates now in effect, and as we work with the parties in the Arizona Commission to bring our case to a close, expect the associated rate relief to further improve our results as we move into 2027. We continue to see constructive outcomes we move through our general rate case cycle. In California, the final decision on cost of capital was received in August, and this completed our general rate case.
The final decision authorized just over $32 million of incremental revenue, a 10% return on equity and a 50% equity ratio with rates effective back to January 1, 2026. A summary of the outcome is shown in the appendix on Slide 26. Turning to slide 9, In Nevada, we received a final order on October 14, authorized nearly $48 million of incremental annual revenue, maintaining our authorized return on equity of 9.5% and an actual equity ratio of 51.35%, up from the 50% in our prior case with rates effective October 2026. This outcome exceeds the roughly $40 million and 9.3% proposed by the other parties.
While we were pleased with several elements of the outcome, we filed for reconsideration of certain post-test-year plan that we believe should have been included in rate base and not deferred to a future rate proceeding. If successful, this request could further improve the overall revenue outcome in Nevada. We also expect the commission to finalize its rules around surrounding alternative rate making by the end of 2026 and making a filing to implement alternative rates by early second quarter 2027.
In Arizona, we received intervenor testimony and notably the commission staff recommends $53 million to $58 million of incremental annual revenue depending on the treatment of the fair value increment and a 9.75% return on equity, Staff also supports post-test-year plans subject to in service verification and most notably, our proposal to transition to formula rates with some modifications. Our rebuttal testimony was filed November 2, and we updated our request to $91.3 million in annual revenue to reflect updated post-test-year plan estimates and cash working capital assumptions as well as other minor adjustments and corrections to our original filing of the $101 million.
Additional testimony is due by the end of November, and the hearing is scheduled to begin December 7th with anticipated rates becoming effective April 1, 2027. Our formula rate proposal would provide an annual rate adjustment beginning 1 year after new base rates take effect with a 20-basis-point dead band above and below the authorized return on equity. And would replace several existing mechanisms. Staff supports the mechanism with some modifications to the dead band, proposing a 50-basis-point deadband and proposing some adjustments to our proposed timeline for the first filing. As well as recommending the lower end of their ROE range, while RUCO opposes it in its entirety. And we address each of these positions in our rebuttal testimony.
Collectively, these proceedings strengthen earnings visibility support timely recovery of prudent investment, and advances our focus on reducing regulatory lag while providing rates stability for our customers. Across all 3 states, the strategy is the same. Pursue timely and constructive outcomes that align cost recovery with the pace of our investment. Turning to slide 11. We continue to advance our Great Basin 28 expansion project in preparation of our FERC certificate application, which remains on track for filing by year end. Recent progress includes filing key draft resource reports submitting our draft FAST 41 application, conducting field surveys and outreach, and advancing engineering and design work.
Shippers have executed binding precedent agreements and posted surety supporting 1 Bcf per day of contracted demand. And upon FERC approval of the certificate, they are to execute transportation service agreements with a minimum term of 20 years. Based on that contracted demand, we expect the projects estimated $2.3 billion investment to generate approximately $270 million to $300 million of incremental annual margin beginning at the expected fourth quarter 2028 in-service date. Because this is a cost of service project, the 1 Bcf per day already under contract is expected to fully support that margin estimate. As a reminder, $600 million of the $2.3 billion estimate along with the associated incremental margin, is not reflected in our long term guidance.
We do not expect the updated estimate to materially affect our 2020 2026 capital expenditure guidance, and we will update long term guidance with our annual 5-year plan in February. Importantly, the current 48-inch pipe design will serve the contracted 1 Bcf per day and can accommodate greater throughput with relatively modest additional investment depending on shipper specifications. As such, additional demand served within that current design capacity is expected to lower the rate for all shippers subscribed to the 2028 expansion project. Capital spending is expected to be approximately 15% in 2026, 25 percent in 2027, and 60% in 2028 as shown on the slide.
We anticipate a decision on our CPCN filing in late 2027 and AFUDC is expected to be capitalized into project costs and contribute to future invested capital upon placement into service. We remain focused on executing the project safely efficiently, and in a manner that supports long term value creation.
Justin S. Forsberg: I will now turn the call over to Justin S. Forsberg to discuss our financial performance expected financing plans, our guidance outlook in greater detail. Thank you, Justin. Turning to the EPS walk on Slide 13. The quarter over quarter improvement at Southwest Gas was operationally driven by improved rates as well as customer growth. Lower interest expense at the holding company also contributed to the increase. While the third quarter tends to be our lowest earnings period, the earnings growth continues to support the benefits of our simplified fully regulated natural gas business model as well as our disciplined focus on cost management, regulatory improvement, and purposeful capital allocation.
On slide 14, you will see the key drivers of the quarter over quarter change in Southwest Gas' adjusted net income, compared comparing the third quarter of 2026 to the same period in 2025. Operating margin increased $3.8 billion driven primarily by updated rates in California as well as customer growth, which remains steady across our service territories, despite a prolonged higher interest rate environment. We also saw the margin benefits from the Arizona system integrity mechanism capital tracker. These and the other increases in recovery, return, on regulatory account balances were partially offset by lower built margin across Arizona and Nevada attributable to nondecoupled customers as well as lower margin related to the Nevada veer mechanism.
The impact of which is offset in net interest deductions. Our team continues to deliver disciplined cost management Year to date, O&M is relatively flat, and we expect our continued focus on operational efficiency to help us achieve our goal of maintaining flat O&M expense per customer at the utility over our 5-year plan. Depreciation and amortization increased by a net $1.8 million. The increase mostly reflects a 7% increase in gas plant in service compared to the third quarter of 2025. Partially offsetting the higher depreciation expense was an related to certain regulatory assets to more closely align the return on those assets with the time period over which those costs have been deferred.
The increase in plant and service is consistent with our disciplined infrastructure investment strategy focused on safety, reliability, and customer growth. Lower net interest deductions primarily related to lower amounts incurred on over collected PGA balances for Nevada as well as recoveries associated with the Nevada fare mechanism I mentioned earlier, offset the offset in margin. also benefited results by $4.9 million. Although other income was flat, lower nonservice pension related income and lower interest income were nearly fully offset by higher FOLI gains, and an increase in AFUDC equity driven mostly by capital investment in Great Basin's 2028 expansion project.
Finally, even though adjusted earnings were higher, we had a net income tax benefit driven mostly by lower deferred state income taxes. Overall, we remain confident we are on track to achieve our full year outlook. Turning to slide 15, I will discuss our financing plans. We are in a strong financial position utilizing strategically sourced debt to support future growth. We have yet to issue any equity outside of our dividend reinvestment plan so far in 2026. And we continue to anticipate no equity issuances for the remainder of this year. We currently plan on issuing debt at the utility this year which we anticipate sizing as needed to support liquidity and capital allocation priorities.
Our strong liquidity across the company provides us with flexibility to optimize internal and external financing sources across the enterprise as we navigate a relatively volatile interest rate market. Additionally, we have wide flexibility in terms of tenor, as we monitor borrowing costs across the yield curve and evaluate laddering maturities against our current debt maturity profile. Recall that our 5-year plan includes a mix of leverage capacity of the holding company utility bond issuances, and modest ATM usage to finance our growing $6.3 billion capital plan. And we intend to optimize the lowest cost source of funds when prudent.
Later this month, when we extend the shelf registration, you will see us update and extend our existing at the market equity program while retaining its capacity at $340 million Maintaining ATM capacity remains a prudent financing tool and should not be interpreted as a change in our current financing expectations. We continue to only expect modest external equity needs to fund our capital plan and we do not anticipate needing to draw meaningfully on the ATM until the end of our current planning horizon. Our highly flexible and well capitalized balance sheet positions us well to fund future growth.
Over the long term, we continue to believe we have sufficient leverage at the holding company to absorb much of the anticipated equity needs of the utility that are driven by our capital plan. Supported by meaningful cushion above our current downgrade thresholds, we retain considerable flexibility in how we finance investment while preserving our financial strength. Briefly on Slide 16, at the end of the third quarter, consolidated net debt was approximately $3.7 billion when considering the purchase gas adjustment balances that are payable to customers. We maintain investment grade ratings with stable outlooks across the enterprise.
We continue to target consolidated S and P FFO to debt above 17% over time as the significant margin growth from the investments we are making are expected to support even further strengthening of the balance sheet as well as potential capital reinvestment opportunities. Finally, on Slide 17, based on current visibility, we are reaffirming our 2026 adjusted EPS guidance expectations to center around the midpoint of the range of $4.17 to $4.32. In addition, we are reaffirming 2026 capital expenditures and our long term guidance metrics and drivers. As noted, those long term metrics reflect $1.7 billion of Great Basin capital through 2030 and do not yet incorporate the updated $300 million project estimate.
We intend to include the full estimate when we roll forward our 5-year capital, financing, rate base and earnings assumptions this coming February. The successful execution of our current 5 year capital program would nearly double our wide rate base from today by the end of 2030. Taken together, we believe our year to date results, on track plan execution, and the continued commercial interest in Great Basin's expansion opportunities reinforce the durability of our plan. We remain confident in our ability to deliver on our long term financial objectives, of receiving timely recovery of investments improving earned returns, and preserving balance sheet strength.
The progress we have made this year reinforces our confidence in achieving our long term objective regardless of the timing of individual regulatory outcomes. We remain committed to prudent capital allocation and to supporting long term value creation for stockholders. With that, let's open the line for your questions.
Operator: Thank you. Ladies and gentlemen, we will now begin the Q&A session. Should you have a question, please press * followed by 1 on your touch tone phone. You will then hear a prompt that your hand has been raised. Should you wish to withdraw from the queue, please press * followed by 2. If you are using a speakerphone, please lift the handset before pressing any key. 1 moment, please, for your first question. And your first question comes from Constantine from Wells Fargo. Please go ahead.
Constantine Lednev: Congrats on the quarter. Maybe just starting off on the Arizona ACC turnover. Do you see any impacts for the current litigated process, and would it be feasible still to get at least a partial settlement on the more straightforward elements? Specifically as we look at formula rates backdrop?
Justin L. Brown: Yes, Constantine, it is Justin. I think it is a good question. Obviously, you know, the election was yesterday. I do not think they have called it, but things directionally appear to be the turnover like you mentioned. I do not see how that would have any impact on the litigation itself, that you referenced. And then I think the commission turnover, again, I think the consistent thing there is the staff and our working relationship with the staff. And so I think our prospects around settlement or working with the staff and the parties is the same regardless of elections and different things.
I mean, that is the 1 consistent that we do know about Arizona is they do have elections every 2 years, and we manage our business accordingly and in a very measured way. And focus on our working relationship with the underlying parties like the staff and the consumer advocate.
Constantine Lednev: Excellent. Understood. And maybe shifting to the overall progress on regulatory matters year to date. How are you thinking about the kind of gross margin drivers in the context of 2027 California and Nevada are known, Arizona is progressing. And any way to frame the net ROE lag with the new rates Anything structural kind of that you would call out that still remains?
Justin S. Forsberg: This is Justin S. Forsberg, Constantine. Thanks for the question. I think when we think about margin, obviously, we have California and Nevada behind us. And so we kind of have we have line of sight or clarity for the impact on 2027 in those states. Especially when you think about Nevada, just as a reminder, we plan on filing for formula rates which will not necessarily impact 2027. it is more of further out. Impact on that potential adjustment. And then I think the risk that is left is really Arizona, as we talked about just a second ago, right?
And we are expecting, we have a hearing in December, expecting a final decision sometime early next year with rates effective in our plan by April. So I think from that perspective, that is kind of how we think about margin improvements on the regulatory side. for next year.
Constantine Lednev: And then just to clarify, then with the timing between Nevada and Arizona those would kind of roll in 2027, 2028. Kind of towards the full kind of margin contribution from the improvement, right?
Justin S. Forsberg: Yeah. As far as the margin contribution, full run rate, yeah, you are exactly right. Like, Nevada, full run rate would be 2027. Arizona would be partial year. 2028. And full or 2027, full run rate, 2028. With formula rate or alternative rate making adjustments currently expected mid-2028. Excellent.
Constantine Lednev: Perfect. Thank you so much. Thanks for your time.
Operator: Thank you. And your next question comes from Elias Jossen from JPMorgan. Please go ahead.
Elias Jossen: Hey, thanks for taking the question. Maybe sticking with Nevada, obviously, we saw the governor's seat flip. So just wanted to get a sense of where you guys are in the rule making process and how to think about if there are any implications to consider in the state there more broadly?
Justin L. Brown: Yeah. Elias, it is Justin L. Brown. We are still working through the regulation at the PUCN. And so they had issued draft regulations in May. They received feedback and comments on those. We anticipate them issuing a new draft and hopefully voting on it by year end. We do not see the governor's race really impacting that process. And so, we would anticipate kind of that is the timeline we are still thinking about in terms of moving forward with respect to those regulations. And as Justin S.
Forsberg just mentioned, kind of the timing around how we are thinking about a formula rate or an alternative rate making proposal in Nevada and kind of when that would show up in rates We are still targeting mid. Middle of 28. Gotcha. And I know you said the ACC race is not called, but I guess if outcomes were to hold and the commission is clearly moving towards democratic base. And, if we think about the timeline into next April for rate finalization, You know, what are the kind of key items for us to monitor in next year?
And if there is any historical precedent for this kind of timeline with the commission I know, again, you still have a majority of Republicans, but just at a high level thinking about the timeline into next year. Yeah, that is a good question, Elias. I think given the recent voting record among the existing 5 and really the 3 commissioners that are staying You know, I would just look for continued consistency in terms of their approach on these different filings. I think you have seen that they have kind of coalesced around an approach this year. And it seems like those 3 have been fairly consistent. And I would look for that consistency to continue into the year.
I mean, obviously, when you have 2 new commissioners we will see where they end up voting on different matters that come before them. So, time will tell on that. As cases come up and we start to see kind of their votes and the rationale for their votes. But I think the key is looking for the consistency with the 3 that are currently seeded and then just as we move into 2027, we will be evaluating kind of directionally where the 2 new commissioners, what their perspectives are. What their rationale is, and kind of where they start to place their votes. Thanks.
Operator: Thank you. And your next question comes from Jamieson Alexander Ward from Jefferies. Please go ahead.
Jamieson Alexander Ward: Hi, guys. Thanks for taking my question. The DNA true up and the state tax benefit added about $0.12 this quarter. Were those in your plan when you set guidance? And if not, what is offsetting them?
Justin S. Forsberg: Yeah. it is a good question. So I think when we sort of rewind, you know, we do have in our plans, including our plans, potential items when we think about it as we do our sort of prompt year numbers. I think, you know, I have to really think through, like, the magnitude of some of these opportunities that showed up. While that might be a little bit different than what we had in our plan, we do tend to when we put our plans, have opportunities that are in front of us. That we could look at.
In terms of sort of your question on offsetting, I do not think we necessarily think that there is anything significant going that direction. Like, maybe the other I guess other than the PGA is probably returning back customers a little slower. Than what we would have anticipated just simply given weather conditions and volumetric rates. And so the reduction of our PGA has been a little bit slower, especially in Nevada. And so that is probably something that would have been offsetting it in the other direction.
Jamieson Alexander Ward: Got it. Okay. Okay. That makes sense. Thanks. In Arizona, if the commission adopts the formula rate at the low end, of staff's range, how much would you still expect to see an improvement versus authorized pardon me, versus the actual earned returns in recent years. And separate, but related to that, could you live with a 50-basis-point deadband like you and ESCO?
Justin L. Brown: Yeah, James. I mean, I think we have talked about the dead band in the past. I mean, the policy statement provides for, I think, 20, I think the commissions and the staff's been pretty consistent on their votes around a 50. I think that is still, from our perspective, an improvement over kind of the current historical model, historical past year model, and regulatory lag that exists. And so we definitely still think there is improvement there and you know, regarding that possible outcome. And we will see how it goes on a go-forward basis. Obviously, we are proposing the 20-basis-point band. And then obviously, there is circles around whatever ROE you end up getting.
And so whether you are authorized to our current 9.84% and you have the deadband or if they adjust the ROE to something else, you know, that is just part of the process. No different than any rate case where they set an ROE and an authorized ROE and trying to manage your business to get as close to that authorized level as you can. Thank you very much. Appreciate the answers.
Operator: Thank you. And your next question comes from Gabriel Moreen from Mizuho.
Gabriel Moreen: If I can ask a couple of Great Basin questions. Can you talk about the FAST-41 application and what that may or may not do for the process in terms of either accelerating it, smoothing it out. And then in terms of that 1.8 Bcf of additional customer interest, can you just talk about where you are, you think, in terms of getting some of that interest across the finish line? And I am curious also of that 1 Bcf per day, to what extent that is data centers or other interest like industrial or power gen, not data center related?
Justin L. Brown: Yeah, Gabe. it is Justin. On the FAST-41 application, I would think of that as more of a of a transparent and a coordination opportunity. it is a voluntary program where we will make an application filing. We have submitted a draft application, we will get feedback. But really what it does is it does not necessarily guarantee things to be faster or it is the same review requirements. it is just more of a coordination among the different permitting agencies. And so it provides greater transparency regarding how that process will go and so greater predictability in terms of the schedule. And so that is how we are thinking about it.
You know, granted there could be some efficiency improvements as a result of the coordination, but that is not a guarantee. And then with respect to the additional demand, again, that is something right now we are really focused on the 2028 expansion and the shippers that have signed up there, and we are continuing to work with those that are looking at capacity beyond that. And we will continue to do that. We continue to receive inbound calls to this day where we get additional inquiries.
I think over time, that will settle in where once we start the process, you know, in terms of the FERC filing, maybe even construction around 2028, probably get greater clarity around those shippers and kinda what their anticipated timelines are then we will try to coalesce around a date and look for an announcement sometime in the future regarding kinda what that looks like and what shippers are willing to commit, to binding precedent agreements with surety, similar to what we did this last year and a half.
Gabriel Moreen: Thanks, Justin. And I know you responded earlier to Elias's question. Questions on the Nevada governor election as it pertains to, I think, forward rates. Can you talk about it within the context of Great Basin. I do not know to what extent it matters for land acquisition rights-of-way or things like that. But maybe can you just. I know it is early days, but can you speak to that too?
Justin L. Brown: Yeah. I think it is early. it is something we will obviously keep an eye on. I think when we think about the 2028 expansion, I think a lot of those things are already in motion. And I think given the locale of where the shippers primarily are located, I think some of them have already received some of their permits from different state agencies. So I do not really anticipate any change in trajectory around the 2028. Obviously, time will tell around the 2029 to 35. And, you know, those shippers and kinda their appetite for continuing with their projects and things of that nature.
So that is something we will keep a close eye on as we work with them to firm up their interest. Great. Thanks, Justin. Appreciate it.
Operator: Thank you. And your next question comes from Christopher Ellinghaus from Siebert Williams Shank. Please go ahead.
Christopher Ellinghaus: Hey, guys. Good morning. Hey, Christopher. Forsberg here. I heard what you said about the ATM, but could you just repeat what you were saying about equity following that?
Justin S. Forsberg: Yeah. So I was just talking about this housekeeping that we will re. We will renew the ATM, when we when we renew the extend the shelf here in a few weeks. And just wanted to help people understand, you know, keeping the size of it the same is expected as $340 million and our expectations for equity, need for equity externally have not changed. Just trying to help people understand that this is a housekeeping item. So essentially, still, when you go back to what we have said previously, still expect relatively modest equity issuances externally off the ATM. You know, during the construction time frame of Great Basin primarily. Okay. Great. Thanks.
Christopher Ellinghaus: As far as the Great Basin margin range goes, can you give some sense of what you are thinking the variables are within the range?
Justin S. Forsberg: Yeah. I think, there are a couple of things the way we think about it. And you will remember that it is a cost of service project. And so the margin really depending on, you know, assuming that you do not have significant change in the construction cost. Margins should be relatively similar. You know, supported by everyone who signed up today is what we are thinking about the range. We do. In our construction, estimates. We do assume some contingencies in the CapEx numbers. And so that is something that could bring the range, say, a little bit lower if costs end up coming at a little bit lower than what we have estimated in our estimates.
And then I think when you think about what could raise it much higher, I think it kind of depends on the timing and spending of capital which would impact your AFUDC numbers. Which would then obviously change the total cost. Of the project as far as rate base goes, you ultimately capitalize that interest and equity from AFUDC could have an impact on the margin. So those are kind of how we think about the range. Bottom and top. So actual spending timing would be an important factor as well. Yep.
Christopher Ellinghaus: The elections I guess, people have been trying to ask questions around this in various ways, but rather than thinking about the individual personnel or governors or whatever, but just the general you know, swing, what happened last night. Do you think that leads to any kind of policy direction that might have any implications at all?
Justin L. Brown: Christopher, it is Justin L. Brown. it is a really good question. Think when we look at our 3 states, and based on the changes. I mean, obviously, time will tell, but I do not think there is anything that jumps out to us as a big risk in terms of big swings in policy changes that would affect our day to day business. Okay. Fair enough. Alright. Thanks. Appreciate the details.
Operator: Thank you. Thank you. And your next question comes from Paul Fremont from Ladenburg. Please go ahead.
Paul Tremont: Thanks and congratulations on your quarter. I guess my first question is on the depreciation adjustment to the regulatory assets. Is that spread over a number of states? Is it all in 1 state? Where would that be?
Justin S. Forsberg: You can assume it is across our jurisdictions. Just really working to line it up with the timing of when the intent of those regulatory accounts are deferred. The costs are deferred over.
Paul Tremont: And then I guess I would assume that in your next rate filings, in, I guess, it would be all 3 jurisdictions that would sort of be a pass through back to back to customers. Or was there an immediate sort of an adjustment to revenue when you when you adopted the depreciation change?
Justin S. Forsberg: Yeah, I would say it is you should probably think of it more as nonrecurring. Because we are essentially, as we align that with the timing of that of our allowed deferral, We are essentially it is something that you might have waited until you had a rate case outcome in the past. To make a true up adjustment on your finalization. But a higher level way to think about it, Paul, is when you have to make an assessment in the accounting world as to how, you know, do you believe that you are gonna be able to recover the return on those assets that you were allowed to book by the regulators. Right?
So from our perspective, the regulators as we went through and assessed all of our regulatory assets in this case, we believe that we are going get recovery. From the regulators on the returns that they have already allowed us to book on certain regulatory accounts. And so that is just the true up. K.
Paul Tremont: And since you have already had 2 rate outcomes in Nevada and California, we would assume that it may be some period of time before you file again in those jurisdictions?
Justin L. Brown: Yeah, Paul. it is Justin L. Brown. Yeah, I think a lot of it will probably hinge. On California, we have a 5-year rate cycle. And so we are on a 5-year rate cycle absent something unique happening. And so I think you can look at it from that perspective on California. On Nevada, I think it largely. It will depend on the timing of the commission issuing the regulations on the alternative rate making. If that happens, we anticipate it happening within sufficient time, but think we have up to 6 months after our rate case decision to make a filing under those regulations per the legislation.
So as long as the regulations are done, and we meet that window, we would look to move to more of an alternative rate making model. And as we mentioned, looking to make a filing in 2027, for rates effective in 2028. If for some reason that timing does not work, then we would look at probably filing another rate case. At some point in, you know, around that same timeline. Just to kinda stay current with our rates. And then at that point in time, we would transition to an alternative rate. So a lot of it will just depend on the timing of the regulations in Nevada.
And I think it is probably fair to look at Arizona the same way. Obviously, we will get a final decision in the first-- Around April of next year. And then we will evaluate, you know, 1, whether we get approval of a formula rate proposal, but then kind of the transition timing and how we think about our rate case Historically in Nevada, we have been anywhere from 18 to 24 months from rate case to rate case. In Arizona, we are kind of on a similar timeline of you know, depending on if you are looking at from when you file to file, it is been about 2 to 3 years.
And then in Nevada, it is been a year and a half to 2 years. And so we usually try to keep rates as fresh as possible by making frequent filings.
Paul Tremont: And then given the fact that the 2 commissioners are going to be seated, late in your rate case process, is there a possibility of a delay in the schedule so that they are able to get sort of up to speed on the issues, or would you expect the schedule to hold exactly as it is?
Justin L. Brown: Yeah. that is a good question. I think if our schedule provided for a draft decision in January for a vote, I think you know, there might be a greater risk. I think looking back over history, sometimes you would see things get moved from January to February to your point. Interestingly enough, in our last rate case, couple years ago, or maybe 2 rate cases ago, during an election, we had a vote on our rate case in January. Since our schedule is really not January schedule, it is more of a March, April timeline.
I think that probably lessens any likelihood that there would be a delay because the new commissioners would be in their seats for a couple of months. I think, generally speaking, they are kind of expected to be ready to take on their roles and responsibilities when they are seated in January. So I think if there is a minor delay, it would be on anything that would come up for a vote in January that might get pushed to February. But I really do not expect a trickle down effect beyond that. At least we have never seen it historically.
Paul Tremont: And then last question for me. You know, since the 2 commissioners on the Republican side who lost sort of played a major role in the establishment of sort of the formula rate filings that were approved by the commission, do you see any potential sort of changes that might come about given the fact that they are no longer. That will not be any longer on the commission.
Justin L. Brown: Yeah, Paul. I think that is a fair question. I mean, Nick and Kevin were both strong advocates. I would say, though, that they have been very effective just culturally. I mean, you can see where the commission staff has been supportive. I think the other 3 commissioners that are still there have been supportive. We touched on that earlier in terms of them coalescing around kind of different outcomes. And, you know, we will see where, you know, whoever ends up getting seated, and we will see where their perspective is on these issues. I think in Arizona, you know, you always have that kind of situation where when you have elections, you have changes.
And I think you see things kind of evolve back and forth on different policy objectives. And over time, we will see how that goes. Clearly, the formula rate issue, there are 3 commissioners that will still be there. That will have a majority next year, around. Kind of these proposals, and they seem to have been supportive, at least most recently. So time will tell. But I think from our perspective, you know, again, we do not anticipate major swings in policy just given the current makeup and where people have been voting more recently.
Paul Tremont: Great. I think that is it for me. Thank you.
Operator: Thanks, Paul. Thank you. And your last question comes from Ryan Levine from Citi. Please go ahead.
Ryan Levine: I wanted to touch on Great Basin. It looks like some of the CapEx was moved slightly to be more back end-weighted from your guidance last quarter. Any color as to what drove the change and any impact to time line?
Justin S. Forsberg: This is Justin S. Forsberg for you, Ryan. Yeah. I think it is probably not a lot to read in there. I think when we. As we go along and we continue to refine some of the estimates as you think about like, at this point in time, we have you know, really mitigated the risks that might have been out there from a supply chain perspective in terms of pipe as well as the compression side of things. And so we have a lot more clarity around the timing of when we might roll pipe and take delivery on those kind of things.
And then I think when we think about the construction timeline and try to align that with the expected construction spending with what we are expecting to an EPC contractor to do. it is just a modest refinement. Not anything major changing there.
Ryan Levine: Okay. And then just in just a follow-up on that, in terms of the that answer, suggested that you have more confidence around the supply chain contracts? Is there anything to note around agreements that were signed or what portion of that cost that is now been secured over the last few months?
Justin S. Forsberg: No. I think we have really secured or signed POs, if you will, a little bit earlier this year or, you know, over the summer, etcetera. And I think we are there is not a lot has changed there. We feel pretty confident on where we stand with suppliers. As you probably know, it is just important to add that we do not yet have an EPC contractor. For the construction phase. We have had early meetings, like an early contractor meeting as far as education Q&A sessions with them, but we have not finished or completed an RFP there for the EPC side. Okay. Appreciate the time.
Operator: Thank you. And there are no further questions at this time. Mr. Patista, you may proceed with your conference.
Tyler Franek: Thanks again, Kelsey, and thank you all for joining us today and for your questions. This concludes our conference call. We appreciate your interest in Southwest Gas Holdings and look forward to speaking with many of you soon.
Operator: Ladies and gentlemen, this does conclude your conference call for today. We thank you very much for your participation, and you may now disconnect. Have a great day, everyone.
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