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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D. C.
    20549
 Form 10-K
 ANNUAL REPORT
    PURSUANT TO SECTIONS 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended June
    30, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File number 0-14183
  ENERGY WEST,
    INCORPORATED
 (Exact name of registrant as
    specified in its charter)
  Montana(State or other jurisdiction
    of
    incorporation or organization)

81-0141785(I.R.S. Employer
    Identification No.)1 First Avenue South,
    Great Falls, Montana(Address of principal
    executive offices)

59401(Zip Code)   Registrants telephone number, including area code
 (406) 791-7500
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon, par value $.15 per share

Nasdaq National Market   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
    Form 10-K, Form 10-K




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##### 





TABLE OF
    CONTENTS
   
 PagePart I


1Item 1.

Business


1Item 1A.

Risk Factors


14Item 2.

Properties


22Item 3.

Legal Proceedings


23Item 4.

Submission of Matters to a Vote of Security
    Holders


23Part II


23Item 5.

Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


23Item 6.

Selected Financial Data


27Item 7.

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


28Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk


41Item 8.

Financial Statements and Supplementary Data


42Item 9.

Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


42Item 9A.

Controls and Procedures


42Item 9B.

Other Information


43Part III


43Item 10.

Directors, Executive Officers and Corporate
    Governance


43Item 11.

Executive Compensation


43Item 12.

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


43Item 13.

Certain Relationships and Related Transactions
    and Director Independence


43Item 14.

Principal Accountant Fees and Services


43Part IV


44Item 15.

Exhibits and Financial Statement Schedules


44Signatures


48EX-10.25EX-10.26EX-10.27EX-10.28EX-10.29EX-10.30EX-10.31EX-10.32EX-10.33EX-21EX-23.1EX-31EX-32    Forward-Looking
    Statements
  This
    Form 10-K
    contains forward-looking statements within the meaning of the
    federal securities laws. Statements that are not historical
    facts, including statements about our beliefs and expectations,
    are forward-looking statements. Forward-looking statements
    include statements preceded by, followed by or that include the
    words may, could, would,
    should, believe, expect,
    anticipate, plan, estimate,
    target, project, intend, or
    similar expressions. These statements include, among others,
    statements regarding our current expectations, estimates and
    projections about future events and financial trends affecting
    the financial condition and operations of our business.
    Forward-looking statements are only predictions and not
    guarantees of performance and speak only as of the date they are
    made. We undertake no obligation to update any forward-looking
    statement in light of new information or future events.
  Although we believe that the expectations, estimates and
    projections reflected in the forward-looking statements are
    based on reasonable assumptions when they are made, we can give
    no assurance that these expectations, estimates and projections
    can be achieved. We believe the forward-looking statements in
    this
    Form 10-K
    are reasonable; however, you should not place undue reliance on
    any forward-looking statement, as they are based on current
    expectations. Future events and actual results may differ
    materially from those
 i




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discussed in the forward-looking statements. Factors that
    could cause actual results to differ materially from our
    expectations include, but are not limited to:
  
    fluctuating energy commodity prices,
    the possibility that regulators may not permit us to pass
    through all of our increased costs to our customers,
    the impact of the Federal Energy Regulatory Commission (FERC)
    and state public service commission statutes, regulations, and
    actions, including allowed rates of return, and the resolution
    of other regulatory matters,
    the impact of weather conditions and alternative energy sources
    on our sales volumes,
    future utilization of pipeline capacity, which can depend on
    energy prices, competition from alternative fuels, the general
    level of natural gas and propane demand, decisions by customers
    not to renew expiring natural gas contracts and weather
    conditions,
    changes in federal or state laws and regulations to which we are
    subject, including tax, environmental, and employment laws and
    regulations,
    the ability to meet financial covenants imposed by lenders,
    the effect of changes in accounting policies, if any,
    the ability to manage our growth,
    the ability to control costs,
    the ability of each business unit to successfully implement key
    systems, such as service delivery systems,
    our ability to develop expanded markets and product offerings
    and our ability to maintain existing markets,
    our ability to maintain effective internal controls in
    accordance with Section 404 of the Sarbanes-Oxley Act of
    2002,
    our ability to obtain governmental and regulatory approval of
    various expansion or other projects, ii




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PART I  Item 1.
    Business.  Overview
     Natural Gas Operations
    
    Annually, we distribute approximately 23 billion cubic feet
    of natural gas to approximately 36,000 customers through
    regulated utilities operating in and around Great Falls and West
    Yellowstone, Montana, Cody, Wyoming, Bangor, Maine and Elkin,
    North Carolina. The approximate population of the service
    territories is 173,000. The operation in Elkin, North Carolina
    was added October 1, 2007. The operation in Bangor, Maine
    was added December 1, 2007. Marketing and Production 
    Operations (EWR)
    
    Annually, we market approximately 1.6 billion cubic feet of
    natural gas to commercial and industrial customers in Montana
    and Wyoming and manage midstream supply and production assets
    for transportation customers and utilities through our
    subsidiary, Energy West Resources, Inc. (EWR). EWR owns an
    average 60% gross working interest (an average 51% net revenue
    interest) in 162 natural gas producing wells and gas gathering
    assets. Energy West Propane, Inc. dba Missouri River Propane
    (MRP), our small Montana wholesale distribution company that
    sells propane to our affiliated utility, had been reported in
    our propane operations. It is now being reported in marketing
    and production operations. Pipeline Operations (EWD)
    
    We own the Shoshone interstate and the Glacier gathering natural
    gas pipelines located in Montana and Wyoming through our
    subsidiary Energy West Development, Inc. (EWD). Certain natural
    gas producing wells owned by our pipeline operations are being
    managed and reported under our marketing and production
    operations. Propane Operations
    (Discontinued Operations)
    
    Annually, we distributed approximately 5.4 million gallons
    of propane to approximately 8,000 customers through utilities
    operating underground vapor systems in and around Payson, Pine,
    and Strawberry, Arizona and retail distribution of bulk propane
    to approximately 2,300 customers in the same Arizona
    communities. The Arizona assets were sold during fiscal year
    2007, and the results of operations for the propane assets
    related to this sale have been reclassified as income from
    discontinued operations. The associated assets and liabilities
    are shown on the consolidated balance sheet as Assets held
    for sale and Liabilities held for sale. MRP,
    our small Montana wholesale distribution company that sells
    propane to our affiliated utility, had been reported in propane
    operations. It is now being reported in our marketing and
    production operations. Corporate and Other
    
    This segment was not reported prior to the fiscal 2008.
    Corporate and other was established to encompass the results of
    corporate acquisitions and other equity transactions. Reported
    in Corporate and other are the extraordinary gain of
    $6.8 million from the acquisition of properties during
    fiscal year 2008, costs associated with an equity offering that
    did not occur, gains on the sales of marketable securities, and
    dividend income from marketable securities.  See Note 12 to our Consolidated Financial Statements for
    financial information for each of our segments.
 1




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Recent
    Developments
          Form 10-K.
     2




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Recent
    Acquisitions and Future Acquisition Strategy
               3




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
    cost-effective expansion of our existing customer base by
    prudently managing capital expenditures and ensuring that new
    customers provide sufficient margins for an appropriate return
    on the additional resources and investment required to serve
    these customers,
    appropriate regulatory treatment of increases in the cost of
    natural gas,
    continuous improvement of our operational efficiencies,
    management of cash flow to reduce our existing debt, and
    maintenance and improvement of our positive reputation with our
    regulators and customers.  New
    Holding Company Structure
      Recent
    Industry Trends
   4




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Natural
    Gas Operations
      Natural
    Gas  Montana
          Gas RevenueYears Ended June 30,2008


2007


2006(In thousands)Residential

$
22,143


$
19,287


$
22,155Commercial


13,923



12,894



14,233Transportation


2,337



2,058



1,961Total

$
38,403


$
34,239


$
38,349     Note:
    Higher revenues in fiscal 2008 and 2006 compared to fiscal 2007
    are due to higher gas costs which are passed on to the customers
    in accordance with approvals from the MPSC. 5




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Gas VolumesYears Ended June 30,2008


2007


2006(In MMcf)Residential


2,212



2,097



1,978Commercial


1,336



1,267



1,210Transportation


1,652



1,526



1,524Total Gas Sales


5,200



4,890



4,712     Note:
    Volumes were lower in fiscal 2006 compared to fiscal 2008 and
    2007 primarily due to warmer weather.        Natural
    Gas  Wyoming
        Gas RevenueYears Ended June 30,2008


2007


2006(In thousands)Residential

$
4,982


$
4,657


$
5,883Commercial


4,438



2,990



5,771Industrial


2,008



4,348



5,741Total

$
11,428


$
11,995


$
17,395     Note:
    Higher revenues were realized in fiscal 2006 compared to fiscal
    2008 and 2007 due to higher gas costs which are passed on to the
    customers in accordance with approvals from the WPSC. 6




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Gas VolumesYears Ended June 30,2008


2007


2006(In MMcf)Residential

$
567


$
526


$
478Commercial


613



593



567Industrial


334



472



684Total Gas Sales

$
1,514


$
1,591


$
1,729         Natural
    Gas  North Carolina
         7




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Gas RevenueYears EndedJune 30, 2008(In thousands)Residential

$
258Commercial


2,171Transportation


2,631Total

$
5,060     Gas VolumesYears EndedJune 30, 2008(In MMcf)Residential


18Commercial


162Transportation


1,533Total Gas Sales


1,713   Natural
    Gas  Maine
        start-up start-up
    ten-year
 8




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Gas RevenueYears EndedJune 30, 2008(In thousands)Residential

$
232Commercial


3,218Transportation


778Bucksport


671Total

$
4,899     Gas VolumesYears EndedJune 30, 2008(In MMcf)Residential


16Commercial


221Transportation


532Bucksport


8,131Total Gas Sales


8,900   Marketing
    and Production Operations
     9




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Pipeline
    Operations
    Propane
    Operations  (Discontinued Operations)
    Form 10-K.
  Corporate
    and Other
     10




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24-year
      Competition
  and/or
    Gas
    Supply Marketers and Gas Supply Contracts
     11




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Governmental
    Regulation
  State
    Regulation
      Franchise
    Agreements
      Federal
    Regulations
   12




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Seasonality
    Environmental
    Matters
  Environmental
    Laws and Regulations
       13




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Environmental
    Issues
            Employees
    Item 1A.
    Risk
    Factors.    Risks
    Related to Our Business
  We are
    subject to comprehensive regulation by federal, state and local
    regulatory agencies that impact the rates we are able to charge,
    our costs and profitability.
   14




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Our
    gas purchase practices are subject to an annual review by state
    regulatory agencies which could impact our earnings and cash
    flow.
    Operational
    issues beyond our control could have an adverse effect on our
    business.
      Storing
    and transporting natural gas involves inherent risks that could
    cause us to incur significant financial losses.
    Our
    earnings and cash flow are sensitive to decreases in customer
    consumption resulting from warmer than normal temperatures and
    customer conservation.
     15




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The
    increased cost of purchasing natural gas during periods in which
    natural gas prices are rising significantly could adversely
    impact our earnings and cash flow.
    The
    loss of a major commercial or industrial gas customer to which
    we provide natural gas may negatively impact our
    profitability.
    Volatility
    in the price of natural gas could result in customers switching
    to alternative energy sources which could reduce our revenues,
    earnings and cash flow.
    The
    gas industry is intensely competitive and competition has
    increased in recent years as a result of changes in the price
    negotiation process within the supply and distribution chain of
    the gas industry, both of which could negatively impact
    earnings.
    Earnings
    and cash flow may be adversely affected by downturns in the
    economy.
   16




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Changes
    in the regulatory environment and events in the energy markets
    that are beyond our control may reduce our earnings and limit
    our access to capital markets.
    We
    acquired interests in our natural gas wells by quitclaim deed
    and cannot guarantee that we hold clear title to our interests
    or that our interests will not be challenged in the
    future.
      Failure
    to maintain effective internal controls in accordance with
    Section 404 of the Sarbanes-Oxley Act could have a material
    adverse effect on our business and stock price.
  Form 10-K
    Our
    actual results of operations could differ from estimates used to
    prepare our financial statements.
   17




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
    Regulatory Accounting  Regulatory accounting
    allows for the actions of regulators to be reflected in the
    financial statements. Their actions may cause us to capitalize
    costs that would otherwise be included as an expense in the
    current period by unregulated companies. If future recovery of
    costs ceases to be probable, the assets will be written off as a
    charge in current period earnings.
    Derivative Accounting Derivative accounting
    requires evaluation of rules that are complex and subject to
    varying interpretations. Our evaluation of these rules, as they
    apply to our contracts, will determine whether we use accrual
    accounting or fair value (mark-to-market) accounting.
    Mark-to-market accounting requires us to record changes in fair
    value in earnings or, if certain hedge accounting criteria are
    met, in common stock equity (as a component of other
    comprehensive income (loss)).  We are
    subject to numerous environmental laws and regulations that may
    increase our cost of operations, impact our business plans and
    expose us to environmental liabilities.
    clean-up clean-up
    We
    have a net deferred tax asset of $11.6 million and we
    cannot guarantee that we will be able to generate sufficient
    future taxable income to realize a significant portion of this
    net deferred tax asset, which could lead to a writedown (or even
    a loss) of the net deferred tax asset and adversely affect our
    operating results and financial position.
  24-year
     18




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Changes
    in the market price and transportation costs of natural gas
    could result in financial losses that would negatively impact
    our results of operations.
    Risks
    Related to Our Acquisition Strategy
  We
    face a variety of risks associated with acquiring and
    integrating new business operations.
    
    identify suitable acquisition candidates or opportunities,
    acquire assets or business operations on commercially acceptable
    terms,
    effectively integrate the operations of any acquired assets or
    businesses with our existing operations,
    manage effectively the combined operations of the acquired
    businesses,
    achieve our operating and growth strategies with respect to the
    acquired assets or businesses,
    reduce our overall selling, general, and administrative expenses
    associated with the acquired assets or businesses, or
    comply with the internal control requirements of
    Section 404 as a result of an acquisition.    To the
    extent we are successful in making an acquisition, we may be
    exposed to a number of risks.
   19




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Subsequent
    to the consummation of an acquisition, we may be required to
    take write-downs or write-offs, restructuring and impairment
    charges or other charges that could have a significant negative
    impact on our financial condition, results of operations and our
    stock price.
    Risks
    Related to Our Common Stock
  Our
    ability to pay dividends on our common stock is
    limited.
    The
    possible issuance of future series of preferred stock could
    adversely affect the holders of our common stock.
    Organization,
    Structure and Management Risks
  Our
    credit facility contains restrictive covenants that may reduce
    our flexibility, and adversely affect our business, earnings,
    cash flow, liquidity and financial condition.
    
    requiring us to dedicate a substantial portion of our cash flow
    from operations to the payment of principal and interest on our
    indebtedness, thereby reducing the availability of cash flow for
    working capital, capital expenditures and other business
    activities,
    requiring us to meet certain financial tests, which may affect
    our flexibility in planning for, or reacting to, changes in our
    business and the industries in which we operate,
    limiting our ability to sell assets, make investments or acquire
    assets of, or merge or consolidate with, other companies,
    limiting our ability to repurchase or redeem our stock or enter
    into transactions with our shareholders or affiliates, and
    limiting our ability to grant liens, incur additional
    indebtedness or contingent obligations or obtain additional
    financing for working capital, capital expenditures,
    acquisitions and general corporate and other activities. 20




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Our
    performance depends substantially on the performance of our
    executive officers and other key personnel and the ability of
    our new management team to fully implement our business
    strategy.
      We
    have entered a limited liability operating agreement with third
    parties to develop and operate oil, gas and mineral leasehold
    estates, which exposes us to the risk associated with oil, gas
    and mineral exploration as well as the risks inherent in relying
    upon third parties in business ventures and we may enter into
    similar agreements in the future.
      We
    have entered into certain transactions with persons who are our
    directors and may enter into additional transactions in the
    future.
   21




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We
    have filed applications with the MPSC and the WPSC to reorganize
    our operations into a holding company structure, which could
    affect our ability to pay dividends in the future.
    Item 2.
    Properties.               22




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Item 3.
    Legal
    Proceedings.    Shelby Gas
    Association v. Energy West Resources, Inc. No. DV-08-008,
    Item 4.
    Submission
    of Matters to a Vote of Security Holders.   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder
    Matters, and Issuer Purchases of Equity
    Securities.  Our
    Common Stock
  3-for-2
    Fiscal Year 2008

High


LowFirst Quarter

$
9.49


$
8.14Second Quarter

$
9.80


$
8.19Third Quarter

$
9.68


$
7.59Fourth Quarter

$
11.21


$
7.40   Fiscal Year 2007

High


LowFirst Quarter

$
7.96


$
6.01Second Quarter

$
8.00


$
7.19Third Quarter

$
10.00


$
7.40Fourth Quarter

$
10.81


$
9.01   Holders
    of Record
    Dividend
    Policy
   23




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October 28, 2005

$
0.026January 31, 2006

$
0.033May 31, 2006

$
0.052August 28, 2006

$
0.066November 2, 2006

$
0.080February 13, 2007

$
0.093May 3, 2007

$
0.100September 25, 2007

$
0.106     November 19, 2007

$
0.107December 28, 2007

$
0.036January 28, 2008

$
0.036February 28, 2008

$
0.036March 28, 2008

$
0.036April 30, 2008

$
0.036May 30, 2008

$
0.036June 30, 2008

$
0.040   Restrictions
    on Payment of Dividends
        Recent
    Sales of Unregistered Securities
   24




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Purchases
    of Equity Securities by Our Company and Affiliated
    Purchasers
  Maximum NumberTotal Number of


of Shares that mayShares Purchased as


yet be PurchasedTotal Shares


Average Price


Part of Publicly


Under the StockPeriod

Purchased


Paid per Share


Announced Plans


Repurchase PlanMay 30, 2007  June 30, 2007


146,348


$
15.00



146,348July 1, 2007  June 30, 2008


11,187


$
14.24



11,187157,535







157,535



141,465    25




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Performance
    Graph
  6/30/2003 6/30/2008.
  
 26




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Item 6.
    Selected
    Financial Data.  Form 10-K.
  Fiscal Year Ended June 30,2008


2007


2006


2005


2004(In thousands, except per share)Operating resultsOperating revenue

$
76,833


$
59,373


$
74,696


$
67,889


$
58,664Operating expensesGas and electric purchases


56,170



43,806



60,398



53,510



46,981General and administrative


10,662



6,198



6,389



7,309



8,020Maintenance


650



567



505



521



399Depreciation and amortization


1,865



1,692



1,672



1,790



1,812Taxes other than income(1)


2,080



1,697



1,453



1,479



1,058Total operating expenses


71,427



53,960



70,417



64,609



58,270Operating income (loss)


5,406



5,413



4,279



3,280



394Other
    income-net


316



241



391



235



204Total interest charges(2)


1,077



2,124



1,649



2,113



1,933Income (loss) before taxes


4,645



3,530



3,021



1,402



(1,335
)Income tax expense (benefit)


1,333



1,273



1,109



475



(412
)Discontinued operations (net of tax)






3,955



405



454



367Net Income (Loss) before extraordinary item


3,312



6,212



2,317



1,381



(556
)Extraordinary Gain


6,819Net Income

$
10,131


$
6,212


$
2,317


$
1,381


$
(556
)Basic earnings (loss) per common share

$
2.35


$
1.40


$
0.53


$
0.35


$
(0.14
)Diluted earnings (loss) per common share

$
2.35


$
1.39


$
0.52


$
0.35


$
(0.14
)Dividends per common share(3)

$
0.47


$
0.34


$
0.11


$



$
Weighted average common shares Outstanding  diluted


4,316,244



4,484,073



4,422,069



3,946,019



3,894,681At year end:Current assets

$
16,340


$
18,830


$
23,669


$
15,423


$
16,739Total assets

$
59,800


$
52,896


$
57,931


$
59,433


$
61,445Current liabilities

$
11,962


$
8,756


$
10,796


$
11,525


$
16,725Total long-term debt

$
13,000


$
13,000


$
17,605


$
18,677


$
21,697Total stockholders equity

$
30,649


$
22,296


$
19,165


$
17,187


$
13,401Total capitalization

$
43,649


$
35,296


$
36,770


$
35,864


$
35,098     (1)
    
    Taxes other than income include approximately $290,000 increases
    in property tax in fiscal 2004, 2005 and another $250,000 in
    2007 for additional personal property taxes assessed by the
    Montana Department of 27




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Revenue. The 2008 increase results from personal property taxes
    on our acquired companies in Maine and North Carolina.(2)
    
    Total interest charges reflect the costs associated with the
    addition of $6,000,000 of long-term debt and a $2,000,000 bridge
    loan incurred in March 2004. In May 2005, we paid off the
    $2,000,000 bridge loan and during fiscal 2006 we reduced the
    line of credit significantly, thus reducing interest in fiscal
    2006. In fiscal 2007, we refinanced our long-term debt,
    resulting in the $991,000 expensing of debt issue costs related
    to the refinanced debt.(3)
    
    There were no cash dividends paid between April 2003 and
    September 2005.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  Form 10-K. Forward-Looking
    Statements.
  Executive
    Overview
      Critical
    Accounting Policies and Estimates
    Regulatory
    Accounting
  Accounting for
    the Effects of Certain Types of Regulation
   28




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Accumulated
    Provisions for Doubtful Accounts
    Unbilled
    Revenues and Gas Costs
    Recoverable/Refundable
    Costs of Gas and Propane Purchases
    Deferred
    Tax Asset
  24-year
     29




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Results
    of Consolidated Operations
    Fiscal
    Year Ended June 30, 2008 Compared to Fiscal Year Ended
    June 30, 2007
  Net Income
  The
    principal changes that contributed to the improvement in net
    income from fiscal 2007 to fiscal 2008 are explained
    below.
  Revenues
  Gross Margin
  Expenses Other Than Cost of Sales
  Other Income
 30




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Interest Expense
  Income Tax Expense
  Extraordinary
    Gain
    Discontinued
    Operations
    Income from discontinued operations before income
    tax
  Gain from Disposal of Operations
  Income Tax Expense from discontinued
    operations
  Fiscal
    Year Ended June 30, 2007 Compared to Fiscal Year Ended
    June 30, 2006
  Net Income
  Revenues
  Gross Margin
 31




---



##### Table of Contents



Expenses Other Than Costs of Sales
  Other Income
  Interest Expense
  Income Tax Expense
  Discontinued
    Operations
    Income from Discontinued Operations Before Income
    Tax
  Gain from Disposal of Operations
  Income Tax (Expense)
 32




---



##### Table of Contents



Operating
    Results of our Natural Gas Operations
    Years Ended June 30,2008


2007


2006Total LessNew


NewTotal


Acquisitions


Acquisitions(In thousands)Natural Gas OperationsOperating revenues

$
59,339


$
9,960


$
49,379


$
46,439


$
55,453Gas Purchased


41,337



5,159



36,178



33,542



43,161Gross Margin


18,002



4,801



13,201



12,897



12,292Operating expenses


13,954



3,681



10,273



9,307



9,160Operating income


4,048



1,120



2,928



3,590



3,132Other (income)


(245
)


7



(252
)


(229
)


(358
)Income before interest and taxes


4,293



1,113



3,180



3,819



3,490Interest expense


933



30



903



1,897



1,425Income before income taxes


3,360



1,083



2,277



1,922



2,065Income tax (expense)


(1,091
)


(417
)


(674
)


(653
)


(741
)Net income

$
2,269


$
666


$
1,603


$
1,269


$
1,324   Fiscal
    Year Ended June 30, 2008 Compared to Fiscal Year Ended
    June 30, 2007
  Natural Gas Revenues and Gross Margins
  th
    Natural Gas Operating Expenses
  Natural Gas Other Income
  Natural Gas Interest Expense
 33




---



##### Table of Contents



Natural Gas Income Tax Benefit (Expense)
  Fiscal
    Year Ended June 30, 2007 Compared to Fiscal Year Ended
    June 30, 2006
  Natural Gas Revenues and Gross Margins
      Natural Gas Operating Expenses
  Natural Gas Other Income
  Natural Gas Interest Expense
  Natural Gas Income Tax Benefit (Expense)
  Operating
    Results of our Marketing and Production Operations
  Years Ended June 302008


2007


2006(In thousands)Energy West ResourcesOperating revenues

$
17,124


$
12,545


$
18,832Gas Purchased


14,833



10,264



17,238Gross Margin


2,291



2,281



1,594Operating expenses


631



559



711Operating income


1,660



1,722



883Other (income)


(1
)


(2
)


(33
)Income before interest and taxes


1,661



1,724



916Interest expense


125



185



182Income before income taxes


1,536



1,539



734Income tax (expense)


(344
)


(593
)


(284
)Net income

$
1,192


$
946


$
450  34




---



##### Table of Contents



Fiscal
    Year Ended June 30, 2008 Compared to Fiscal Year Ended
    June 30, 2007
    Marketing and Production Revenues and Gross
    Margins
    Marketing and Production Operating Expenses
  Marketing and Production Other Income
  Marketing and Production Interest Expense
  Marketing and Production Income Tax Expense
  Fiscal
    Year Ended June 30, 2007 Compared to Fiscal Year Ended
    June 30, 2006
    Marketing and Production Revenues and Gross
    Margins
    Marketing and Production Operating Expenses
 35




---



##### Table of Contents



Marketing and Production Other Income
  Marketing and Production Interest Expense
  Marketing and Production Income Tax Expense
  Operating
    Results of our Pipeline Operations
  Years Ended June 302008


2007


2006(In thousands)Pipeline OperationsOperating revenues

$
370


$
388


$
411Gas Purchased










Gross Margin


370



388



411Operating expenses


233



289



149Operating income


137



99



262Other (income)






(11
)


Income before interest and taxes


137



110



262Interest expense


17



42



41Income before income taxes


120



68



221Income tax (expense)


(40
)


(26
)


(85
)Net income

$
80


$
42


$
136     Results
    of our Discontinued Operations
  Years Ended June 302007


2006(In thousands)Discontinued Operations:Income from discontinued operations before income tax

$
976


$
671Gain from disposal of operations


5,479



Income tax (expense)


(2,500
)


(266
)Income from discontinued operations

$
3,955


$
405     Fiscal
    Year Ended June 30, 2007 Compared to Fiscal Year Ended
    June 30, 2006
   36




---



##### Table of Contents



Income from discontinued operations before income
    tax
  Gain from disposal of operations
  Income Tax (Expense)
  Results
    of our Corporate and Other Operations
  Year Ended June 302008(In thousands)Corporate and OtherOperating revenues

$
Gas Purchased


Gross Margin


Operating expenses


441Operating income


(441
)Other (income)


(70
)Income before interest and taxes


(371
)Interest expense


Income before income taxes


(371
)Income tax benefit


142Income before extraordinary item


(229
)Extraordinary gain


(6,819
)Net income

$
6,590   Fiscal
    Year Ended June 30, 2008
      Consolidated
    Cash Flow Analysis
  Sources
    and Uses of Cash
   37




---



##### Table of Contents



Years Ended June 30,2008


2007


2006Cash provided by (used in) operating activities

$
5,437,000


$
(1,271,000
)

$
8,529,000Cash (used in) provided by investing activities


(9,798,000
)


15,819,000



(1,583,000
)Cash provided by (used in) financing activities


(1,853,000
)


(9,178,000
)


(5,401,000
)Increase (decrease) in cash

$
(6,214,000
)

$
5,370,000


$
1,545,000        38




---



##### Table of Contents



Liquidity
    and Capital Resources
      Long-term Debt  $13.0 million
    6.16% Senior Unsecured Notes
  Bank of America Line of Credit
    First


Second


Third


FourthQuarter


Quarter


Quarter


QuarterYear Ended June 30, 2008Minimum borrowing

$



$
3,275,000


$



$
Maximum borrowing

$



$
7,525,000


$
6,525,000


$
Average borrowing

$



$
4,558,000


$
2,256,000


$
Year Ended June 30, 2007Minimum borrowing

$



$
2,900,000


$



$
Maximum borrowing

$
2,900,000


$
6,200,000


$
3,502,000


$
6,700,000Average borrowing

$
282,000


$
4,384,000


$
392,000


$
485,000Year Ended June 30, 2006Minimum borrowing

$
3,100,000


$
5,200,000


$



$
Maximum borrowing

$
5,200,000


$
12,250,000


$
12,050,000


$
Average borrowing

$
4,167,000


$
9,489,000


$
5,619,000


$
  39




---



##### Table of Contents



60-month
      Capital
    Expenditures
    EstimatedFuture CashActual


Requirements2008


2009(In thousands)Natural Gas Operations

$
3,577


$
4,000Energy West Resources


250



Pipeline Operations


41



Total capital expenditures

$
3,868


$
4,000     Contractual
    Obligations
    1 Year








AfterContractual Obligations

Total


or Less


2-3 Years


4-5 Years


5 YearsInterest payments(a)

$
7,207,200


$
800,800


$
1,601,600


$
1,601,600


$
3,203,200Long Term Debt(b)


13,000,000















13,000,000Operating Lease Obligations


383,490



253,363



55,655



10,799



63,673Transportation and Storage Obligation(c)


7,234,184



4,394,920



2,839,264







Total Obligations

$
27,824,874


$
5,449,083


$
4,496,519


$
1,612,399


$
16,266,873     (a)
    
    Our long-term debt interest payments are projected based on
    actual interest rates on long-term debt until the underlying
    debts mature. 40




---



##### Table of Contents



(b)
    
    See Note 9 of the Notes to Consolidated Financial
    Statements for a description of this debt.(c)
    
    Transportation and storage obligations represent annual
    commitments with suppliers for periods extending up to four
    years. These costs are recoverable in customer rates.    Off-Balance-Sheet
    Arrangements
    New
    Accounting Pronouncements
    Fair Value Measurements
  The
    Fair Value Option for Financial Assets and Financial Liabilities
  Business Combinations,
  Accounting for Noncontrolling Interests
    Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk   41




---



##### Table of Contents



Commodity
    Price Risk
    Credit
    Risk
    Item 8.
    Financial
    Statements and Supplementary Data.  page F-1 Form 10-K.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure.    Item 9A(T).
    Controls
    and Procedures.  Rules 13a-15(f) 15d-15(f)
     42




---



##### Table of Contents



Form 10-K Form 10-K.
    Item 9B.
    Other
    Information.   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance.    Item 11.
    Executive
    Compensation.    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.    Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence.    Item 14.
    Principal
    Accountant Fees and Services.    43




---



##### 



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules.  (a)
    Financial
    Statements:   
 PageReport of Independent Registered Public Accounting
    Firm  Hein & Associates LLP


F-2Consolidated Balance Sheets


F-3Consolidated Statements of Income


F-4Consolidated Statements of Stockholders Equity


F-5Consolidated Statements of Cash Flows


F-6Notes to Consolidated Financial Statements


F-8Schedule II  Valuation and Qualifying Accounts


47    (b)
    Exhibit Index.  3
.1(a)


Restated Articles of Incorporation. Exhibit 3.1 to
    Amendment No. 1 to the Registrants Annual Report on
    Form 10-K/A
    for the year ended June 30, 1996, as filed on July 8,
    1997, is incorporated herein by reference.3
.1(b)


Articles of Amendment to the Articles of Incorporation dated
    January 28, 2008 Filed as Exhibit 3.1 to the
    Registrants Current Report on
    Form 8-K
    dated February 1, 2008 and incorporated herein by reference3
.1(c)


Articles of Amendment to the Articles of Incorporation dated
    December 5, 2007. Filed as Exhibit 3.1(e) to the
    Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended December 31, 2007 and incorporated
    herein by reference3
.1(d)


Articles of Amendment to the Articles of Incorporation dated
    May 29, 2007. Exhibit 3.1 to the Registrants
    Current Report on
    Form 8-K,
    as filed on June 4, 2007, is incorporated herein by
    reference.3
.2


Amended and Restated Bylaws. Exhibit 3.2 to the
    Registrants Current Report on
    Form 8-K,
    as filed on March 5, 2004, is incorporated herein by
    reference.3
.2(a)


Amendment No. 3 to Amended and Restated Bylaws dated
    April 10, 2008. Filed as Exhibit 3.1 to the
    Registrants Current Report on
    Form 8-K
    dated August 12, 2008 and incorporated herein by reference3
.2(b)


Amendment No. 2 to Amended and Restated Bylaws dated
    April 10, 2008. Filed as Exhibit 3.1 to the
    Registrants Current Report on
    Form 8-K
    dated April 10, 2008 and incorporated herein by reference3
.2(c)


Amendment No. 1 to Amended and Restated Bylaws dated
    November 14, 2007. Filed as Exhibit 3.1 to the
    Registrants Current Report on
    Form 8-K
    dated November 14, 2007 and incorporated herein by reference10
.1(a)


Satisfaction and Discharge of Indenture dated June 22,
    2007, between the Registrant and HSBC Bank USA, National
    Association, as Successor Trustee for the Series 1997
    Notes. Exhibit 10.1 to the Registrants Current Report
    on
    Form 8-K,
    as filed July 5, 2007, is incorporated herein by reference.10
.1(b)


Satisfaction and Discharge of Indenture dated June 22,
    2007, between the Registrant and US Bank National Association,
    as Successor Trustee for the Series 1993 Notes.
    Exhibit 10.2 to the Registrants Current Report on
    Form 8-K,
    as filed July 5, 2007, is incorporated herein by reference.10
.1(c)


Discharge of Obligor under Indenture dated June 22, 2007,
    between the Registrant and HSBC Bank USA, National Association,
    as Successor Trustee for the
    Series 1992-B
    Bonds. Exhibit 10.3 to the Registrants Current Report
    on
    Form 8-K,
    as filed July 5, 2007, is incorporated herein by reference.10
.1(d)


Note Purchase Agreement dated June 29, 2007, between the
    Registrant and various Purchasers relating to 6.16% Senior
    Unsecured Notes due June 29, 2017. Exhibit 10.4 to the
    Registrants Current Report on
    Form 8-K,
    as filed July 5, 2007, is incorporated herein by reference.10
.1(e)


Credit Agreement dated as of June 29, 2007, by and among
    the Registrant and various financial institutions and LaSalle
    Bank National Association. Exhibit 10.5 to the
    Registrants Current Report on
    Form 8-K,
    as filed July 5, 2007, is incorporated herein by reference. 44




---



##### Table of Contents



10
.1(f)


Amendment dated October 22, 2007 to the Credit Agreement
    among the Registrant, various financial institutions and LaSalle
    Bank National Association, as agent. Filed as Exhibit 10.1
    to the Registrants Current Report on
    Form 8-K
    dated October 22, 2007 and incorporated herein by reference10
.2*


Energy West, Incorporated 2002 Stock Option Plan.
    Appendix A to the Registrants Proxy Statement on
    Schedule 14A, as filed on October 30, 2002, is
    incorporated herein by reference.10
.3*


Employee Stock Ownership Plan Trust Agreement.
    Exhibit 10.2 to Registration Statement on
    Form S-1
    (File
    No. 33-1672)
    is incorporated herein by reference.10
.4*


Management Incentive Plan. Exhibit 10.12 to the
    Registrants Annual Report on
    Form 10-K/A
    for the year ended June 30, 1996, filed on July 8,
    1997, is incorporated herein by reference.10
.5*


Energy West Senior Management Incentive Plan. Exhibit 10.19
    to the Registrants Annual Report on
    Form 10-K
    for the year ended June 30, 2002, as filed on
    September 30, 2002, is incorporated herein by reference.10
.6*


Energy West Incorporated Deferred Compensation Plan for
    Directors. Exhibit 10.20 to the Registrants Annual
    Report on
    Form 10-K
    for the year ended June 30, 2002, as filed on
    September 30, 2002, is incorporated herein by reference.10
.10*


Employment Agreement entered into as of June 23, 2004,
    between the Company and David Cerotzke. Exhibit 10.16 to
    the Registrants Annual Report on
    Form 10-K
    for the year ended June 30, 2004, as filed on
    December 17, 2004, is incorporated herein by reference.10
.11*


Employment Agreement entered into as of June 23, 2004,
    between the Company and John Allen. Exhibit 10.17 to the
    Registrants Annual Report on
    Form 10-K
    for the year ended June 30, 2004, as filed on
    December 17, 2004, is incorporated herein by reference.10
.12


Amended and Restated Operating Agreement of Kykuit Resources,
    LLC, dated October 24, 2007. Filed as Exhibit 10.6 to
    the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2007 and incorporated
    herein by reference10
.13


First Amendment to Amended and Restated Operating Agreement of
    Kykuit Resources, LLC, dated December 17, 2007. Filed as
    Exhibit 10.2 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended December 31, 2007 and incorporated
    herein by reference10
.14


Stock Purchase Agreement dated January 30, 2007 between the
    Registrant and Sempra Energy. Filed as Exhibit 10.1 to the
    Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2007 and incorporated
    herein by reference10
.15


Amendment No. 1 to Stock Purchase Agreement dated
    April 11, 2007 between the Registrant and Sempra Energy.
    Filed as Exhibit 10.2 to the Registrants Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 30, 2007 and incorporated
    herein by reference10
.16


Amendment No. 2 to Stock Purchase Agreement dated
    August 7, 2007 between the Registrant and Sempra Energy.
    Filed as Exhibit 10.3 to the Registrants Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 30, 2007 and incorporated
    herein by reference10
.17


Amendment No. 3 to Stock Purchase Agreement, dated
    November 28, 2007, by and between the Registrant and Sempra
    Energy. Filed as Exhibit 10.1 to the Registrants
    Quarterly Report on
    Form 10-Q
    for the quarter ended December 31, 2007 and incorporated
    herein by reference10
.18


Stock Purchase Agreement dated January 30, 2007 between the
    Registrant and Sempra Energy. Filed as Exhibit 10.4 to the
    Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2007 and incorporated
    herein by reference10
.19


Amendment Number 1 to Stock Purchase Agreement dated
    August 2, 2007 between the Registrant and Sempra Energy.
    Filed as Exhibit 10.5 to the Registrants Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 30, 2007 and incorporated
    herein by reference10
.20


Stock Purchase Agreement dated December 18, 2007 between
    the Registrant, Dan F. Whetstone, Pamela R. Lowry, Paula A.
    Poole, William J. Junkermier and Roger W. Junkermier. Filed as
    Exhibit 10.1 to the Registrants Current Report on
    Form 8-K
    dated December 17, 2007 and incorporated herein by reference10
.21


Non-Competition and Non-Disclosure Agreement dated
    December 18, 2007 between the Registrant and Daniel F.
    Whetstone. Filed as Exhibit 10.2 to the Registrants
    Current Report on
    Form 8-K
    dated December 17, 2007 and incorporated herein by
    reference 45




---



##### Table of Contents



10
.22


Separation Agreement dated December 17, 2007 between David
    A. Cerotzke and the Registrant. Filed as Exhibit 10.3 to
    the Registrants Current Report on
    Form 8-K
    dated December 17, 2007 and incorporated herein by reference10
.23


Lease Agreement dated February 25, 2008 between OsAir, Inc.
    and the Registrant. Filed as Exhibit 10.1 to the
    Registrants Current Report on
    Form 8-K
    dated February 25, 2008 and incorporated herein by reference10
.24*


Employment Agreement dated November 16, 2007 between James
    W. Garrett and the Registrant. Filed as Exhibit 10.1 to the
    Registrants Current Report on
    Form 8-K
    dated November 14, 2007 and incorporated herein by reference10
.25**


Gas Sales Agreement dated as of July 1, 2008 between John
    D. Oil & Gas Marketing Co., LLC, Northeast Ohio
    Natural Gas Corp., Orwell Natural Gas Company and Brainard Gas
    Corp.10
.26**


Natural Gas Transportation Service Agreement dated as of
    July 1, 2008 between Orwell-Trumbull Pipeline Co., LLC,
    Orwell Natural Gas Company and Brainard Gas Corp.10
.27**


Transportation Service Agreement dated as of July 1, 2008
    between Cobra Pipeline Co., Ltd., Northeast Ohio Natural Gas
    Company, Orwell Natural Gas Company and Brainard Gas Corp.10
.28**


First Amendment dated July 1, 2008 to the Orwell-Trumbull
    Pipeline Co., LLC Operations Agreement between Orwell Natural
    Gas Company and Orwell-Trumbull Pipeline Co., LLC10
.29**


Orwell-Trumbull Pipeline Co., LLC Operations Agreement dated
    January 1, 2008 between Orwell Natural Gas Company and
    Orwell-Trumbull Pipeline Co., LLC10
.30**


Triple Net Lease Agreement dated as of July 1, 2008 between
    Station Street Partners, LLC and Orwell Natural Gas Company10
.31**


Triple Net Lease Agreement dated as of July 1, 2008 between
    OsAir, Inc. and Orwell Natural Gas Company10
.32**


Triple Net Lease Agreement dated as of July 1, 2008 between
    Richard M. Osborne, Trustee and Orwell Natural Gas Company10
.33**


Triple Net Lease Agreement dated as of July 1, 2008 between
    OsAir, Inc. and Northeast Ohio Natural Gas Company10
.34


Stock purchase agreement dated September 12, 2008, between
    Energy West, Incorporated, and Richard M. Osborne, trustee,
    Rebecca Howell, Stephen G. Rigo, Marty Whelan, and Thomas J.
    Smith, filed as exhibit 10.1 to the registrants
    current report on
    Form 8-K
    dated September 17, 2008, and incorporated herein by
    reference.14



Code of Business Conduct21**



Company Subsidiaries23
.1**


Consent of Hein & Associates LLP31**



Certifications pursuant to SEC Release
    No. 33-8238,
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 200232**



Certifications pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002     *
    
    Management agreement or compensatory plan or arrangement  **
    
    Filed herewith 46




---



##### Table of Contents



(c)
    Financial
    Statement Schedules:  Schedule II
    Valuation and Qualifying Accounts
    Energy West, Incorporated
    June 30, 2008
  Balance at


Charged to


Write-Offs


Balance atBeginning of


Costs &


Net of


End ofDescription

Period


Expenses


Recoveries


PeriodAllowance for bad debtsYear Ended June 30, 2006

$
266,704


$
225,856


$
(371,107
)

$
121,453Year Ended June 30, 2007

$
121,453


$
210,956


$
(268,355
)

$
64,054Year Ended June 30, 2008

$
64,054


$
174,531


$
(102,186
)

$
136,399    47




---



##### Table of Contents



SIGNATURES      Richard
    M. Osborne
        Form 10-K,
    /s/  Richard
    M. OsborneRichard
    M. Osborne

Chief Executive Officer
    (Principal Executive Officer)

September 29, 2008/s/  Thomas
    J. SmithThomas
    J. Smith

Chief Financial Officer (Principal Financial Officer and
    Principal Accounting Officer)

September 29, 2008/s/  W.E.
    ArgoW.E.
    Argo

Director

September 29, 2008/s/  Mark
    D. GrossiMark
    D. Grossi

Director

September 29, 2008/s/  Ian
    AbramsIan
    Abrams

Director

September 29, 2008/s/  Michael
    I. GermanMichael
    I. German

Director

September 29, 2008/s/  Steven
    A. CalabreseSteven
    A. Calabrese

Director

September 29, 2008/s/  James
    E. SpragueJames
    E. Sprague

Director

September 29, 2008/s/  James
    R. SmailJames
    R. Smail

Director

September 29, 2008  48




---



##### 



CONSOLIDATED
    FINANCIAL STATEMENTS
    OF
    ENERGY WEST, INCORPORATED AND SUBSIDIARIES
    TABLE OF CONTENTS
   
 PageReport of Independent Registered Public
    Accounting Firm  Hein & Associates LLP


F-2Consolidated Balance Sheets as of June 30,
    2008 and 2007


F-3Consolidated Statements of Income for the Years
    Ended June 30, 2008, 2007, and 2006


F-4Consolidated Statements of Changes in
    Stockholders Equity for the Years Ended June 30,
    2008, 2007, and 2006


F-5Consolidated Statements of Cash Flows for the
    Years Ended June 30, 2008, 2007, and 2006


F-6Notes to Consolidated Financial Statements


F-8   F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            Controls and Procedures
  HEIN & ASSOCIATES LLP
    F-2




---



##### Table of Contents



ENERGY
    WEST INCORPORATED AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS, JUNE 30, 2008 AND 2007
  2008


2007ASSETSCurrent Assets:Cash

$
796,302


$
7,010,020Marketable securities


910,778



Accounts receivable less $136,399 and $64,054 respectively,
    allowance for bad debt


5,108,796



3,532,083Unbilled gas


1,252,638



649,939Derivative assets


145,428



57,847Natural gas and propane inventories


5,505,337



5,474,309Materials and supplies


955,467



377,296Prepayment and other


193,581



142,964Income tax receivable


417,164



162,432Recoverable cost of gas purchases


1,054,875



1,369,584Deferred tax asset






53,370Total current assets


16,340,366



18,829,844Property, Plant and Equipment, Net


32,475,133



30,473,991Deferred Charges


2,761,656



3,031,425Deferred Tax Assets  Long term


6,825,575



Other Investments


1,118,264



Other Assets


279,810



560,463TOTAL ASSETS

$
59,800,804


$
52,895,723LIABILITIES AND CAPITALIZATIONCurrent Liabilities:Bank overdraft

$
532,901


$
Accounts payable


7,994,513



4,543,525Derivative liabilities


146,206



58,018Deferred income taxes


18,039



Refundable purchased gas costs


522,347



1,061,685Accrued and other current liabilities


2,747,947



3,092,726Total current liabilities


11,961,953



8,755,954Other Obligations:Deferred income taxes






4,585,170Deferred investment tax credits


250,096



271,158Other long-term liabilities


3,939,976



3,987,731Total other obligations


4,190,072



8,844,059Long-Term Debt


13,000,000



13,000,000Commitments and Contingencies (note 14)Stockholders Equity:Preferred stock; $.15 par value, 1,500,000 shares
    authorized, no shares outstanding






Common stock; $.15 par value, 5,000,000 shares
    authorized, 4,347,769 and 4,288,657 shares outstanding at
    June 30, 2008 and 2007, respectively


652,165



643,299Capital in excess of par value


6,280,649



5,867,726Retained earnings


23,715,965



15,784,685Total stockholders equity


30,648,779



22,295,710TOTAL CAPITALIZATION


43,648,779



35,295,710TOTAL LIABILITIES AND CAPITALIZATION

$
59,800,804


$
52,895,723    F-3




---



##### Table of Contents



ENERGY
    WEST INCORPORATED AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF INCOME
 FOR THE
    YEARS ENDED JUNE 30, 2008, 2007, AND 2006
  2008


2007


2006REVENUES:Natural gas operations

$
59,338,996


$
46,439,506


$
55,452,395Gas and electric  wholesale


17,124,081



12,545,359



18,831,929Pipeline operations


370,171



388,175



411,237Total revenues


76,833,248



59,373,040



74,695,561COST OF SALES:Gas purchased


41,337,397



33,541,993



43,160,830Gas and electric  wholesale


14,833,353



10,264,633



17,237,396Total cost of sales


56,170,750



43,806,626



60,398,226GROSS MARGIN


20,662,498



15,566,414



14,297,335Distribution, general, and administrative


10,661,878



6,197,529



6,389,130Maintenance


650,553



566,683



504,671Depreciation and amortization


1,865,294



1,692,486



1,671,647Taxes other than income


2,080,144



1,696,936



1,453,375Total expenses


15,257,869



10,153,634



10,018,823OPERATING INCOME


5,404,629



5,412,780



4,278,512OTHER INCOME


315,779



241,519



390,677INTEREST (EXPENSE)


(1,076,345
)


(2,124,155
)


(1,648,897
)INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE


4,644,063



3,530,144



3,020,292INCOME TAX (EXPENSE)


(1,332,688
)


(1,272,664
)


(1,109,043
)INCOME FROM CONTINUING OPERATIONS


3,311,375



2,257,480



1,911,249DISCONTINUED OPERATIONS:Gain from disposal of operations






5,479,166



Income from discontinued operations






975,484



671,084Income tax (expense)






(2,499,875
)


(265,663
)INCOME FROM DISCONTINUED OPERATIONS






3,954,775



405,421INCOME BEFORE EXTRAORDINARY ITEM


3,311,375



6,212,255



2,316,670EXTRAORDINARY GAIN


6,819,182NET INCOME

$
10,130,557


$
6,212,255


$
2,316,670BASIC INCOME PER COMMON SHARE:Income from continuing operations

$
0.77


$
0.51


$
0.44Income from discontinued operations






0.89



0.09Income from extraordinary gain


1.58







$
2.35


$
1.40


$
0.53DILUTED INCOME PER COMMON SHARE:Income from continuing operations

$
0.77


$
0.51


$
0.43Income from discontinued operations






0.88



0.09Income from extraordinary gain


1.58







$
2.35


$
1.39


$
0.52WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:Basic


4,314,748



4,437,807



4,386,768Diluted


4,316,244



4,484,073



4,422,069    F-4




---



##### Table of Contents



ENERGY
    WEST INCORPORATED AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 FOR THE
    YEARS ENDED JUNE 30, 2008, 2007, AND 2006
  Capital inCommon


Common


Excess of


RetainedShares


Stock


Par Value


Earnings


TotalBALANCE AT JULY 1, 2005


4,368,846


$
655,338


$
7,216,863


$
9,314,424


$
17,186,625Sales of common stock at $6.03 to $7.67 per share under the
    Companys dividend reinvestment plan


960



144



6,020



(10,780
)


(4,616
)Stock contributions at $6.03 to $7.67 to the 401(k) plan


2,915



426



39,195



(39,621
)


Stock Compensation


24,795



3,720



131,530







135,250Exercise of stock options @ $5.66


3,750



563



20,665







21,228Net income














2,316,670



2,316,670Dividends @ $0.11














(490,044
)


(490,044
)BALANCE AT JUNE 30, 2006


4,401,266


$
660,191


$
7,414,273


$
11,090,649


$
19,165,113Stock Compensation


13,163



1,974



83,111







85,085Repurchase of Stock  stock buyback program


(219,522
)


(32,928
)


(2,162,133
)






(2,195,061
)Costs associated with stock buyback










(81,280
)






(81,280
)Stock option liability










115,603







115,603Exercise of stock options @ $4.31 to $7.00


93,750



14,062



498,152







512,214Net income














6,212,255



6,212,255Dividends paid @ $0.34














(1,518,219
)


(1,518,219
)BALANCE AT JUNE 30, 2007


4,288,657


$
643,299


$
5,867,726


$
15,784,685


$
22,295,710Stock compensation


3,750



563



248,528







249,091Repurchase of Stock  stock buyback program


(16,780
)


(2,517
)


(156,821
)






(159,338
)Costs associated with stock buyback










(2,313
)






(2,313
)Exercise of stock options @ $4.31 to $10.00


109,500



16,424



611,491







627,915Intrinsic value of stock exercised  tax effect










80,933







80,933Return of stock at market price in exchange for stock options


(37,500
)


(5,625
)


(368,874
)






(374,499
)Rounding adjustments for stock split issuance


142



21



(21
)






Net income














10,130,557



10,130,557Dividends paid @ $0.47














(2,199,277
)


(2,199,277
)BALANCE AT JUNE 30, 2008


4,347,769


$
652,165


$
6,280,649


$
23,715,965


$
30,648,779    F-5




---



##### Table of Contents



ENERGY
    WEST INCORPORATED AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 FOR THE
    YEARS ENDED JUNE 30, 2008, 2007, AND 2006
  2008


2007


2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income

$
10,130,557



6,212,255


$
2,316,670Adjustments to reconcile net income to net cash provided by
    (used in) operating activities:Depreciation and amortization, including deferred charges and
    financing costs


2,037,070



3,011,727



2,356,448Stock-based compensation


249,090







Derivative assets


(87,581
)


80,018



(18,796
)Derivative liabilities


88,188



15,354



(71,573
)Deferred gain






(325,582
)


(643,280
)Gain on sale of assets






(5,479,166
)


Investment tax credit


(21,062
)


(21,062
)


(21,062
)Deferred gain on sale of assets










(23,639
)Deferred income taxes


(176,719
)


(1,573,249
)


(259,022
)Extraordinary gain


(6,819,182
)






Changes in assets and liabilities:Accounts receivable


(779,559
)


509,893



1,450,570Natural gas and propane inventories


(31,027
)


(615,710
)


(1,615,395
)Accounts payable


1,925,899



971,466



549,217Recoverable/refundable cost of gas purchases


(260,137
)


(228,388
)


1,034,494Prepayments and other


(25,069
)


118,800



(37,572
)Net assets held for sale






(1,585,772
)


(367,023
)Other assets


(309,466
)


(275,609
)


1,895,776Other liabilities


(483,719
)


(2,086,253
)


1,983,484Net cash provided by (used in) operating activities


5,437,283



(1,271,278
)


8,529,297CASH FLOWS FROM INVESTING ACTIVITIES:Construction expenditures


(3,869,832
)


(2,406,910
)


(1,865,594
)Purchase of marketable securities


(1,301,524
)






Sale of marketable securities


390,746







Purchase of fixed assets  Acquisition of Bangor and
    Frontier


(5,327,296
)






Acquisition of cash purchased in acquisition


960,464







Collection of note receivable










174,561Proceeds from sale of assets






17,899,266



Other investments


(875,658
)






Customer advances received for construction


129,641



327,376



115,305Increase (decrease) from contributions in aid of construction


125,678







(7,093
)Net cash (used in) provided by investing activities


(9,798,335
)


15,819,732



(1,582,821
) F-6




---



##### Table of Contents



ENERGY
    WEST INCORPORATED AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS  (Continued)
 FOR THE
    YEARS ENDED JUNE 30, 2008, 2007, AND 2006
  2008


2007


2006CASH FLOWS FROM FINANCING ACTIVITIES:Repayments of long-term debt






(18,663,213
)


(1,027,073
)Proceeds from lines of credit


14,075,495



11,012,000



14,850,000Repayments of lines of credit


(14,075,495
)


(11,012,000
)


(18,750,000
)Proceeds from long-term debt






13,000,000



Repurchase of common stock


(161,651
)


(2,276,192
)


Debt issuance cost






(317,539
)


Sale of common stock


334,350



597,151



21,229Dividends paid


(2,025,365
)


(1,518,219
)


(494,660
)Net cash (used in) financing activities


(1,852,666
)


(9,178,012
)


(5,400,504
)NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS


(6,213,718
)


5,370,442



1,545,972CASH AND CASH EQUIVALENTS:Beginning of year


7,010,020



1,639,578



93,606End of year

$
796,302


$
7,010,020


$
1,639,578SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the period for interest

$
922,359


$
1,410,114


$
1,047,633Cash paid during the period for income taxes


1,929,499



5,474,500



8,000SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
    ACTIVITIES:Shares issued to satisfy deferred board compensation






84,046



135,242Acquisition of Kykuit investment


242,606







Shares issued under the Companys 401k reinvestment plan










19,436Capitalized interest


11,512



21,414



18,855Repurchase of stock  noncash


374,499







Accrued dividends


173,911







    F-7




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 For the
    years ended June 30, 2008, 2007, and 2006
  1.
    Summary
    of Business and Significant Accounting Policies  Nature of Business
    Basis of Presentation
  Principles of Consolidation
  Segments
  Use of Estimates in Preparing Financial
    Statements
  Natural Gas Inventories
  Accumulated Provisions for Doubtful Accounts
 F-8




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Recoverable/Refundable Costs of Gas and Propane
    Purchases
  Property, Plant, and Equipment
  Contributions in Aid and Advances Received for
    Construction
  Natural Gas Reserves
  Impairment of Long-Lived Assets
  Stock-Based Compensation Share-Based
    Payment
  Pro-Forma Disclosures Accounting for Stock Issued to Employees Accounting for Stock-Based
    Compensation, Accounting for Stock-Based Compensation 
    Transition and Disclosure, an Amendment of
    SFAS No. 123,
 F-9




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2006Net income, as reported for the year ended June 30,

$
2,316,670Add: stock-based employee compensation expense included in
    reported net income, net of related tax effects


35,308Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards, net of
    related tax effects


(35,308
)Pro forma net income

$
2,316,670Earnings per share:Basic  as reported

$
0.53Basic  pro forma

$
0.53Diluted  as reported

$
0.53Diluted  pro forma

$
0.52     2008


2007


2006Expected dividend rate


4.47
%


4.00
%


2.00
%Risk free interest rate


3.61



5.10



4.87Weighted average expected lives, in years


2.50



2.26



3.40Price volatility


31.16
%


30.00
%


39.00
%Total intrinsic value of options exercised

$
419,890


$
218,609


$
4,087Total cash received from options exercised

$
293,930


$
512,175


$
21,228   Comprehensive Income
  Revenue Recognition
  Derivatives Accounting for
    Derivative Instruments and Hedging Activities Accounting for Certain Derivative
    Instruments and Certain Hedging Activities Amendment of Statement 133 on Derivatives and Hedging
    Activities
 F-10




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##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Debt Issuance and Reacquisition Costs
  Cash and Cash Equivalents
  Marketable securities
  Earnings Per Share 3-for-2
  Credit Risk
  Effects of Regulation Accounting for the Effects of Certain
    Types of Regulation
  Income Taxes
   F-11




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Financial Instruments
  Asset Retirement Obligations (ARO) Accounting for Asset
    Retirement Obligation
      Balance  June 30, 2006


650,717Accretion


37,654Balance  June 30, 2007

$
688,371Accretion


37,860Balance  June 30, 2008

$
726,231   Equity Method Investments
 F-12




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  New Accounting Pronouncements
    Business Combinations,
  Accounting for Noncontrolling Interests
    2.
    Discontinued
    Operations      and/or
 F-13




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Years EndedJune 302007


2006(In thousands)Propane Operations  (Discontinued operations)Operating revenues

$
10,266


$
9,583Propane purchased


6,906



5,971Gross Margin


3,360



3,612Operating expenses


2,104



2,623Operating income


1,256



989Other (income)


(51
)


(114
)Income before interest and taxes


1,307



1,103Interest expense


333



431Income before income taxes


974



672Income tax (expense)


(378
)


(266
)Income from discontinued operations


596



406Gain from disposal of operations


5,479



Income tax (expense)


(2,120
)


Net Income

$
3,955


$
406     3.
    Acquisitions
    and Extraordinary Gain       F-14




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  24-year
    Frontier Utilities of North Carolina, Inc.
  October 1, 2007Current assets

$
957,439Property and equipment


Noncurrent assets


4,522,076Total assets acquired


5,479,515Current liabilities


666,524Long-term debt


Other long-term obligations


Total liabilities assumed


666,524Net assets acquired:

$
4,812,991   Penobscot Natural Gas, Inc.
  December 1, 2007Current assets

$
1,281,199Property and equipment


Noncurrent assets


197,545Total assets acquired


1,478,744Current liabilities


726,035Long-term debt


Total liabilities assumed

$
726,035  F-15




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended June 30,2008


2007Pro forma revenues

$
79,497


$
71,505Pro forma income before extraordinary items


3,037



4,973Pro forma net income


9,856



4,973Pro forma earnings per share  basicIncome before extraordinary items

$
0.70


$
1.12Net income


2.28



1.12Pro forma earnings per share  dilutedIncome before extraordinary items

$
0.70


$
1.12Net income


2.28



1.11           4.
    Natural
    Gas Wells  units-of-production
   F-16




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Disclosures About the Oil and Gas
    Producing Properties
  5.
    Property,
    Plant and Equipment    2008


2007Gas transmission and distribution facilities

$
47,611,006


$
45,980,012Land


137,037



139,132Buildings and leasehold improvements


2,940,816



2,907,975Transportation equipment


1,696,286



1,581,196Computer equipment


3,560,478



4,481,310Other equipment


3,351,006



3,752,790Construction
    work-in-progress


1,136,504



258,029Producing natural gas properties


3,677,872



2,381,88364,111,005



61,482,327Accumulated depreciation, depletion, and amortization


(31,635,871
)


(31,008,336
)Total

$
32,475,134


$
30,473,991   6.
    Deferred
    Charges    2008


2007Regulatory asset for property tax

$
1,707,371


$
2,013,623Regulatory asset for income taxes


452,646



452,646Regulatory assets for deferred environmental remediation costs


149,625



247,617Rate case costs


11,525



Unamortized debt issue costs


440,490



317,539Total

$
2,761,657


$
3,031,425    F-17




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    7.
    Accrued
    and Other Current Liabilities    2008


2007Property tax settlement  current portion

$
235,772


$
243,000Payable to employee benefit plans


119,269



132,131Accrued vacation


310,472



224,588Customer deposits


498,880



394,128Accrued interest


276



9,069Accrued taxes other than income


474,775



506,448Deferred short-term gain






243,519Deferred payments from levelized billing






605,031Other


1,108,503



734,812Total

$
2,747,947


$
3,092,726   8.
    Other
    Long-Term Liabilities    2008


2007Asset retirement obligation

$
726,231


$
688,371Contribution in aid of construction


1,423,714



1,313,907Customer advances for construction


734,862



605,221Deferred gain  long-term






82,063Regulatory liability for income taxes


83,161



83,161Property tax settlement


972,008



1,215,008Total

$
3,939,976


$
3,987,731   9.
    Credit
    Facility and Long-Term Debt    Bank of America Line of Credit
 F-18




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Long-term Debt
  2008


20076.16% Senior Unsecured Notes

$
13,000,000


$
13,000,000Less current portion of long-term debt






Long-term debt

$
13,000,000


$
13,000,000   $13,000,000 6.16% Senior Unsecured Notes
  Series 1997 Notes Payable
  Series 1993 Notes Payable
  Series 1992B Industrial Development Revenue
    Obligations
  Term Loan
 F-19




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Aggregate Annual Maturities
  Series 2007Year ending June 30:2008

$
2009


2010


2011


2012


Thereafter


13,000,000Total

$
13,000,000   Debt Covenants 60-month debt-to-capital
  10.
    Employee
    Benefit Plans       F-20




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  11.
    Income
    Taxes    2008


2007Current


Long-Term


Current


Long-TermDeferred tax asset:Allowances for doubtful accounts

$
58,047


$



$
23,827


$
Unamortized investment tax credit






2,806







10,907Contributions in aid of construction






349,538







318,455Impairment






55,858,087Other nondeductible accruals


359







77,445



Recoverable purchase gas costs














Derivatives


31,561







93,657



Deferred incentive and pension accrual






60,875







14,997Other


92,588



511,596







533,298Total


182,555



56,782,902



194,929



877,657Deferred tax liabilities:Recoverable purchase gas costs


234,297







189,294



Property, plant, and equipment






41,425,907







5,110,398Debt issue costs














Property tax liability






190,134







214,028Amortization of intangibles and goodwill






2,624,737







42,374Other


(33,703
)


71,133



(47,735
)


96,027Total


200,594



44,311,911



141,559



5,462,827Net deferred tax asset (liabilities)


(18,039
)


12,470,991



53,370



(4,585,170
)Less valuation allowance






(5,645,416
)






Net deferred tax asset (liabilities)

$
(18,039
)

$
6,825,575


$
53,370


$
(4,585,170
)     2008


2007


2006Current income taxes:Federal

$
1,058,405


$
957,135


$
1,281,537State


52,121



164,240



131,331Total current income taxes


1,110,526



1,121,375



1,412,868Deferred income taxes:Federal


241,244



137,881



(240,349
)State


1,980



34,470



(42,414
)Total deferred income taxes


243,224



172,351



(282,763
)Total income taxes before credits


1,353,750



1,293,726



1,130,105Investment tax credit, net


(21,062
)


(21,062
)


(21,062
)Total income tax expense

$
1,332,688


$
1,272,664


$
1,109,043  F-21




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008


2007


2006Tax expense at statutory rate of 34%

$
1,578,981


$
1,200,249


$
1,026,763State income tax, net of federal tax benefit


179,835



154,620



132,271Amortization of deferred investment tax credits


(21,062
)


(21,062
)


(21,062
)Adjust prior year accruals to actual, and other


(405,066
)


(61,143
)


(28,929
)Total

$
1,332,688


$
1,272,664


$
1,109,043     12.
    Segments
    of Operations     F-22




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Natural Gas





Pipeline


CorporateYear Ended June 30, 2008

Operations


EWR


Operations


and Other


Eliminations


ConsolidatedOperating revenue:Natural gas operations

$
60,093,090


$



$



$



$
(754,094
)

$
59,338,996Marketing and wholesale






29,395,960











(12,271,879
)


17,124,081Pipeline operations










370,171











370,171Total operating revenue


60,093,090



29,395,960



370,171







(13,025,973
)


76,833,248Gas purchased


42,091,491















(754,094
)


41,337,397Gas and electric  wholesale






27,105,232











(12,271,879
)


14,833,353Distribution, general, and administrative


9,710,294



370,374



140,087



441,123







10,661,878Maintenance


641,211



1,094



8,248











650,553Depreciation and amortization


1,566,359



242,551



56,384











1,865,294Taxes other than income


2,035,403



16,704



28,037











2,080,144Operating expenses


56,044,758



27,735,955



232,756



441,123



(13,025,973
)


71,428,619Operating income


4,048,332



1,660,005



137,415



(441,123
)






5,404,629Other income


245,487



578



17



69,697







315,779Interest (expense)


(933,655
)


(124,827
)


(17,863
)










(1,076,345
)Income from continuing operations before income taxes


3,360,164



1,535,756



119,569



(371,426
)






4,644,063Income taxes (expense) benefit


(1,091,105
)


(343,646
)


(40,007
)


142,070







(1,332,688
)Net income before extraordinary item


2,269,059



1,192,110



79,562



(229,356
)






3,311,375Extraordinary gain














6,819,182







6,819,182Net income

$
2,269,059


$
1,192,110


$
79,562


$
6,589,826


$



$
10,130,557Capital expenditures and natural gas properties

$
3,578,307


$
250,091


$
41,434


$



$



$
3,869,832Total assets

$
50,837,931


$
7,486,996


$
988,318


$
25,713,911


$
(25,226,352
)

$
59,800,804  F-23




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Natural Gas





Pipeline


DiscontinuedYear Ended June 30, 2007

Operations


EWR


Operations


Operations


Eliminations


ConsolidatedOperating revenue:Natural gas operations

$
47,074,560


$



$



$



$
(635,054
)

$
46,439,506Marketing and wholesale






22,466,030











(9,920,671
)


12,545,359Pipeline operations










388,175











388,175Total operating revenue


47,074,560



22,466,030



388,175







(10,555,725
)


59,373,040Gas purchased


34,177,047















(635,054
)


33,541,993Gas and electric  wholesale






20,185,304











(9,920,671
)


10,264,633Distribution, general, and administrative


5,676,195



315,279



206,055











6,197,529Maintenance


563,912



297



2,474











566,683Depreciation and amortization


1,414,003



222,110



56,373











1,692,486Taxes other than income


1,652,661



20,529



23,746











1,696,936Operating expenses


43,483,818



20,743,519



288,648







(10,555,725
)


53,960,260Operating income


3,590,742



1,722,511



99,527











5,412,780Other income


228,515



1,592



11,412











241,519Interest (expense)


(1,896,650
)


(185,365
)


(42,140
)










(2,124,155
)Income from continuing operations before income taxes


1,922,607



1,538,738



68,799











3,530,144Income taxes (expense)


(653,130
)


(593,078
)


(26,456
)










(1,272,664
)Income from continuing operations


1,269,477



945,660



42,343











2,257,480Discontinued operations:Gain from disposal of operations














5,479,166







5,479,166Income from discontinued operations














975,484







975,484Income tax (expense)














(2,499,875
)






(2,499,875
)Income from discontinued operations














3,954,775







3,954,775Net income

$
1,269,477


$
945,660


$
42,343


$
3,954,775


$



$
6,212,255Capital expenditures and natural gas properties

$
2,024,443


$
361,379


$
21,088


$



$



$
2,406,910Total assets

$
39,574,187


$
5,882,390


$
1,003,145


$



$
6,436,001


$
52,895,723   F-24




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Natural Gas





Pipeline


DiscontinuedYear Ended June 30, 2006

Operations


EWR


Operations


Operations


Eliminations


ConsolidatedOperating revenue:Natural gas operations

$
56,044,531


$



$



$



$
(592,136
)

$
55,452,395Marketing and wholesale






32,879,779











(14,047,850
)


18,831,929Pipeline operations










411,237











411,237Total operating revenue


56,044,531



32,879,779



411,237







(14,639,986
)


74,695,561Gas purchased


43,752,966















(592,136
)


43,160,830Gas and electric  wholesale






31,285,246











(14,047,850
)


17,237,396Distribution, general, and administrative


5,830,719



473,341



85,070











6,389,130Maintenance


504,473



198















504,671Depreciation and amortization


1,394,169



221,814



56,064











1,672,047Taxes other than income


1,430,101



15,672



7,602











1,453,375Operating expenses


52,912,428



31,996,271



148,736







(14,639,986
)


70,417,449Operating income


3,132,103



883,508



262,501











4,278,112Other income


358,213



32,464















390,677Interest (expense)


(1,425,186
)


(182,422
)


(41,290
)










(1,648,898
)Income from continuing operations before income taxes


2,065,130



733,550



221,211











3,019,891Income taxes (expense)


(740,624
)


(283,339
)


(85,080
)










(1,109,043
)Income from continuing operations


1,324,506



450,211



136,131











1,910,848Discontinued operations:Income from discontinued operations














671,485







671,485Income tax (expense)














(265,663
)






(265,663
)Income from discontinued operations














405,822







405,822Net income

$
1,324,506


$
450,211


$
136,131


$
405,822


$



$
2,316,670Capital expenditures and natural gas properties

$
1,744,046


$
114,747


$
6,801


$



$



$
1,865,594Total assets

$
38,887,681


$
5,424,107


$
1,044,214


$
12,199,782


$
525,278


$
58,081,062   13.
    Stockholders
    Equity  3-for-2
 F-25




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Purchases
    of Equity Securities by Our Company and Affiliated
    Purchasers
  Maximum Number ofTotal Number of


Shares that may yetShares Purchased as


be Purchased UnderTotal Shares


Average Price


Part of Publicly


the Stock RepurchasePeriod

Purchased


Paid per Share


Announced Plans


PlanMay 30, 2007  June 30, 2007


146,348


$
15.00



146,348July 1, 2007  June 30, 2008


11,187


$
14.24



11,187157,535







157,535



141,465     2002 Stock Option Plan
    SFAS No. 123 Disclosures Accounting for Stock-Based
    Compensation Accounting for Stock-Based Compensation 
    Transition and Disclosure
 F-26




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Weighted


AggregateNumber of


Average


IntrinsicShares


Exercise Price


ValueOutstanding June 30, 2005


189,000


$
5.57Granted


72,750


$
6.74Exercised


(3,750
)

$
5.66Expired


(39,750
)

$
5.58Outstanding June 30, 2006


218,250


$
5.56Granted


45,000


$
7.03Exercised


(93,750
)

$
5.47Expired


(4,500
)

$
0.00Outstanding June 30, 2007


165,000


$
5.98Granted


30,000


$
6.59Exercised


(109,500
)

$
3.82Expired


(66,000
)

$
6.56Outstanding June 30, 2008


19,500


$
9.10


$
32,165Exerciseable June 30, 2008


3,750


$
9.93


$
3,088       WeightedAverageWeighted


Remaining





WeightedAverage


Contractual





AverageExercise


Number


Exercise


Life


Number


ExerciseGrant Date

Price


Outstanding


Price


(Years)


Exercisable


Price1/6/2006

$
6.35



4,500


$
6.35



2.5



0


$
6.3512/1/2007

$
9.93



15,000


$
9.93



9.6



3,750


$
9.9319,500











3,750     Termination of Preferred Stock Rights Agreement by Amendment
    of Final Expiration Date  Expiration of the Preferred
    Stock Purchase Rights
 F-27




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    14.
    Commitments
    and Contingencies  Commitments
  Year ending June 30:2009

$
4,258,8962010


2,839,2642011


Total

$
7,098,160   Environmental Contingency
          Derivative Contingencies
 F-28




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Litigation
    1997-2002.
  Operating Leases
  Year ended:June 30, 2009

$
253,363June 30, 2010


39,837June 30, 2011


15,817June 30, 2012


8,179June 30, 2013


2,620Thereafter


63,673$
383,489     15.
    Financial
    Instruments and Risk Management  Management of Risks Related to Derivatives
     F-29




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Assets

LiabilitiesContracts maturing during fiscal year 2009

$
145,428


$
146,206   16.
    Subsequent
    Events         F-30




---



##### Table of Contents



ENERGY
    WEST, INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Form 10-K.
  17.
    Quarterly
    Information (Unaudited)    First


Second


Third


FourthYear Ended June 30, 2008

Quarter


Quarter


Quarter


QuarterRevenues

$
6,951


$
20,171


$
30,878


$
18,833Gross margin

$
2,675


$
5,742


$
7,639


$
4,606Operating income

$
117


$
1,620


$
3,553


$
114Income (loss) before extraordinary items

$
75


$
1,049


$
2,307


$
(120
)Extraordinary gain

$
0


$
6,819


$
0


$
0Net income (loss)

$
75


$
7,868


$
2,307


$
(120
)Basic earnings (loss) before extraordinary items per common share

$
0.02


$
0.24


$
0.53


$
(0.03
)Basic earnings (loss) per common share  extraordinary
    gain

$
0.00


$
1.59


$
0.00


$
0.00Basic earnings (loss) per common share  net income

$
0.02


$
1.83


$
0.53


$
(0.03
)Diluted earnings (loss) per share

$
0.02


$
0.24


$
0.53


$
(0.03
)Diluted earnings (loss) per share  extraordinary gain

$
0.00


$
1.58


$
0.00


$
0.00Diluted earnings (loss) per share  net income

$
0.02


$
1.83


$
0.53


$
(0.03
)   First


Second


Third


FourthYear Ended June 30, 2007

Quarter


Quarter


Quarter


QuarterRevenues

$
8,456


$
18,041


$
21,516


$
11,360Gross margin

$
3,200


$
5,566


$
6,935


$
3,225Operating income

$
326


$
2,121


$
2,358


$
606Income (loss) from continuing operations

$
4


$
1,113


$
1,293


$
(152
)Discontinued operations

$
(199
)

$
157


$
636


$
3,360Net income (loss)

$
(195
)

$
1,270


$
1,929


$
3,208Basic earnings (loss) per common share  continuing
    operations

$
0.00


$
0.25


$
0.29


$
(0.03
)Basic earnings (loss) per common share  discontinued
    operations

$
(0.05
)

$
0.04


$
0.14


$
0.76Basic earnings (loss) per common share  net income

$
(0.04
)

$
0.29


$
0.43


$
0.72Diluted earnings (loss) per share  continuing
    operations

$
0.00


$
0.25


$
0.28


$
(0.03
)Diluted earnings (loss) per share  discontinued
    operations

$
(0.04
)

$
0.04


$
0.14


$
0.75Diluted earnings (loss) per share  net income

$
(0.04
)

$
0.28


$
0.42


$
0.71    F-31




---



##### Table of Contents



Exhibit Index
  3
.1(a)

Restated Articles of Incorporation. Exhibit 3.1 to Amendment No.
    1 to the Registrants Annual Report on Form 10-K/A for the
    year ended June 30, 1996, as filed on July 8, 1997, is
    incorporated herein by reference.3
.1(b)

Articles of Amendment to the Articles of Incorporation dated
    January 28, 2008 Filed as Exhibit 3.1 to the Registrants
    Current Report on Form 8-K dated February 1, 2008 and
    incorporated herein by reference3
.1(c)

Articles of Amendment to the Articles of Incorporation dated
    December 5, 2007. Filed as Exhibit 3.1(e) to the
    Registrants Quarterly Report on Form 10-Q for the quarter
    ended December 31, 2007 and incorporated herein by reference3
.1(d)

Articles of Amendment to the Articles of Incorporation dated May
    29, 2007. Exhibit 3.1 to the Registrants Current Report on
    Form 8-K, as filed on June 4, 2007, is incorporated herein by
    reference.3
.2

Amended and Restated Bylaws. Exhibit 3.2 to the
    Registrants Current Report on Form 8-K, as filed on March
    5, 2004, is incorporated herein by reference.3
.2(a)

Amendment No. 3 to Amended and Restated Bylaws dated April 10,
    2008. Filed as Exhibit 3.1 to the Registrants Current
    Report on Form 8-K dated August 12, 2008 and incorporated herein
    by reference3
.2(b)

Amendment No. 2 to Amended and Restated Bylaws dated April 10,
    2008. Filed as Exhibit 3.1 to the Registrants Current
    Report on Form 8-K dated April 10, 2008 and incorporated herein
    by reference3
.2(c)

Amendment No. 1 to Amended and Restated Bylaws dated November
    14, 2007. Filed as Exhibit 3.1 to the Registrants Current
    Report on Form 8-K dated November 14, 2007 and incorporated
    herein by reference10
.1(a)

Satisfaction and Discharge of Indenture dated June 22, 2007,
    between the Registrant and HSBC Bank USA, National Association,
    as Successor Trustee for the Series 1997 Notes.  Exhibit 10.1 to
    the Registrants Current Report on Form 8-K, as filed July
    5, 2007, is incorporated herein by reference.10
.1(b)

Satisfaction and Discharge of Indenture dated June 22, 2007,
    between the Registrant and US Bank National Association, as
    Successor Trustee for the Series 1993 Notes.  Exhibit 10.2 to
    the Registrants Current Report on Form 8-K, as filed July
    5, 2007, is incorporated herein by reference.10
.1(c)

Discharge of Obligor under Indenture dated June 22, 2007,
    between the Registrant and HSBC Bank USA, National Association,
    as Successor Trustee for the Series 1992-B Bonds. Exhibit 10.3
    to the Registrants Current Report on Form 8-K, as filed
    July 5, 2007, is incorporated herein by reference.10
.1(d)

Note Purchase Agreement dated June 29, 2007, between the
    Registrant and various Purchasers relating to 6.16% Senior
    Unsecured Notes due June 29, 2017.  Exhibit 10.4 to the
    Registrants Current Report on Form 8-K, as filed July 5,
    2007, is incorporated herein by reference.10
.1(e)

Credit Agreement dated as of June 29, 2007, by and among the
    Registrant and various financial institutions and LaSalle Bank
    National Association. Exhibit 10.5 to the Registrants
    Current Report on Form 8-K, as filed July 5, 2007, is
    incorporated herein by reference.10
.1(f)

Amendment dated October 22, 2007 to the Credit Agreement among
    the Registrant, various financial institutions and LaSalle Bank
    National Association, as agent. Filed as Exhibit 10.1 to the
    Registrants Current Report on Form 8-K dated October 22,
    2007 and incorporated herein by reference10
.2*

Energy West, Incorporated 2002 Stock Option Plan. Appendix A to
    the Registrants Proxy Statement on Schedule 14A, as filed
    on October 30, 2002, is incorporated herein by reference.10
.3*

Employee Stock Ownership Plan Trust Agreement. Exhibit 10.2 to
    Registration Statement on Form S-1 (File No. 33-1672) is
    incorporated herein by reference.10
.4*

Management Incentive Plan. Exhibit 10.12 to the
    Registrants Annual Report on Form 10-K/A for the year
    ended June 30, 1996, filed on July 8, 1997, is incorporated
    herein by reference.10
.5*

Energy West Senior Management Incentive Plan. Exhibit 10.19 to
    the Registrants Annual Report on Form 10-K for the year
    ended June 30, 2002, as filed on September 30, 2002, is
    incorporated herein by reference.10
.6*

Energy West Incorporated Deferred Compensation Plan for
    Directors. Exhibit 10.20 to the Registrants Annual Report
    on Form 10-K for the year ended June 30, 2002, as filed on
    September 30, 2002, is incorporated herein by reference.10
.10*

Employment Agreement entered into as of June 23, 2004, between
    the Company and David Cerotzke. Exhibit 10.16 to the
    Registrants Annual Report on Form 10-K for the year ended
    June 30, 2004, as filed on December 17, 2004, is incorporated
    herein by reference.10
.11*

Employment Agreement entered into as of June 23, 2004, between
    the Company and John Allen. Exhibit 10.17 to the
    Registrants Annual Report on Form 10-K for the year ended
    June 30, 2004, as filed on December 17, 2004, is incorporated
    herein by reference.




---



##### Table of Contents



10
.12

Amended and Restated Operating Agreement of Kykuit Resources,
    LLC, dated October 24, 2007.  Filed as Exhibit 10.6 to the
    Registrants Quarterly Report on Form 10-Q for the quarter
    ended September 30, 2007 and incorporated herein by reference10
.13

First Amendment to Amended and Restated Operating Agreement of
    Kykuit Resources, LLC, dated December 17, 2007. Filed as Exhibit
    10.2 to the Registrants Quarterly Report on Form 10-Q for
    the quarter ended December 31, 2007 and incorporated herein by
    reference10
.14

Stock Purchase Agreement dated January 30, 2007 between the
    Registrant and Sempra Energy. Filed as Exhibit 10.1 to the
    Registrants Quarterly Report on Form 10-Q for the quarter
    ended September 30, 2007 and incorporated herein by reference10
.15

Amendment No. 1 to Stock Purchase Agreement dated April 11, 2007
    between the Registrant and Sempra Energy. Filed as Exhibit 10.2
    to the Registrants Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2007 and incorporated herein by
    reference10
.16

Amendment No. 2 to Stock Purchase Agreement dated August 7, 2007
    between the Registrant and Sempra Energy. Filed as Exhibit 10.3
    to the Registrants Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2007 and incorporated herein by
    reference10
.17

Amendment No. 3 to Stock Purchase Agreement, dated November 28,
    2007, by and between the Registrant and Sempra Energy. Filed as
    Exhibit 10.1 to the Registrants Quarterly Report on Form
    10-Q for the quarter ended December 31, 2007 and incorporated
    herein by reference10
.18

Stock Purchase Agreement dated January 30, 2007 between the
    Registrant and Sempra Energy.  Filed as Exhibit 10.4 to the
    Registrants Quarterly Report on Form 10-Q for the quarter
    ended September 30, 2007 and incorporated herein by reference10
.19

Amendment Number 1 to Stock Purchase Agreement dated August 2,
    2007 between the Registrant and Sempra Energy.  Filed as Exhibit
    10.5 to the Registrants Quarterly Report on Form 10-Q for
    the quarter ended September 30, 2007 and incorporated herein by
    reference10
.20

Stock Purchase Agreement dated December 18, 2007 between the
    Registrant, Dan F. Whetstone, Pamela R. Lowry, Paula
    A. Poole, William J. Junkermier and Roger W. Junkermier.  Filed
    as Exhibit 10.1 to the Registrants Current Report on
    Form 8-K dated December 17, 2007 and incorporated herein by
    reference10
.21

Non-Competition and Non-Disclosure Agreement dated December 18,
    2007 between the Registrant and Daniel F. Whetstone.  Filed as
    Exhibit 10.2 to the Registrants Current Report on Form 8-K
    dated December 17, 2007 and incorporated herein by reference10
.22

Separation Agreement dated December 17, 2007 between David A.
    Cerotzke and the Registrant. Filed as Exhibit 10.3 to the
    Registrants Current Report on Form 8-K dated December 17,
    2007 and incorporated herein by reference10
.23

Lease Agreement dated February 25, 2008 between OsAir, Inc. and
    the Registrant. Filed as Exhibit 10.1 to the Registrants
    Current Report on Form 8-K dated February 25, 2008 and
    incorporated herein by reference10
.24*

Employment Agreement dated November 16, 2007 between James W.
    Garrett and the Registrant.  Filed as Exhibit 10.1 to the
    Registrants Current Report on Form 8-K dated November 14,
    2007 and incorporated herein by reference10
.25**

Gas Sales Agreement dated as of July 1, 2008 between John D. Oil
    & Gas Marketing Co., LLC, Northeast Ohio Natural Gas Corp.,
    Orwell Natural Gas Company and Brainard Gas Corp.10
.26**

Natural Gas Transportation Service Agreement dated as of July 1,
    2008 between Orwell-Trumbull Pipeline Co., LLC, Orwell Natural
    Gas Company and Brainard Gas Corp.10
.27**

Transportation Service Agreement dated as of July 1, 2008
    between Cobra Pipeline Co., Ltd., Northeast Ohio Natural Gas
    Company, Orwell Natural Gas Company and Brainard Gas Corp.10
.28**

First Amendment dated July 1, 2008 to the Orwell-Trumbull
    Pipeline Co., LLC Operations Agreement between Orwell Natural
    Gas Company and Orwell-Trumbull Pipeline Co., LLC10
.29**

Orwell-Trumbull Pipeline Co., LLC Operations Agreement dated
    January 1, 2008 between Orwell Natural Gas Company and
    Orwell-Trumbull Pipeline Co., LLC10
.30**

Triple Net Lease Agreement dated as of July 1, 2008 between
    Station Street Partners, LLC and Orwell Natural Gas Company10
.31**

Triple Net Lease Agreement dated as of July 1, 2008 between
    OsAir, Inc. and Orwell Natural Gas Company10
.32**

Triple Net Lease Agreement dated as of July 1, 2008 between
    Richard M. Osborne, Trustee and Orwell Natural Gas Company




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##### Table of Contents



10
.33**

Triple Net Lease Agreement dated as of July 1, 2008 between
    OsAir, Inc. and Northeast Ohio Natural Gas Company10
.34

Stock purchase agreement dated September 12, 2008, between
    Energy West, Incorporated, and Richard M. Osborne,
    trustee, Rebecca Howell, Stephen G. Rigo, Marty Whelan, and
    Thomas J. Smith, filed as exhibit 10.1 to the
    registrants current report on Form 8-K dated September 17,
    2008, and incorporated herein by reference.14


Code of Business Conduct21
**

Company Subsidiaries23
.1**

Consent of Hein & Associates LLP31
**

Certifications pursuant to SEC Release No. 33-8238, as adopted
    pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
**

Certifications pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the
    Sarbanes-Oxley
    Act of 2002     *
    
    Management agreement or compensatory plan or arrangement**
    
    Filed herewith