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Southwest Gas says pipe integrity work will last 20 years or more

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Southwest Gas says pipe integrity work will last 20 years or more

Pipeline integrity is and will remain a focus in 's spending plans andregulatory discussions even though the company's system is relatively modern, executivesassured.

Though aging systemsin the Northeast are often highlightedas some of the most leak-prone pipes in the nation and the ones in needof the most urgent replacement, even newer systems are increasingly coming underscrutiny.

"While we do have a different type of system … from theNortheast and we don't have any cast-iron pipe, I think that the changing natureof pipeline safety regulations and our continued effort to make sure we are evaluatingthe risks of all the pipe in our system mean … this is going to be an effort thatis going to last for 20 years or more," John Hester, Southwest Gas' presidentand CEO, said during the company's May 9 earningscall.

One of Southwest Gas' primary focuses is the replacement of earlyvintage plastic pipe and bare steel. Hester said the company plans to pursue theseinitiatives aggressively.

The company's operations and maintenance costs were up 6% duringthe first quarter compared to the same period of 2015, partly driven by pipelineintegrity management program.

Southwest Gas officials said the company's in California, Arizona and Nevadahave all been supportive of the company's efforts to improve safety, and each regulatorycommission has approved funding mechanisms geared toward infrastructure integritywork. Southwest Gas expects to spend $67 million in 2016 on replacement work thatfalls under regulator-approved trackers.

Additional pipe replacement work was good news for the company'sconstruction services segment, which saw its revenues increase compared to the firstquarter of last year.

Company officials also touted moderate but steady levels of customergrowth. Southwest Gas in 2015 grew its customer base by 26,000, and the companyexpects continued annual customer growth of about 1.5%. For 2016, company officialssaid they anticipate devoting $112 million in capital expenditures to growth. SouthwestGas projected a roughly 3% increase in operating margin for 2016, in large partthanks to customer growth, expansion projects and infrastructure recovery mechanisms.

Southwest Gas reported first-quarter consolidated net incomeof $75.4 million, or $1.58 per share, compared to $72.0 million, or $1.53 per share,in the year-ago quarter.