##### 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, 2009
 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, 2009,
September 30, 2008 and March 31, 2008
    
    
    1Condensed Consolidated Statements of Income for the three and
six months ended March 31, 2009 and 2008
    
    
    2Condensed Consolidated Statements of Cash Flows for the
six months ended March 31, 2009 and 2008
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4        -        24Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    25        -        34Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    34        -        35Item 4T. Controls and Procedures
    
    
    36Part II Other InformationItem 1. Legal Proceedings
    
    
    37Item 1A. Risk Factors
    
    
    37Item 6. Exhibits
    
    
    38Signatures
    
    
    39Exhibit 10.3Exhibit 10.4Exhibit 12.1Exhibit 31.1Exhibit 31.2Exhibit 32
   -i-




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March 31,
    
    
    September 30,
    
    
    March 31,2009
    
    
    2008
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    22,440
    
    
    $
    3,483
    
    
    $
    15,555Restricted cash
    
    
    92,613
    
    
    
    34,037
    
    
    
    Accounts receivable (less allowances for doubtful accounts of ($25,619,
$10,369 and $14,013, respectively)
    
    
    200,674
    
    
    
    70,259
    
    
    
    191,883Accounts receivable  related parties
    
    
    5,107
    
    
    
    1,946
    
    
    
    4,813Accrued utility revenues
    
    
    51,402
    
    
    
    20,823
    
    
    
    63,649Inventories
    
    
    26,765
    
    
    
    161,272
    
    
    
    31,160Deferred income taxes
    
    
    21,659
    
    
    
    13,712
    
    
    
    24,463Regulatory assets
    
    
    61,067
    
    
    
    15,987
    
    
    
    Derivative financial instruments
    
    
    962
    
    
    
    506
    
    
    
    39,464Prepaid expenses & other current assets
    
    
    12,941
    
    
    
    3,380
    
    
    
    9,186Total current assets
    
    
    495,630
    
    
    
    325,405
    
    
    
    380,173Property, plant and equipment, at cost (less accumulated depreciation and
amortization of $680,722, $562,135 and $544,424, respectively)
    
    
    1,345,450
    
    
    
    1,106,921
    
    
    
    1,089,078Goodwill
    
    
    176,906
    
    
    
    161,726
    
    
    
    162,309Regulatory assets
    
    
    112,572
    
    
    
    91,396
    
    
    
    91,179Other assets
    
    
    13,592
    
    
    
    9,018
    
    
    
    6,764Total assets
    
    $
    2,144,150
    
    
    $
    1,694,466
    
    
    $
    1,729,503LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Bank loans
    
    $
    178,000
    
    
    $
    57,000
    
    
    $
    96,000Accounts payable
    
    
    76,944
    
    
    
    57,384
    
    
    
    79,544Accounts payable  related parties
    
    
    6,428
    
    
    
    14,680
    
    
    
    8,113Accrued income taxes
    
    
    48,483
    
    
    
    3,170
    
    
    
    36,045Deferred fuel refunds
    
    
    4,736
    
    
    
    
    
    
    
    68,202Derivative financial instruments
    
    
    82,275
    
    
    
    23,488
    
    
    
    Other current liabilities
    
    
    99,919
    
    
    
    68,441
    
    
    
    65,502Total current liabilities
    
    
    496,785
    
    
    
    224,163
    
    
    
    353,406Long-term debt
    
    
    640,000
    
    
    
    532,000
    
    
    
    532,000Deferred income taxes
    
    
    132,518
    
    
    
    171,623
    
    
    
    187,688Deferred investment tax credits
    
    
    5,853
    
    
    
    6,039
    
    
    
    6,227Other noncurrent liabilities
    
    
    194,968
    
    
    
    93,071
    
    
    
    43,528Total liabilities
    
    
    1,470,124
    
    
    
    1,026,896
    
    
    
    1,122,849Commitments and contingencies (note 6)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
    
    
    466,990
    
    
    
    466,888
    
    
    
    346,758Retained earnings
    
    
    228,902
    
    
    
    184,201
    
    
    
    215,041Accumulated other comprehensive loss
    
    
    (82,125
    )
    
    
    (43,778
    )
    
    
    (15,404
    )Total common stockholders equity
    
    
    674,026
    
    
    
    667,570
    
    
    
    606,654Total liabilities and stockholders equity
    
    $
    2,144,150
    
    
    $
    1,694,466
    
    
    $
    1,729,503
   -1-




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Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues
    
    $
    581,260
    
    
    $
    519,998
    
    
    $
    1,027,952
    
    
    $
    884,386Costs and expenses:Cost of sales  gas, fuel and purchased power
(excluding depreciation shown below)
    
    
    416,976
    
    
    
    381,893
    
    
    
    733,210
    
    
    
    638,832Operating and administrative expenses
    
    
    57,245
    
    
    
    40,631
    
    
    
    107,923
    
    
    
    76,135Operating and administrative expenses 
related parties
    
    
    6,393
    
    
    
    5,354
    
    
    
    9,138
    
    
    
    6,808Taxes other than income taxes
    
    
    5,022
    
    
    
    4,784
    
    
    
    9,626
    
    
    
    9,253Depreciation and amortization
    
    
    12,562
    
    
    
    10,349
    
    
    
    25,074
    
    
    
    20,580Other income, net
    
    
    (2,611
    )
    
    
    (4,682
    )
    
    
    (4,704
    )
    
    
    (7,500
    )495,587
    
    
    
    438,329
    
    
    
    880,267
    
    
    
    744,108Operating income
    
    
    85,673
    
    
    
    81,669
    
    
    
    147,685
    
    
    
    140,278Interest expense
    
    
    10,809
    
    
    
    10,101
    
    
    
    22,189
    
    
    
    21,001Income before income taxes
    
    
    74,864
    
    
    
    71,568
    
    
    
    125,496
    
    
    
    119,277Income taxes
    
    
    30,118
    
    
    
    28,482
    
    
    
    49,616
    
    
    
    47,558Net income
    
    $
    44,746
    
    
    $
    43,086
    
    
    $
    75,880
    
    
    $
    71,719
   -2-




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Six Months EndedMarch 31,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    75,880
    
    
    $
    71,719Adjustments to reconcile net income to net cash from
operating activities:Depreciation and amortization
    
    
    25,074
    
    
    
    20,580Deferred income taxes, net
    
    
    (14,603
    )
    
    
    (7,115
    )Provision for uncollectible accounts
    
    
    19,846
    
    
    
    9,707Other, net
    
    
    2,054
    
    
    
    1,971Net change in:Accounts receivable and accrued utility revenues
    
    
    (166,819
    )
    
    
    (176,010
    )Inventories
    
    
    157,091
    
    
    
    131,099Deferred fuel costs
    
    
    38,983
    
    
    
    42,925Accounts payable
    
    
    1,924
    
    
    
    11,775Storage
agreements security deposits
    
    
    22,500
    
    
    
    Other current assets
    
    
    (8,942
    )
    
    
    (3,866
    )Other current liabilities
    
    
    30,968
    
    
    
    25,714Net cash provided by operating activities
    
    
    183,956
    
    
    
    128,499CASH FLOWS FROM INVESTING ACTIVITIES:Expenditures for property, plant and equipment
    
    
    (36,831
    )
    
    
    (26,104
    )Acquisition of CPG, net of cash acquired
    
    
    (298,671
    )
    
    
    Proceeds from sale of assets of CPP
    
    
    32,269
    
    
    
    (Increase) decrease in restricted cash
    
    
    (58,576
    )
    
    
    6,642Other, net
    
    
    (990
    )
    
    
    (227
    )Net cash used by investing activities
    
    
    (362,799
    )
    
    
    (19,689
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payment of dividends
    
    
    (31,200
    )
    
    
    (35,462
    )Issuance of long-term debt
    
    
    108,000
    
    
    
    20,000Increase (decrease) in bank loans
    
    
    121,000
    
    
    
    (94,000
    )Net cash provided (used) by financing activities
    
    
    197,800
    
    
    
    (109,462
    )Cash and cash equivalents increase (decrease)
    
    $
    18,957
    
    
    $
    (652
    )CASH AND CASH EQUIVALENTS:End of period
    
    $
    22,440
    
    
    $
    15,555Beginning of period
    
    
    3,483
    
    
    
    16,207Increase (decrease)
    
    $
    18,957
    
    
    $
    (652
    )
   -3-




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UGI UTILITIES, INC. AND SUBSIDIARIES
 
 Notes to Condensed Consolidated Financial Statements
   1.
    
    Basis of Presentation
     Restricted Cash.
  -4-




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 Comprehensive Income.
 Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income
    
    $
    44,746
    
    
    $
    43,086
    
    
    $
    75,880
    
    
    $
    71,719Other comprehensive income (loss)
    
    
    171
    
    
    
    191
    
    
    
    (38,347
    )
    
    
    (87
    )Comprehensive income
    
    $
    44,917
    
    
    $
    43,277
    
    
    $
    37,533
    
    
    $
    71,632
  Natural Gas Inventories.
  -5-




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 Reclassifications.
 Use of Estimates.
 Income Taxes.
 Newly Adopted Accounting Standards.
   -6-




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
   Recently Issued Accounting Standards Not Yet Adopted.
    -7-




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
      -8-




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 2.
    
    Acquisition of PPL Gas Utilities Corporation
    -9-




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
   Working capital
    
    $
    21,589Property, plant and equipment, net
    
    
    227,301Goodwill
    
    
    15,180Regulatory assets
    
    
    22,466Other assets
    
    
    7,412Noncurrent liabilities
    
    
    (32,057
    )Total
    
    $
    261,891
     Three Months Ended
    
    
    Six Months EndedMarch 31, 2008
    
    
    March 31, 2008(pro forma)
    
    
    (pro forma)Revenues
    
    $
    600,255
    
    
    $
    1,011,841Net income
    
    
    48,858
    
    
    
    81,496
   3.
    
    Segment Information
    -10-




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
  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
    
    
    $
    
    
    
    $
    
 Three Months Ended March 31, 2008:
 Reportable SegmentsGas
    
    
    ElectricTotal
    
    
    Utility
    
    
    Utility
    
    
    OtherRevenues
    
    $
    519,998
    
    
    $
    476,803
    
    
    $
    38,597
    
    
    $
    4,598Cost of sales
    
    
    381,893
    
    
    
    355,120
    
    
    
    24,227
    
    
    
    2,546Depreciation and amortization
    
    
    10,349
    
    
    
    9,454
    
    
    
    889
    
    
    
    6Operating income (loss)
    
    
    81,669
    
    
    
    75,582
    
    
    
    6,413
    
    
    
    (326
    )Interest expense
    
    
    10,101
    
    
    
    9,577
    
    
    
    524
    
    
    
    Income (loss) before income taxes
    
    
    71,568
    
    
    
    66,005
    
    
    
    5,889
    
    
    
    (326
    )Total assets at period end
    
    $
    1,729,503
    
    
    $
    1,603,593
    
    
    $
    120,409
    
    
    $
    5,501Goodwill at period end
    
    $
    162,309
    
    
    $
    162,309
    
    
    $
    
    
    
    $
    
  -11-




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 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
    
    
    $
    Goodwill at period end
    
    $
    176,906
    
    
    $
    176,906
    
    
    $
    
    
    
    $
    
 Six Months Ended March 31, 2008:
 Reportable SegmentsGas
    
    
    ElectricTotal
    
    
    Utility
    
    
    Utility
    
    
    OtherRevenues
    
    $
    884,386
    
    
    $
    803,445
    
    
    $
    70,533
    
    
    $
    10,408Cost of sales
    
    
    638,832
    
    
    
    591,901
    
    
    
    41,897
    
    
    
    5,034Depreciation and amortization
    
    
    20,580
    
    
    
    18,802
    
    
    
    1,769
    
    
    
    9Operating income
    
    
    140,278
    
    
    
    125,650
    
    
    
    13,872
    
    
    
    756Interest expense
    
    
    21,001
    
    
    
    19,935
    
    
    
    1,066
    
    
    
    Income before income taxes
    
    
    119,277
    
    
    
    105,715
    
    
    
    12,806
    
    
    
    756Total assets at period end
    
    $
    1,729,503
    
    
    $
    1,603,593
    
    
    $
    120,409
    
    
    $
    5,501Goodwill at period end
    
    $
    162,309
    
    
    $
    162,309
    
    
    $
    
    
    
    $
    
  -12-




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 4.
    
    Regulatory Assets and Liabilities and Regulatory Matters
  March 31,
    
    
    September 30,
    
    
    March 31,2009
    
    
    2008
    
    
    2008Regulatory assets:Income taxes recoverable
    
    $
    75,660
    
    
    $
    73,695
    
    
    $
    73,059Postretirement benefits
    
    
    3,561
    
    
    
    4,321
    
    
    
    4,476Recoverable costs  CPG Gas postretirement benefit plans
    
    
    5,551
    
    
    
    
    
    
    
    Environmental costs
    
    
    20,665
    
    
    
    9,009
    
    
    
    9,009Deferred fuel costs
    
    
    61,067
    
    
    
    15,987
    
    
    
    Other
    
    
    7,135
    
    
    
    4,371
    
    
    
    4,635Total regulatory assets
    
    $
    173,639
    
    
    $
    107,383
    
    
    $
    91,179Regulatory liabilities:Postretirement benefits
    
    $
    9,609
    
    
    $
    8,886
    
    
    $
    8,093Environmental overcollections
    
    
    9,724
    
    
    
    
    
    
    
    Deferred fuel refunds
    
    
    4,736
    
    
    
    
    
    
    
    68,202Total regulatory liabilities
    
    $
    24,069
    
    
    $
    8,886
    
    
    $
    76,295
 Deferred fuel costs and refunds.
 Recoverable costs  CPG Gas postretirement benefit plans.
 Environmental overcollections.
   -13-




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 Other Regulatory Matters
 Electric Utility.
   UGIPNG and CPG Base Rate Filings.
 5.
    
    Defined Benefit Pension and Other Postretirement Plans
   -14-




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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 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Service cost
    
    $
    1,492
    
    
    $
    1,270
    
    
    $
    2
    
    
    $
    67Interest cost
    
    
    5,263
    
    
    
    4,453
    
    
    
    162
    
    
    
    212Expected return on assets
    
    
    (5,892
    )
    
    
    (5,693
    )
    
    
    (130
    )
    
    
    (159
    )Amortization of:Prior service cost (benefit)
    
    
    7
    
    
    
    8
    
    
    
    (87
    )
    
    
    (97
    )Actuarial loss
    
    
    1,138
    
    
    
    
    
    
    
    30
    
    
    
    17Net benefit cost
    
    
    2,008
    
    
    
    38
    
    
    
    (23
    )
    
    
    40Change in associated
regulatory liabilities
    
    
    
    
    
    
    
    
    
    
    803
    
    
    
    818Net expense
    
    $
    2,008
    
    
    $
    38
    
    
    $
    780
    
    
    $
    858
 Pension Benefits
    
    
    Other Postretirement BenefitsSix Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Service cost
    
    $
    2,873
    
    
    $
    2,541
    
    
    $
    66
    
    
    $
    134Interest cost
    
    
    10,717
    
    
    
    8,906
    
    
    
    422
    
    
    
    424Expected return on assets
    
    
    (11,998
    )
    
    
    (11,386
    )
    
    
    (260
    )
    
    
    (318
    )Amortization of:Prior service cost (benefit)
    
    
    14
    
    
    
    15
    
    
    
    (174
    )
    
    
    (194
    )Actuarial loss
    
    
    1,311
    
    
    
    
    
    
    
    60
    
    
    
    34Net benefit cost
    
    
    2,917
    
    
    
    76
    
    
    
    114
    
    
    
    80Change in associated
regulatory liabilities
    
    
    
    
    
    
    
    
    
    
    1,606
    
    
    
    1,635Net expense
    
    $
    2,917
    
    
    $
    76
    
    
    $
    1,720
    
    
    $
    1,715
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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
    Three MonthsEndedDecember 31, 2008Change in benefit obligations:Benefit obligations  October 1, 2008
    
    $
    300,578Service cost
    
    
    1,317Interest cost
    
    
    5,073Actuarial loss
    
    
    35,413Benefits paid
    
    
    (3,690
    )Benefit obligations  December 31, 2008
    
    $
    338,691Change in plan assets:Fair value of plan assets  October 1, 2008
    
    $
    240,997Actual loss on assets
    
    
    (27,350
    )Benefits paid
    
    
    (3,690
    )Fair value of plan assets  December 31, 2008
    
    $
    209,957Funded status of the merged plan  December 31, 2008
    
    $
    (128,734
    )Liabilities recorded in the balance sheet:Unfunded liabilities (included in other noncurrent
liabilities)
    
    
    (128,734
    )Amounts recorded in stockholders equity  December
31, 2008:Prior service cost
    
    $
    313Net actuarial loss
    
    
    132,874Total
    
    $
    133,187
   -16-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 6.
    
    Commitments and Contingencies
       -17-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
  South Carolina Electric & Gas Company v. UGI Utilities, Inc.
 City of Bangor, Maine v. Frontier Communications Corporation, f/k/a Citizens Communications
Company.
  -18-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 Sag Harbor, New York Matter.
 Yankee Gas Services Company and Connecticut Light and Power Company v. UGI Utilities, Inc.
   -19-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 7.
    
    Related Party Transactions
      -20-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
  8.
    
    Financing Transactions
  9.
    
    Fair Value Measurement
    -21-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
  
    
    Level 1  Quoted prices (unadjusted) in active markets for identical assets and
liabilities that we have the ability to access at the measurement date.
Instruments categorized in Level 1 consist of our exchange-traded commodity
futures contracts.
 
    
    Level 2  Inputs other than quoted prices included within Level 1 that are
either directly or indirectly observable for the asset or liability, including
quoted prices for similar assets or liabilities in active markets, quoted prices
for identical or similar assets or liabilities in inactive markets, inputs other
than quoted prices that are observable for the asset or liability, and inputs that
are derived from observable market data by correlation or other means. Instruments
categorized in Level 2 include our FTRs.
 
    
    Level 3  Unobservable inputs for the asset or liability including situations
where there is little, if any, market activity for the asset or liability. The
Company did not have any derivative financial instruments categorized as Level 3
at March 31, 2009.
   Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalDerivative financial
instruments:Assets
    
    $
    
    
    
    $
    962
    
    
    $
    
    
    
    $
    962Liabilities
    
    $
    (82,275
    )
    
    $
    
    
    
    $
    
    
    
    $
    (82,275
    )
 10.
    
    Disclosures About Derivative Instruments and Hedging Activities
   -22-




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 Commodity Price Risk
     -23-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 Interest Rate Risk
   Derivative Assets
    
    
    Derivative (Liabilities)Balance Sheet
    
    Fair
    
    
    Balance Sheet
    
    FairAs of March 31, 2009
    
    Location
    
    Value
    
    
    Location
    
    ValueDerivatives Accounted for
Under SFAS 71:Natural gas futures contracts
    
    
    
    
    
    
    
    Derivative financial instruments
    
    $
    (81,893
    )Derivatives Not Designated as
Hedging Instruments:FTRs
    
    Derivative financial instruments
    
    $
    962Gasoline futures contracts
    
    
    
    
    
    
    
    Derivative financial instruments
    
    $
    (382
    )Total Derivatives Not Designated
as Hedging Instruments
    
    
    
    $
    962
    
    
    
    
    $
    (382
    )Total Derivatives
    
    
    
    $
    962
    
    
    
    
    $
    (82,275
    )
   -24-




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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
     -25-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES
 ANALYSIS OF RESULTS OF OPERATIONS
  2009 three-month period compared with 2008 three-month period
 IncreaseThree Months Ended March 31,
    
    2009
    
    
    2008
    
    
    (Decrease)(Millions of dollars)Gas Utility:Revenues
    
    $
    542.8
    
    
    $
    476.8
    
    
    $
    66.0
    
    
    
    13.8
    %Total margin (a)
    
    $
    150.0
    
    
    $
    121.7
    
    
    $
    28.3
    
    
    
    23.3
    %Operating income
    
    $
    80.0
    
    
    $
    75.6
    
    
    $
    4.4
    
    
    
    5.8
    %Income before income taxes
    
    $
    69.6
    
    
    $
    66.0
    
    
    $
    3.6
    
    
    
    5.5
    %System throughput  bcf
    
    
    56.5
    
    
    
    49.6
    
    
    
    6.9
    
    
    
    13.9
    %Heating degree days  % colder (warmer)
than normal (b)
    
    
    4.1
    %
    
    
    (1.7
    )%
    
    
    
    
    
    
    Electric Utility:Revenues
    
    $
    38.1
    
    
    $
    38.6
    
    
    $
    (0.5
    )
    
    
    (1.3
    )%Total margin (a)
    
    $
    11.9
    
    
    $
    12.2
    
    
    $
    (0.3
    )
    
    
    (2.5
    )%Operating income
    
    $
    5.4
    
    
    $
    6.4
    
    
    $
    (1.0
    )
    
    
    (15.6
    )%Income before income taxes
    
    $
    5.0
    
    
    $
    5.9
    
    
    $
    (0.9
    )
    
    
    (15.3
    )%Distribution sales  gwh
    
    
    273.1
    
    
    
    279.1
    
    
    
    (6.0
    )
    
    
    (2.1
    )%
 
 (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 $2.0 million and $2.2 million during the
three-month periods ended March 31, 2009 and 2008, 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.
  -26-




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UGI UTILITIES, INC. AND SUBSIDIARIES
    Electric Utility.
   -27-




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UGI UTILITIES, INC. AND SUBSIDIARIES
  2009 six-month period compared with 2008 six-month period
 IncreaseSix Months Ended March 31,
    
    2009
    
    
    2008
    
    
    (Decrease)(Millions of dollars)Gas Utility:Revenues
    
    $
    953.2
    
    
    $
    803.4
    
    
    $
    149.8
    
    
    
    18.6
    %Total margin (a)
    
    $
    267.3
    
    
    $
    211.5
    
    
    $
    55.8
    
    
    
    26.4
    %Operating income
    
    $
    136.9
    
    
    $
    125.7
    
    
    $
    11.2
    
    
    
    8.9
    %Income before income taxes
    
    $
    115.5
    
    
    $
    105.7
    
    
    $
    9.8
    
    
    
    9.3
    %System throughput  bcf
    
    
    100.5
    
    
    
    89.1
    
    
    
    11.4
    
    
    
    12.8
    %Heating degree days  % colder (warmer)
than normal (b)
    
    
    5.4
    %
    
    
    (2.7
    )%
    
    
    
    
    
    
    Electric Utility:Revenues
    
    $
    74.0
    
    
    $
    70.5
    
    
    $
    3.5
    
    
    
    5.0
    %Total margin (a)
    
    $
    22.6
    
    
    $
    24.6
    
    
    $
    (2.0
    )
    
    
    (8.1
    )%Operating income
    
    $
    10.5
    
    
    $
    13.9
    
    
    $
    (3.4
    )
    
    
    (24.5
    )%Income before income taxes
    
    $
    9.6
    
    
    $
    12.8
    
    
    $
    (3.2
    )
    
    
    (25.0
    )%Distribution sales  gwh
    
    
    525.9
    
    
    
    533.5
    
    
    
    (7.6
    )
    
    
    (1.4
    )%
 
 (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 $4.1 million and $4.0 million during the
six-month periods ended March 31, 2009 and 2008, 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.
   -28-




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UGI UTILITIES, INC. AND SUBSIDIARIES
   Electric Utility.
   FINANCIAL CONDITION AND LIQUIDITY
 Financial Condition
   -29-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES
  Acquisition of PPL Gas Utilities Corporation
    -30-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES
  Merger of Defined Benefit Pension Plans
  Effect of Recent Market Conditions.
     -31-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES
  Cash Flows
 Operating activities.
  Investing activities.
  -32-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES
 Financing activities.
 Regulatory Matters
 Electric Utility.
    -33-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES
 UGIPNG and CPG Base Rate Filings.
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     -34-




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UGI UTILITIES, INC. AND SUBSIDIARIES
      -35-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES
 
 ITEM 4T. CONTROLS AND PROCEDURES
 (a)
    
    Evaluation of Disclosure Controls and Procedures
  (b)
    
    Change in Internal Control over Financial Reporting
   -36-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES
 
 PART II OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 South Carolina Electric & Gas Company v. UGI Utilities, Inc.
 Yankee Gas Services Company and Connecticut Light and Power Company v. UGI Utilities, Inc.
 
 ITEM 1A. RISK FACTORS
   -37-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES
 
 ITEM 6. EXHIBITS
  Incorporation by Reference
 Exhibit No.
    
    Exhibit
    
    Registrant
    
    Filing
    
    Exhibit10.1
    
    
    UGI Corporation
2004 Omnibus Equity
Compensation Plan
Performance Unit
Grant Letter for
UGI Utilities
Employees, dated
January 1, 2009
    
    UGI
Corporation
    
    10-Q
(3/31/09)
    
    
    10.210.2
    
    
    UGI Corporation
2004 Omnibus Equity
Compensation Plan
Nonqualified Stock
Option Grant Letter
for Utilities
Employees, dated
January 1, 2009
    
    UGI
Corporation
    
    10-Q
(3/31/09)
    
    
    10.610.3
    
    
    FSS Service
Agreement No.
80935, dated as of
October 29, 2004,
by and between
Columbia Gas
Transmission, LLC
and UGI Central
Penn Gas, Inc.10.4
    
    
    SST Service
Agreement No.
80934, dated as of
October 29, 2004,
by and between
Columbia Gas
Transmission, LLC
and UGI Central
Penn Gas, Inc.12.1
    
    
    Computation of
ratio of earnings
to fixed charges.31.1
    
    
    Certification by
the Chief Executive
Officer relating to
the Registrants
Report on Form 10-Q
for the quarter
ended March 31,
2009, pursuant to
Section 302 of the
Sarbanes-Oxley Act
of 2002.31.2
    
    
    Certification by
the Chief Financial
Officer relating to
the Registrants
Report on Form 10-Q
for the quarter
ended March 31,
2009, pursuant to
Section 302 of the
Sarbanes-Oxley Act
of 2002.32
    
    
    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,
2009, pursuant to
Section 906 of the
Sarbanes-Oxley Act
of 2002.
  -38-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES
 
   UGI Utilities, Inc.

(Registrant)Date:  May 8, 2009
    By:
    /s/ John C. BarneyJohn C. BarneySenior Vice President  Finance
and
Chief Financial Officer  -39-




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES
 
 EXHIBIT INDEX
 10.3
    
    

FSS
Service Agreement No. 80935, dated as of October 29, 2004, by and
between Columbia Gas Transmission, LLC and UGI Central Penn Gas, Inc.10.4
    
    
    SST Service Agreement No. 80934, dated as of October 29, 2004, by and between
Columbia Gas Transmission, LLC and UGI Central Penn Gas, Inc.12.1
    
    
    Computation of ratio of earnings to fixed charges.31.1
    
    
    Certification by the Chief Executive Officer relating to the Registrants
Report on Form 10-Q for the quarter ended March 31, 2009, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification by the Chief Financial Officer relating to the Registrants
Report on Form 10-Q for the quarter ended March 31, 2009 , pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.32
    
    
    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, 2009,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.