##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 1-1398
 UGI UTILITIES, INC.
  Pennsylvania
    
    23-1174060(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 
 Yes þ No o
 Yes
o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o
 Yes o No þ




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##### 



UGI UTILITIES, INC. AND SUBSIDIARIES
 TABLE OF CONTENTS
 PAGESPart I Financial InformationItem 1. Financial Statements (unaudited)Condensed Consolidated Balance Sheets as of March 31, 2010,
September 30, 2009 and March 31, 2009
    
    
    1Condensed Consolidated Statements of Income for the three and
six months ended March 31, 2010 and 2009
    
    
    2Condensed Consolidated Statements of Cash Flows for the three
and six months ended March 31, 2010 and 2009
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4  18Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    19  25Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    25  26Item 4T. Controls and Procedures
    
    
    26Part II Other InformationItem 1A. Risk Factors
    
    
    27Item 6. Exhibits
    
    
    27Signatures
    
    
    28Exhibit 12.1Exhibit 31.1Exhibit 31.2Exhibit 32
   -i-




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##### Table of Contents



March 31,
    
    
    September 30,
    
    
    March 31,2010
    
    
    2009
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    7,492
    
    
    $
    13,523
    
    
    $
    22,440Restricted cash
    
    
    12,573
    
    
    
    
    
    
    
    92,613Accounts receivable (less allowances for doubtful accounts of $18,051,
$11,384 and $25,619, respectively)
    
    
    162,152
    
    
    
    74,286
    
    
    
    200,674Accounts receivable  related parties
    
    
    11,371
    
    
    
    3,378
    
    
    
    5,107Accrued utility revenues
    
    
    33,294
    
    
    
    20,980
    
    
    
    51,402Inventories
    
    
    38,865
    
    
    
    196,598
    
    
    
    26,765Deferred income taxes
    
    
    24,671
    
    
    
    24,905
    
    
    
    21,659Regulatory assets
    
    
    6,662
    
    
    
    19,584
    
    
    
    61,067Derivative financial instruments
    
    
    525
    
    
    
    867
    
    
    
    962Prepaid expenses & other current assets
    
    
    16,131
    
    
    
    5,167
    
    
    
    12,941Total current assets
    
    
    313,736
    
    
    
    359,288
    
    
    
    495,630Property, plant and equipment, at cost (less accumulated depreciation and
amortization of $715,234, $692,082 and $680,722, respectively)
    
    
    1,364,622
    
    
    
    1,364,795
    
    
    
    1,345,450Goodwill
    
    
    180,145
    
    
    
    180,145
    
    
    
    176,906Regulatory assets
    
    
    123,199
    
    
    
    121,960
    
    
    
    112,572Other assets
    
    
    6,405
    
    
    
    4,049
    
    
    
    13,592Total assets
    
    $
    1,988,107
    
    
    $
    2,030,237
    
    
    $
    2,144,150LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Bank loans
    
    $
    37,000
    
    
    $
    154,000
    
    
    $
    178,000Accounts payable
    
    
    46,726
    
    
    
    53,265
    
    
    
    76,944Accounts payable  related parties
    
    
    10,482
    
    
    
    8,746
    
    
    
    6,428Deferred fuel refunds
    
    
    16,789
    
    
    
    30,846
    
    
    
    4,736Derivative financial instruments
    
    
    7,616
    
    
    
    
    
    
    
    82,275Other current liabilities
    
    
    121,845
    
    
    
    110,966
    
    
    
    148,402Total current liabilities
    
    
    240,458
    
    
    
    357,823
    
    
    
    496,785Long-term debt
    
    
    640,000
    
    
    
    640,000
    
    
    
    640,000Deferred income taxes
    
    
    197,872
    
    
    
    168,830
    
    
    
    132,518Deferred investment tax credits
    
    
    5,489
    
    
    
    5,670
    
    
    
    5,853Pension and postretirement benefit obligations
    
    
    146,137
    
    
    
    150,499
    
    
    
    138,615Other noncurrent liabilities
    
    
    60,428
    
    
    
    61,372
    
    
    
    56,353Total liabilities
    
    
    1,290,384
    
    
    
    1,384,194
    
    
    
    1,470,124Commitments and contingencies (note 8)Common stockholders equity:Common Stock, $2.25 par value (authorized  40,000,000 shares;
issued and outstanding - 26,781,785 shares)
    
    
    60,259
    
    
    
    60,259
    
    
    
    60,259Additional paid-in capital
    
    
    467,258
    
    
    
    467,160
    
    
    
    466,990Retained earnings
    
    
    251,226
    
    
    
    201,710
    
    
    
    228,902Accumulated other comprehensive loss
    
    
    (81,020
    )
    
    
    (83,086
    )
    
    
    (82,125
    )Total common stockholders equity
    
    
    697,723
    
    
    
    646,043
    
    
    
    674,026Total liabilities and stockholders equity
    
    $
    1,988,107
    
    
    $
    2,030,237
    
    
    $
    2,144,150
   - 1 -




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    477,273
    
    
    $
    581,260
    
    
    $
    839,476
    
    
    $
    1,027,952Costs and expenses:Cost of sales  gas, fuel and purchased power
(excluding depreciation shown below)
    
    
    312,171
    
    
    
    416,976
    
    
    
    543,388
    
    
    
    733,210Operating and administrative expenses
    
    
    48,632
    
    
    
    57,245
    
    
    
    92,854
    
    
    
    107,923Operating and administrative expenses  related parties
    
    
    6,565
    
    
    
    6,393
    
    
    
    7,757
    
    
    
    9,138Taxes other than income taxes
    
    
    4,894
    
    
    
    5,022
    
    
    
    9,422
    
    
    
    9,626Depreciation
    
    
    12,438
    
    
    
    12,082
    
    
    
    25,119
    
    
    
    24,113Amortization
    
    
    771
    
    
    
    480
    
    
    
    1,378
    
    
    
    961Other income, net
    
    
    (2,535
    )
    
    
    (2,611
    )
    
    
    (4,052
    )
    
    
    (4,704
    )382,936
    
    
    
    495,587
    
    
    
    675,866
    
    
    
    880,267Operating income
    
    
    94,337
    
    
    
    85,673
    
    
    
    163,610
    
    
    
    147,685Interest expense
    
    
    10,724
    
    
    
    10,809
    
    
    
    21,361
    
    
    
    22,189Income before income taxes
    
    
    83,613
    
    
    
    74,864
    
    
    
    142,249
    
    
    
    125,496Income taxes
    
    
    33,001
    
    
    
    30,118
    
    
    
    56,474
    
    
    
    49,616Net income
    
    $
    50,612
    
    
    $
    44,746
    
    
    $
    85,775
    
    
    $
    75,880
   - 2 -




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##### Table of Contents



Six Months EndedMarch 31,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    85,775
    
    
    $
    75,880Adjustments to reconcile net income to net cash from operating activities:Depreciation and amortization
    
    
    26,497
    
    
    
    25,074Deferred income taxes, net
    
    
    25,614
    
    
    
    (14,603
    )Provision for uncollectible accounts
    
    
    12,176
    
    
    
    19,846Other, net
    
    
    4,747
    
    
    
    2,054Net change in:Accounts receivable and accrued utility revenues
    
    
    (120,350
    )
    
    
    (166,819
    )Inventories
    
    
    157,734
    
    
    
    157,091Deferred fuel and power costs
    
    
    (1,135
    )
    
    
    38,983Accounts payable
    
    
    (4,804
    )
    
    
    1,924Storage agreements security deposits
    
    
    3,500
    
    
    
    22,500Other current assets
    
    
    (10,407
    )
    
    
    (8,942
    )Other current liabilities
    
    
    7,880
    
    
    
    30,968Net cash provided by operating activities
    
    
    187,227
    
    
    
    183,956CASH FLOWS FROM INVESTING ACTIVITIES:Expenditures for property, plant and equipment
    
    
    (26,170
    )
    
    
    (36,831
    )Net costs of property, plant and equipment disposals
    
    
    (1,255
    )
    
    
    (990
    )Acquisition of CPG, net of cash acquired
    
    
    
    
    
    
    (298,671
    )Proceeds from sale of CPG propane business assets
    
    
    
    
    
    
    32,269Increase in restricted cash
    
    
    (12,573
    )
    
    
    (58,576
    )Net cash used by investing activities
    
    
    (39,998
    )
    
    
    (362,799
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payment of dividends
    
    
    (36,260
    )
    
    
    (31,200
    )Issuance of long-term debt
    
    
    
    
    
    
    108,000(Decrease) increase in bank loans
    
    
    (117,000
    )
    
    
    121,000Net cash (used) provided by financing activities
    
    
    (153,260
    )
    
    
    197,800Cash and cash equivalents (decrease) increase
    
    $
    (6,031
    )
    
    $
    18,957CASH AND CASH EQUIVALENTS:End of period
    
    $
    7,492
    
    
    $
    22,440Beginning of period
    
    
    13,523
    
    
    
    3,483(Decrease) increase
    
    $
    (6,031
    )
    
    $
    18,957
   - 3 -




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES
 
 Notes to Condensed Consolidated Financial Statements
   1.
    
    Nature of Operations
   2.
    
    Significant Accounting Policies
 Basis of Presentation.
 Comprehensive Income.
 Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income
    
    $
    50,612
    
    
    $
    44,746
    
    
    $
    85,775
    
    
    $
    75,880Other comprehensive income (loss)
    
    
    1,033
    
    
    
    171
    
    
    
    2,066
    
    
    
    (38,347
    )Comprehensive income
    
    $
    51,645
    
    
    $
    44,917
    
    
    $
    87,841
    
    
    $
    37,533
  - 4 -




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
  Restricted Cash.
 Reclassifications.
 Use of Estimates.
 Income Taxes.
 3.
    
    Accounting Changes
 Adoption of New Accounting Standards
 Intangible Asset Useful Lives.
 Business Combinations.
  - 5 -




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 Fair Value Measurements.
 New Accounting Standards Not Yet Adopted
 Enhanced Disclosures of Postretirement Plan Assets .
 4.
    
    Segment Information
    - 6 -




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
  Three Months Ended March 31, 2010:
 Reportable SegmentsGas
    
    
    ElectricTotal
    
    
    Utility
    
    
    Utility
    
    
    OtherRevenues
    
    $
    477,273
    
    
    $
    445,395
    
    
    $
    31,553
    
    
    $
    325Cost of sales
    
    $
    312,171
    
    
    $
    291,433
    
    
    $
    20,738
    
    
    $
    Depreciation and amortization
    
    $
    13,209
    
    
    $
    12,216
    
    
    $
    993
    
    
    $
    Operating income
    
    $
    94,337
    
    
    $
    91,112
    
    
    $
    3,093
    
    
    $
    132Interest expense
    
    $
    10,724
    
    
    $
    10,258
    
    
    $
    466
    
    
    $
    Income before income taxes
    
    $
    83,613
    
    
    $
    80,854
    
    
    $
    2,627
    
    
    $
    132Total assets (at period end)
    
    $
    1,988,107
    
    
    $
    1,862,489
    
    
    $
    125,618
    
    
    $
    Goodwill (at period end)
    
    $
    180,145
    
    
    $
    180,145
    
    
    $
    
    
    
    $
    Capital expenditures
    
    $
    12,360
    
    
    $
    11,499
    
    
    $
    861
    
    
    $
    
 Three Months Ended March 31, 2009:
 Reportable SegmentsGas
    
    
    ElectricTotal
    
    
    Utility
    
    
    Utility
    
    
    OtherRevenues
    
    $
    581,260
    
    
    $
    542,796
    
    
    $
    38,118
    
    
    $
    346Cost of sales
    
    $
    416,976
    
    
    $
    392,823
    
    
    $
    24,153
    
    
    $
    Depreciation and amortization
    
    $
    12,562
    
    
    $
    11,587
    
    
    $
    975
    
    
    $
    Operating income
    
    $
    85,673
    
    
    $
    80,017
    
    
    $
    5,417
    
    
    $
    239Interest expense
    
    $
    10,809
    
    
    $
    10,377
    
    
    $
    432
    
    
    $
    Income before income taxes
    
    $
    74,864
    
    
    $
    69,640
    
    
    $
    4,985
    
    
    $
    239Total assets (at period end)
    
    $
    2,144,150
    
    
    $
    2,019,932
    
    
    $
    124,218
    
    
    $
    Goodwill (at period end)
    
    $
    176,906
    
    
    $
    176,906
    
    
    $
    
    
    
    $
    Capital expenditures
    
    $
    14,020
    
    
    $
    12,727
    
    
    $
    1,293
    
    
    $
    
  - 7 -




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UGI UTILITIES, INC. AND SUBSIDIARIESNotes to Condensed Consolidated Financial Statements
 Six Months Ended March 31, 2010:
 Reportable SegmentsGas
    
    
    ElectricTotal
    
    
    Utility
    
    
    Utility
    
    
    OtherRevenues
    
    $
    839,476
    
    
    $
    773,204
    
    
    $
    65,552
    
    
    $
    720Cost of sales
    
    $
    543,388
    
    
    $
    501,193
    
    
    $
    42,195
    
    
    $
    Depreciation and amortization
    
    $
    26,497
    
    
    $
    24,515
    
    
    $
    1,982
    
    
    $
    Operating income
    
    $
    163,610
    
    
    $
    154,840
    
    
    $
    8,452
    
    
    $
    318Interest expense
    
    $
    21,361
    
    
    $
    20,504
    
    
    $
    857
    
    
    $
    Income before income taxes
    
    $
    142,249
    
    
    $
    134,336
    
    
    $
    7,595
    
    
    $
    318Total assets (at period end )
    
    $
    1,988,107
    
    
    $
    1,862,489
    
    
    $
    125,618
    
    
    $
    Good will (at period end)
    
    $
    180,145
    
    
    $
    180,145
    
    
    $
    
    
    
    $
    Capital expenditures
    
    $
    26,170
    
    
    $
    24,539
    
    
    $
    1,631
    
    
    $
    
 Six Months Ended March 31, 2009:
 Reportable SegmentsGas
    
    
    ElectricTotal
    
    
    Utility
    
    
    Utility
    
    
    OtherRevenues
    
    $
    1,027,952
    
    
    $
    953,162
    
    
    $
    74,039
    
    
    $
    751Cost of sales
    
    $
    733,210
    
    
    $
    685,847
    
    
    $
    47,363
    
    
    $
    Depreciation and amortization
    
    $
    25,074
    
    
    $
    23,136
    
    
    $
    1,938
    
    
    $
    Operating income
    
    $
    147,685
    
    
    $
    136,902
    
    
    $
    10,464
    
    
    $
    319Interest expense
    
    $
    22,189
    
    
    $
    21,352
    
    
    $
    837
    
    
    $
    Income before income taxes
    
    $
    125,496
    
    
    $
    115,550
    
    
    $
    9,627
    
    
    $
    319Total assets (at period end)
    
    $
    2,144,150
    
    
    $
    2,019,932
    
    
    $
    124,218
    
    
    $
    Good will (at period end)
    
    $
    176,906
    
    
    $
    176,906
    
    
    $
    
    
    
    $
    Capital expenditures
    
    $
    36,831
    
    
    $
    34,384
    
    
    $
    2,447
 5.
    
    Inventories
  March 31,
    
    
    September 30,
    
    
    March 31,2010
    
    
    2009
    
    
    2009Gas Utility natural gas
    
    $
    31,693
    
    
    $
    189,747
    
    
    $
    19,227Materials, supplies and other
    
    
    7,172
    
    
    
    6,851
    
    
    
    7,538Total inventories
    
    $
    38,865
    
    
    $
    196,598
    
    
    $
    26,765
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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
   6.
    
    Regulatory Assets and Liabilities and Regulatory Matters
  March 31,
    
    
    September 30,
    
    
    March 31,2010
    
    
    2009
    
    
    2009Regulatory assets:Income taxes recoverable
    
    $
    81,561
    
    
    $
    79,492
    
    
    $
    75,660Postretirement benefits
    
    
    1,833
    
    
    
    2,473
    
    
    
    3,561CPG Gas pension and postretirement plans
    
    
    8,572
    
    
    
    8,572
    
    
    
    5,551Environmental costs
    
    
    25,301
    
    
    
    26,877
    
    
    
    20,665Deferred fuel and power costs
    
    
    6,662
    
    
    
    19,584
    
    
    
    61,067Other
    
    
    5,932
    
    
    
    4,546
    
    
    
    7,135Total regulatory assets
    
    $
    129,861
    
    
    $
    141,544
    
    
    $
    173,639Regulatory liabilities:Postretirement benefits
    
    $
    9,899
    
    
    $
    9,310
    
    
    $
    9,609Environmental overcollections
    
    
    8,398
    
    
    
    8,720
    
    
    
    9,724Deferred fuel refunds
    
    
    16,789
    
    
    
    30,846
    
    
    
    4,736Total regulatory liabilities
    
    $
    35,086
    
    
    $
    48,876
    
    
    $
    24,069
  - 9 -




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 Deferred fuel and power  costs and refunds.
   7.
    
    Defined Benefit Pension and Other Postretirement Plans
   - 10 -




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
  Pension Benefits
    
    
    Other Postretirement BenefitsThree Months Ended
    
    
    Three Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    1,745
    
    
    $
    1,492
    
    
    $
    40
    
    
    $
    2Interest cost
    
    
    5,284
    
    
    
    5,263
    
    
    
    212
    
    
    
    162Expected return on assets
    
    
    (5,858
    )
    
    
    (5,892
    )
    
    
    (126
    )
    
    
    (130
    )Amortization of:Prior service cost (benefit)
    
    
    9
    
    
    
    7
    
    
    
    (102
    )
    
    
    (87
    )Actuarial loss
    
    
    1,333
    
    
    
    1,138
    
    
    
    89
    
    
    
    30Net benefit cost
    
    
    2,513
    
    
    
    2,008
    
    
    
    113
    
    
    
    (23
    )Change in associated regulatory liabilities
    
    
    
    
    
    
    
    
    
    
    736
    
    
    
    803Net expense
    
    $
    2,513
    
    
    $
    2,008
    
    
    $
    849
    
    
    $
    780
 Pension Benefits
    
    
    Other Postretirement BenefitsSix Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    3,490
    
    
    $
    2,873
    
    
    $
    81
    
    
    $
    66Interest cost
    
    
    10,568
    
    
    
    10,717
    
    
    
    423
    
    
    
    422Expected return on assets
    
    
    (11,717
    )
    
    
    (11,998
    )
    
    
    (252
    )
    
    
    (260
    )Amortization of:Prior service cost (benefit)
    
    
    18
    
    
    
    14
    
    
    
    (203
    )
    
    
    (174
    )Actuarial loss
    
    
    2,666
    
    
    
    1,311
    
    
    
    179
    
    
    
    60Net benefit cost
    
    
    5,025
    
    
    
    2,917
    
    
    
    228
    
    
    
    114Change in associated
regulatory liabilities
    
    
    
    
    
    
    
    
    
    
    1,472
    
    
    
    1,606Net expense
    
    $
    5,025
    
    
    $
    2,917
    
    
    $
    1,700
    
    
    $
    1,720
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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 8.
    
    Commitments and Contingencies
     South Carolina Electric & Gas Company v. UGI Utilities, Inc.
  - 12 -




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 Frontier Communications Company v. UGI Utilities, Inc. et al.
 Sag Harbor, New York Matter.
 Yankee Gas Services Company and Connecticut Light and Power Company v. UGI Utilities, Inc.
  - 13 -




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
  9.
    
    Related Party Transactions
    - 14 -




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
     - 15 -




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 10.
    
    Fair Value Measurements
   QuotedPrices inActiveMarkets for
    
    
    SignificantIdentical
    
    
    OtherAssets and
    
    
    Observable
    
    
    UnobservableLiabilities
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TotalMarch 31, 2010:Derivative financial
instruments:Assets
    
    $
    226
    
    
    $
    299
    
    
    $
    
    
    
    $
    525Liabilities
    
    $
    (7,616
    )
    
    $
    
    
    
    $
    
    
    
    $
    (7,616
    )September 30, 2009:Derivative
financial
instruments:Assets
    
    $
    102
    
    
    $
    765
    
    
    $
    
    
    
    $
    867Liabilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    March 31, 2009:Derivative
financial
instruments:Assets
    
    $
    
    
    
    $
    962
    
    
    $
    
    
    
    $
    962Liabilities
    
    $
    (82,275
    )
    
    $
    
    
    
    $
    
    
    
    $
    (82,275
    )
     - 16 -




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 11.
    
    Disclosures About Derivative Instruments, Hedging Activities and Financial Instruments
  Commodity Price Risk
       - 17 -




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 Interest Rate Risk
  Derivative Financial Instrument Credit Risk
   As of March 31:
 Derivative Assets
    
    
    Derivative (Liabilities)Balance Sheet
    
    
    Fair Value
    
    
    Balance Sheet
    
    
    Fair ValueLocation
    
    
    2010
    
    
    2009
    
    
    Location
    
    
    2010
    
    
    2009Derivatives Accounted for Under ASC 980:Commodity contracts
    
    Derivative financial instruments
    
    $
    226
    
    
    $
    
    
    
    Derivative financial instruments
    
    $
    (7,616
    )
    
    $
    (81,893
    )Derivatives Not
Designated as
Hedging Instruments:Commodity contracts
    
    Derivative financial instruments
    
    
    299
    
    
    
    962
    
    
    Derivative financial instruments
    
    
    
    
    
    
    (382
    )Total Derivatives
    
    
    
    
    
    $
    525
    
    
    $
    962
    
    
    
    
    
    
    $
    (7,616
    )
    
    $
    (82,275
    )
    - 18 -




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
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UGI UTILITIES, INC. AND SUBSIDIARIES
 ANALYSIS OF RESULTS OF OPERATIONS
  2010 three-month period compared with 2009 three-month period
 IncreaseThree Months Ended March 31,
    
    2010
    
    
    2009
    
    
    (Decrease)(Millions of dollars)Gas Utility:Revenues
    
    $
    445.4
    
    
    $
    542.8
    
    
    $
    (97.4
    )
    
    
    (17.9
    )%Total margin (a)
    
    $
    154.0
    
    
    $
    150.0
    
    
    $
    4.0
    
    
    
    2.7
    %Operating income
    
    $
    91.1
    
    
    $
    80.0
    
    
    $
    11.1
    
    
    
    13.9
    %Income before income taxes
    
    $
    80.9
    
    
    $
    69.6
    
    
    $
    11.3
    
    
    
    16.2
    %System throughput  bcf
    
    
    54.6
    
    
    
    56.5
    
    
    
    (1.9
    )
    
    
    (3.4
    )%Heating degree days  % (warmer) colder
than normal (b)
    
    
    (2.8
    )%
    
    
    4.1
    %
    
    
    
    
    
    
    Electric Utility:Revenues
    
    $
    31.6
    
    
    $
    38.1
    
    
    $
    (6.5
    )
    
    
    (17.1
    )%Total margin (a)
    
    $
    9.1
    
    
    $
    11.9
    
    
    $
    (2.8
    )
    
    
    (23.5
    )%Operating income
    
    $
    3.1
    
    
    $
    5.4
    
    
    $
    (2.3
    )
    
    
    (42.6
    )%Income before income taxes
    
    $
    2.6
    
    
    $
    5.0
    
    
    $
    (2.4
    )
    
    
    (48.0
    )%Distribution sales  gwh
    
    
    262.8
    
    
    
    273.1
    
    
    
    (10.3
    )
    
    
    (3.8
    )%
  (a)
    
    Gas Utilitys total margin represents total revenues less total cost of sales. Electric
Utilitys total margin represents total revenues less total cost of sales and revenue-related
taxes, i.e. Electric Utility gross receipts taxes, of $1.7 million and $2.0 million during the
three-month periods ended March 31, 2010 and 2009, respectively. For financial statement
purposes, revenue-related taxes are included in Taxes other than income taxes in the
Condensed Consolidated Statements of Income.(b)
    
    Deviation from average heating degree days for the 15-year period 1990-2004 based upon
weather statistics provided by the National Oceanic and Atmospheric Administration (NOAA)
for airports located within Gas Utilitys service territory. Gas Utility.
  - 20 -




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UGI UTILITIES, INC. AND SUBSIDIARIES
    Electric Utility.
  - 21 -




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UGI UTILITIES, INC. AND SUBSIDIARIES
   2010 six-month period compared with 2009 six-month period
 IncreaseSix Months Ended March 31,
    
    2010
    
    
    2009
    
    
    (Decrease)(Millions of dollars)Gas Utility:Revenues
    
    $
    773.2
    
    
    $
    953.2
    
    
    $
    (180.0
    )
    
    
    (18.9
    )%Total margin (a)
    
    $
    272.0
    
    
    $
    267.3
    
    
    $
    4.7
    
    
    
    1.8
    %Operating income
    
    $
    154.8
    
    
    $
    136.9
    
    
    $
    17.9
    
    
    
    13.1
    %Income before income taxes
    
    $
    134.3
    
    
    $
    115.5
    
    
    $
    18.8
    
    
    
    16.3
    %System throughput  bcf
    
    
    96.9
    
    
    
    100.5
    
    
    
    (3.6
    )
    
    
    (3.6
    )%Heating degree days  % (warmer) colder
than normal (b)
    
    
    (1.4
    )%
    
    
    5.4
    %
    
    
    
    
    
    
    Electric Utility:Revenues
    
    $
    65.6
    
    
    $
    74.0
    
    
    $
    (8.4
    )
    
    
    (11.4
    )%Total margin (a)
    
    $
    19.7
    
    
    $
    22.6
    
    
    $
    (2.9
    )
    
    
    (12.8
    )%Operating income
    
    $
    8.5
    
    
    $
    10.5
    
    
    $
    (2.0
    )
    
    
    (19.0
    )%Income before income taxes
    
    $
    7.6
    
    
    $
    9.6
    
    
    $
    (2.0
    )
    
    
    (20.8
    )%Distribution sales  gwh
    
    
    505.2
    
    
    
    525.9
    
    
    
    (20.7
    )
    
    
    (3.9
    )%
  (a)
    
    Gas Utilitys total margin represents total revenues less total cost of sales.
Electric Utilitys total margin represents total revenues less total cost of sales and
revenue-related taxes, i.e. Electric Utility gross receipts taxes, of $3.6 million and $4.1
million during the six-month periods ended March 31, 2010 and 2009, respectively. For
financial statement purposes, revenue-related taxes are included in Taxes other than
income taxes in the Condensed Consolidated Statements of Income.(b)
    
    Deviation from average heating degree days for the 15-year period 1990-2004 based upon
weather statistics provided by the National Oceanic and Atmospheric Administration (NOAA)
for airports located within Gas Utilitys service territory. Gas Utility.
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UGI UTILITIES, INC. AND SUBSIDIARIES
   Electric Utility.
   FINANCIAL CONDITION AND LIQUIDITY
    - 23 -




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UGI UTILITIES, INC. AND SUBSIDIARIES
   Operating activities
  Investing activities
  - 24 -




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES
 Financing activities.
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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UGI UTILITIES, INC. AND SUBSIDIARIES
    
 ITEM 4T. CONTROLS AND PROCEDURES
 (a)
    
    Evaluation of Disclosure Controls and ProceduresThe Companys management, with the participation of the Companys Chief Executive Officer
and Chief Financial Officer, evaluated the effectiveness of the Companys disclosure
controls and procedures as of the end of the period covered by this report. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the
Companys disclosure controls and procedures as of the end of the period covered by this
report were designed and functioning effectively to provide reasonable assurance that the
information required to be disclosed by the Company in reports filed under the Securities
Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commissions rules and forms, and
(ii) accumulated and communicated to our management, including the Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.(b)
    
    Change in Internal Control over Financial ReportingNo change in the Companys internal control over financial reporting occurred during the
Companys most recent fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the Companys internal control over financial reporting.
  - 26 -




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES
 
 PART II OTHER INFORMATION
 
 ITEM 1A. RISK FACTORS
  
 ITEM 6. EXHIBITS
  Incorporation by Reference
 Exhibit No.
    
    Exhibit
    
    Registrant
    
    Filing
    
    Exhibit12.1
    
    
    Computation of
ratio of earnings
to fixed charges31.1
    
    
    Certification by
the Chief Executive
Officer relating to
the Registrants
Report on Form 10-Q
for the quarter
ended March 31,
2010, pursuant to
Section 302 of the
Sarbanes-Oxley Act
of 200231.2
    
    
    Certification by
the Chief Financial
Officer relating to
the Registrants
Report on Form 10-Q
for the quarter
ended March 31,
2010, pursuant to
Section 302 of the
Sarbanes-Oxley Act
of 200232
    
    
    Certification by
the Chief Executive
Officer and the
Chief Financial
Officer relating to
the Registrants
Report on Form 10-Q
for the quarter
ended March 31,
2010, pursuant to
Section 906 of the
Sarbanes-Oxley Act
of 2002
  - 27 -




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES
 
   UGI Utilities, Inc.
(Registrant)Date:  May 7, 2010
    By:
    /s/ John C. BarneyJohn C. BarneySenior Vice President  Finance and
Chief Financial Officer  - 28 -




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UGI UTILITIES, INC. AND SUBSIDIARIES
 
 EXHIBIT INDEX
 12.1
    
    
    Computation of ratio of earnings to fixed charges31.1
    
    
    Certification by the Chief Executive Officer relating to the Registrants
Report on Form 10-Q for the quarter ended March 31, 2010, pursuant to Section 302 of
the Sarbanes-Oxley Act of 200231.2
    
    
    Certification by the Chief Financial Officer relating to the Registrants
Report on Form 10-Q for the quarter ended March 31, 2010, pursuant to Section 302 of
the Sarbanes-Oxley Act of 200232
    
    
    Certification by the Chief Executive Officer and the Chief Financial Officer
relating to the Registrants Report on Form 10-Q for the quarter ended March 31, 2010,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002