##### 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, 2008
 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.)
 
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o
 o 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, 2008, September 30, 2007 and March 31, 2007
    
    1Condensed Consolidated Statements of Income for the three
and six months ended March 31, 2008 and 2007
    
    2Condensed Consolidated Statements of Cash Flows for the
six months ended March 31, 2008 and 2007
    
    3Notes to Condensed Consolidated Financial Statements
    
    4 - 19Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    20 - 26Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    27Item 4. Controls and Procedures
    
    28Part II Other InformationItem 1A. Risk Factors
    
    29Item 6. Exhibits
    
    29Signatures
    
    30Exhibit 10.2Exhibit 12.1Exhibit 31.1Exhibit 31.2Exhibit 32
   -i-




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##### Table of Contents



March 31,
    
    
    September 30,
    
    
    March 31,2008
    
    
    2007
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    15,555
    
    
    $
    16,207
    
    
    $
    10,062Restricted cash
    
    
    
    
    
    
    6,642
    
    
    
    1,202Accounts receivable (less allowances for doubtful accounts of $14,013,
$10,824 and $14,841, respectively)
    
    
    191,883
    
    
    
    74,696
    
    
    
    184,700Accounts receivable  related parties
    
    
    4,813
    
    
    
    1,450
    
    
    
    5,236Accrued utility revenues
    
    
    63,649
    
    
    
    17,889
    
    
    
    56,116Regulatory assets
    
    
    
    
    
    
    14,782
    
    
    
    Inventories
    
    
    31,160
    
    
    
    162,259
    
    
    
    34,500Deferred income taxes
    
    
    24,463
    
    
    
    6,673
    
    
    
    10,883Derivative financial instruments
    
    
    39,464
    
    
    
    1,201
    
    
    
    6,559Prepaid expenses & other current assets
    
    
    9,186
    
    
    
    4,331
    
    
    
    4,556Total current assets
    
    
    380,173
    
    
    
    306,130
    
    
    
    313,814Property, plant and equipment, at cost (less accumulated depreciation and amortization of
$544,424, $536,132, and $520,459, respectively)
    
    
    1,089,078
    
    
    
    1,083,897
    
    
    
    1,059,256Goodwill
    
    
    162,309
    
    
    
    162,309
    
    
    
    162,633Regulatory assets
    
    
    91,179
    
    
    
    88,990
    
    
    
    82,455Other assets
    
    
    6,764
    
    
    
    7,712
    
    
    
    25,139Total assets
    
    $
    1,729,503
    
    
    $
    1,649,038
    
    
    $
    1,643,297LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    20,000Bank loans
    
    
    96,000
    
    
    
    190,000
    
    
    
    146,000Accounts payable
    
    
    79,544
    
    
    
    60,012
    
    
    
    75,877Accounts payable  related parties
    
    
    8,113
    
    
    
    15,871
    
    
    
    8,938Accrued income taxes
    
    
    36,045
    
    
    
    1,017
    
    
    
    20,232Deferred fuel refunds
    
    
    68,202
    
    
    
    
    
    
    
    12,695Other current liabilities
    
    
    65,502
    
    
    
    76,535
    
    
    
    57,353Total current liabilities
    
    
    353,406
    
    
    
    343,435
    
    
    
    341,095Long-term debt
    
    
    532,000
    
    
    
    512,000
    
    
    
    492,000Deferred income taxes
    
    
    187,688
    
    
    
    175,012
    
    
    
    168,543Deferred investment tax credits
    
    
    6,227
    
    
    
    6,417
    
    
    
    6,610Other noncurrent liabilities
    
    
    43,528
    
    
    
    41,460
    
    
    
    40,819Total liabilities
    
    
    1,122,849
    
    
    
    1,078,324
    
    
    
    1,049,067Commitments and contingencies (note 5)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
    
    
    346,758
    
    
    
    346,758
    
    
    
    345,801Retained earnings
    
    
    215,041
    
    
    
    179,014
    
    
    
    191,966Accumulated other comprehensive loss
    
    
    (15,404
    )
    
    
    (15,317
    )
    
    
    (3,796
    )Total common stockholders equity
    
    
    606,654
    
    
    
    570,714
    
    
    
    594,230Total liabilities and stockholders equity
    
    $
    1,729,503
    
    
    $
    1,649,038
    
    
    $
    1,643,297
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Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues
    
    $
    519,998
    
    
    $
    498,816
    
    
    $
    884,386
    
    
    $
    798,140Costs and expenses:Cost of sales  gas, fuel and purchased power
    
    
    381,893
    
    
    
    357,370
    
    
    
    638,832
    
    
    
    563,346Operating and administrative expenses
    
    
    40,631
    
    
    
    40,261
    
    
    
    76,135
    
    
    
    73,471Operating and administrative expenses  related
parties
    
    
    5,354
    
    
    
    4,166
    
    
    
    6,808
    
    
    
    6,627Taxes other than income taxes
    
    
    4,784
    
    
    
    5,165
    
    
    
    9,253
    
    
    
    9,728Depreciation and amortization
    
    
    10,349
    
    
    
    10,424
    
    
    
    20,580
    
    
    
    20,658Other income, net
    
    
    (4,682
    )
    
    
    (3,571
    )
    
    
    (7,500
    )
    
    
    (5,132
    )438,329
    
    
    
    413,815
    
    
    
    744,108
    
    
    
    668,698Operating income
    
    
    81,669
    
    
    
    85,001
    
    
    
    140,278
    
    
    
    129,442Interest expense
    
    
    10,101
    
    
    
    11,074
    
    
    
    21,001
    
    
    
    22,496Income before income taxes
    
    
    71,568
    
    
    
    73,927
    
    
    
    119,277
    
    
    
    106,946Income taxes
    
    
    28,482
    
    
    
    29,219
    
    
    
    47,558
    
    
    
    42,479Net income
    
    $
    43,086
    
    
    $
    44,708
    
    
    $
    71,719
    
    
    $
    64,467
   - 2 -




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Six Months EndedMarch 31,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    71,719
    
    
    $
    64,467Adjustments to reconcile net income to net cash from
operating activities:Depreciation and amortization
    
    
    20,580
    
    
    
    20,658Deferred income taxes, net
    
    
    (7,115
    )
    
    
    3,552Provision for uncollectible accounts
    
    
    9,707
    
    
    
    10,172Other, net
    
    
    1,971
    
    
    
    4,177Net change in:Accounts receivable and accrued utility revenues
    
    
    (176,010
    )
    
    
    (175,771
    )Inventories
    
    
    131,099
    
    
    
    128,110Deferred fuel costs, net of changes in unsettled derivatives
    
    
    42,925
    
    
    
    (3,402
    )Accounts payable
    
    
    11,775
    
    
    
    23,131Other current assets and liabilities
    
    
    21,848
    
    
    
    23,956Net cash provided by operating activities
    
    
    128,499
    
    
    
    99,050CASH FLOWS FROM INVESTING ACTIVITIES:Expenditures for property, plant and equipment
    
    
    (26,104
    )
    
    
    (29,184
    )PG Energy Acquisition working capital settlement
    
    
    
    
    
    
    23,670Decrease in restricted cash
    
    
    6,642
    
    
    
    1,495Other, net
    
    
    (227
    )
    
    
    (577
    )Net cash used by investing activities
    
    
    (19,689
    )
    
    
    (4,596
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payment of dividends
    
    
    (35,462
    )
    
    
    (17,334
    )Issuance of long-term debt
    
    
    20,000
    
    
    
    Decrease in bank loans
    
    
    (94,000
    )
    
    
    (70,000
    )Net cash used by financing activities
    
    
    (109,462
    )
    
    
    (87,334
    )Cash and cash equivalents (decrease) increase
    
    $
    (652
    )
    
    $
    7,120CASH AND CASH EQUIVALENTS:End of period
    
    $
    15,555
    
    
    $
    10,062Beginning of period
    
    
    16,207
    
    
    
    2,942(Decrease) increase
    
    $
    (652
    )
    
    $
    7,120
   - 3 -




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UGI UTILITIES, INC. AND SUBSIDIARIES
 
 Notes to Condensed Consolidated Financial Statements
 Basis of Presentation
    Restricted Cash.
 Comprehensive Income.
 Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    43,086
    
    
    $
    44,708
    
    
    $
    71,719
    
    
    $
    64,467Other comprehensive income (loss)
    
    
    191
    
    
    
    390
    
    
    
    (87
    )
    
    
    (2
    )Comprehensive income
    
    $
    43,277
    
    
    $
    45,098
    
    
    $
    71,632
    
    
    $
    64,465
  - 4 -




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
  Natural Gas Inventories.
 Reclassifications.
 Use of Estimates.
 Adoption of FIN 48.
  - 5 -




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
    Recently Issued Accounting Pronouncements.
   - 6 -




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
   Segment Information
   - 7 -




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##### Table of Contents



UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
   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
    
    
    $
    
    
    
    $
    
 Three Months Ended March 31, 2007:
 Reportable SegmentsGas
    
    
    ElectricTotal
    
    
    Utility
    
    
    Utility
    
    
    OtherRevenues
    
    $
    498,816
    
    
    $
    458,999
    
    
    $
    34,877
    
    
    $
    4,940Cost of sales
    
    
    357,370
    
    
    
    334,175
    
    
    
    20,835
    
    
    
    2,360Depreciation and amortization
    
    
    10,424
    
    
    
    9,593
    
    
    
    822
    
    
    
    9Operating income
    
    
    85,001
    
    
    
    77,946
    
    
    
    6,728
    
    
    
    327Interest expense
    
    
    11,074
    
    
    
    10,407
    
    
    
    667
    
    
    
    Income before income taxes
    
    
    73,927
    
    
    
    67,539
    
    
    
    6,061
    
    
    
    327Total assets at period end
    
    $
    1,643,297
    
    
    $
    1,522,516
    
    
    $
    113,817
    
    
    $
    6,964Goodwill at period end
    
    $
    162,633
    
    
    $
    162,633
    
    
    $
    
    
    
    $
    
  - 8 -




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 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
    
    
    $
    
    
    
    $
    
 Six Months Ended March 31, 2007:
 Reportable SegmentsGas
    
    
    ElectricTotal
    
    
    Utility
    
    
    Utility
    
    
    OtherRevenues
    
    $
    798,140
    
    
    $
    733,428
    
    
    $
    59,772
    
    
    $
    4,940Cost of sales
    
    
    563,346
    
    
    
    527,975
    
    
    
    33,011
    
    
    
    2,360Depreciation and amortization
    
    
    20,658
    
    
    
    18,887
    
    
    
    1,762
    
    
    
    9Operating income
    
    
    129,442
    
    
    
    116,177
    
    
    
    12,938
    
    
    
    327Interest expense
    
    
    22,496
    
    
    
    21,178
    
    
    
    1,318
    
    
    
    Income before income taxes
    
    
    106,946
    
    
    
    94,999
    
    
    
    11,620
    
    
    
    327Total assets at period end
    
    $
    1,643,297
    
    
    $
    1,522,516
    
    
    $
    113,817
    
    
    $
    6,964Goodwill at period end
    
    $
    162,633
    
    
    $
    162,633
    
    
    $
    
    
    
    $
    
  - 9 -




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 Regulatory Assets and Liabilities and Regulatory Matters
  March 31,
    
    
    September 30,
    
    
    March 31,2008
    
    
    2007
    
    
    2007Regulatory assets:Income taxes recoverable
    
    $
    73,059
    
    
    $
    72,040
    
    
    $
    65,776Postretirement benefits
    
    
    4,476
    
    
    
    4,868
    
    
    
    5,181Environmental costs
    
    
    9,009
    
    
    
    8,255
    
    
    
    8,255Deferred fuel costs
    
    
    
    
    
    
    14,782
    
    
    
    Other
    
    
    4,635
    
    
    
    3,827
    
    
    
    3,243Total regulatory assets
    
    $
    91,179
    
    
    $
    103,772
    
    
    $
    82,455Regulatory liabilities:Postretirement benefits
    
    $
    8,093
    
    
    $
    7,502
    
    
    $
    4,507Deferred fuel refunds
    
    
    68,202
    
    
    
    
    
    
    
    12,695Total regulatory liabilities
    
    $
    76,295
    
    
    $
    7,502
    
    
    $
    17,202
 Income taxes recoverable
 Postretirement benefits
   - 10 -




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 Environmental costs
 Deferred fuel costs and refunds.
 Other
  Other Regulatory Matters
    - 11 -




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
  Defined Benefit Pension and Other Postretirement Plans
    - 12 -




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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 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Service cost
    
    $
    1,270
    
    
    $
    1,386
    
    
    $
    67
    
    
    $
    65Interest cost
    
    
    4,453
    
    
    
    4,288
    
    
    
    212
    
    
    
    242Expected return on assets
    
    
    (5,693
    )
    
    
    (5,469
    )
    
    
    (159
    )
    
    
    (152
    )Amortization of:Prior service cost (benefit)
    
    
    8
    
    
    
    61
    
    
    
    (97
    )
    
    
    (55
    )Actuarial loss
    
    
    
    
    
    
    217
    
    
    
    17
    
    
    
    37Net benefit cost
    
    
    38
    
    
    
    483
    
    
    
    40
    
    
    
    137Change in regulatory
assets and liabilities
    
    
    
    
    
    
    
    
    
    
    818
    
    
    
    714Net expense
    
    $
    38
    
    
    $
    483
    
    
    $
    858
    
    
    $
    851
 Pension Benefits
    
    
    Other Postretirement BenefitsSix Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Service cost
    
    $
    2,541
    
    
    $
    2,766
    
    
    $
    134
    
    
    $
    130Interest cost
    
    
    8,906
    
    
    
    8,565
    
    
    
    424
    
    
    
    485Expected return on assets
    
    
    (11,386
    )
    
    
    (10,925
    )
    
    
    (318
    )
    
    
    (303
    )Amortization of:Prior service cost (benefit)
    
    
    15
    
    
    
    121
    
    
    
    (194
    )
    
    
    (110
    )Actuarial loss
    
    
    
    
    
    
    433
    
    
    
    34
    
    
    
    74Net benefit cost
    
    
    76
    
    
    
    960
    
    
    
    80
    
    
    
    276Change in regulatory
assets and liabilities
    
    
    
    
    
    
    
    
    
    
    1,635
    
    
    
    1,429Net expense
    
    $
    76
    
    
    $
    960
    
    
    $
    1,715
    
    
    $
    1,705
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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 Commitments and Contingencies
      -14-




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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. Citizens Communications Company.
 Consolidated Edison Company of New York v. UGI Utilities, Inc.
  -15-




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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.
  -16-




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
  Related Party Transactions
    -17-




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
    Issuance of Long-Term Debt
   -18-




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UGI UTILITIES, INC. AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements
 Proposed Acquisition of PPL Gas Utilities
    -19-




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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
  2008 three-month period compared with 2007 three-month period
 IncreaseThree Months Ended March 31,
    
    2008
    
    
    2007
    
    
    (Decrease)(Millions of dollars)Gas Utility:Revenues
    
    $
    476.8
    
    
    $
    459.0
    
    
    $
    17.8
    
    
    
    3.9
    %Total margin (a)
    
    $
    121.7
    
    
    $
    124.8
    
    
    $
    (3.1
    )
    
    
    (2.5
    )%Operating income
    
    $
    75.6
    
    
    $
    77.9
    
    
    $
    (2.3
    )
    
    
    (3.0
    )%Income before income taxes
    
    $
    66.0
    
    
    $
    67.5
    
    
    $
    (1.5
    )
    
    
    (2.2
    )%System throughput  bcf
    
    
    49.6
    
    
    
    49.8
    
    
    
    (0.2
    )
    
    
    (0.4
    )%Heating degree days  % (warmer) colder
than normal (b)
    
    
    (4.2
    )%
    
    
    1.4
    %
    
    
    
    
    
    
    Electric Utility:Revenues
    
    $
    38.6
    
    
    $
    34.9
    
    
    $
    3.7
    
    
    
    10.6
    %Total margin (a)
    
    $
    12.2
    
    
    $
    12.1
    
    
    $
    0.1
    
    
    
    0.8
    %Operating income
    
    $
    6.4
    
    
    $
    6.7
    
    
    $
    (0.3
    )
    
    
    (4.5
    )%Income before income taxes
    
    $
    5.9
    
    
    $
    6.1
    
    
    $
    (0.2
    )
    
    
    (3.3
    )%Distribution sales  gwh
    
    
    279.1
    
    
    
    281.9
    
    
    
    (2.8
    )
    
    
    (1.0
    )%
 bcf  billions of cubic feet. gwh  millions of kilowatt-hours.(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 $2.2 million and $2.0 million during the
three-month periods ended March 31, 2008 and 2007, 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 30-year period 1975-2004 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.
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UGI UTILITIES, INC. AND SUBSIDIARIES
  2008 six-month period compared with 2007 six-month period
 Six Months Ended March 31,
    
    2008
    
    
    2007
    
    
    Increase(Millions of dollars)Gas Utility:Revenues
    
    $
    803.4
    
    
    $
    733.4
    
    
    $
    70.0
    
    
    
    9.5
    %Total margin (a)
    
    $
    211.5
    
    
    $
    205.4
    
    
    $
    6.1
    
    
    
    3.0
    %Operating income
    
    $
    125.7
    
    
    $
    116.2
    
    
    $
    9.5
    
    
    
    8.2
    %Income before income taxes
    
    $
    105.7
    
    
    $
    95.0
    
    
    $
    10.7
    
    
    
    11.3
    %System throughput  bcf
    
    
    89.1
    
    
    
    83.2
    
    
    
    5.9
    
    
    
    7.1
    %Heating degree days  % warmer
than normal (b)
    
    
    5.0
    %
    
    
    5.4
    %
    
    
    
    
    
    
    Electric Utility:Revenues
    
    $
    70.5
    
    
    $
    59.8
    
    
    $
    10.7
    
    
    
    17.9
    %Total margin (a)
    
    $
    24.6
    
    
    $
    23.5
    
    
    $
    1.1
    
    
    
    4.7
    %Operating income
    
    $
    13.9
    
    
    $
    12.9
    
    
    $
    1.0
    
    
    
    7.8
    %Income before income taxes
    
    $
    12.8
    
    
    $
    11.6
    
    
    $
    1.2
    
    
    
    10.3
    %Distribution sales  gwh
    
    
    533.5
    
    
    
    530.9
    
    
    
    2.6
    
    
    
    0.5
    %
 bcf  billions of cubic feet. gwh  millions of kilowatt-hours.(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 $4.0 million and $3.3 million during the
six-month periods ended March 31, 2008 and 2007, 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 30-year period 1975-2004 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
 Financial Condition
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UGI UTILITIES, INC. AND SUBSIDIARIES
   Cash Flows
 Operating activities.
  Investing activities.
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UGI UTILITIES, INC. AND SUBSIDIARIES
 Financing activities.
 Adoption of FIN 48
  Proposed Acquisition of PPL Gas Utilities
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UGI UTILITIES, INC. AND SUBSIDIARIES
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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UGI UTILITIES, INC. AND SUBSIDIARIES
 
 ITEM 4. 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.
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UGI UTILITIES, INC. AND SUBSIDIARIES
 
 PART II OTHER INFORMATION
 
 ITEM 1A. RISK FACTORS
  
 ITEM 6. EXHIBITS
  Incorporation
by ReferenceExhibitNo.
    
    Exhibit
    
    Registrant
    
    Filing
    
    Exhibit10.1
    
    Stock Purchase Agreement by and between PPL
Corporation, as Seller, and UGI Utilities, Inc.,
as Buyer, dated as of March 5, 2008.
    
    UGI Utilities, Inc.
    
    Form 8-K
(3/5/08)
    
    
    10.110.2
    
    Amendment dated May 2, 2008 to the Stock Purchase
Agreement by and between PPL Corporation, as
Seller, and UGI Utilities, Inc., as Buyer, dated
as of March 5, 2008.12.1
    
    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, 2008, 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, 2008, 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, 2008, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
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UGI UTILITIES, INC. AND SUBSIDIARIES
 
   UGI Utilities, Inc.
(Registrant)Date:  May 9, 2008
    By:
    /s/ John C. BarneyJohn C. BarneySenior Vice President - Finance and Chief Financial Officer  -30-




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UGI UTILITIES, INC.
 
 EXHIBIT INDEX
 10.2
    
    Amendment dated May 2, 2008 to the Stock Purchase Agreement by and between PPL
Corporation, as Seller, and UGI Utilities, Inc., as Buyer, dated March 5, 2008.12.1
    
    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, 2008, 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, 2008, 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, 2008, pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.