Storage revenue is comparable with the previous year as the decline in contracted demand for storage services has stabilized. The apparent abundance of natural gas, coupled with small or even negative differentials between current and forward gas prices, limits the demand for natural gas storage to those customers with relatively low load factors who use the service to mitigate receipt transportation charges.
Customer Capital Contributions
The Corporation receives capital contributions from customers to partially offset the cost of constructing facilities to connect them to the transmission and distribution systems. Generally, contributions related to transmission system projects tend to be larger but less frequent than contributions related to the distribution system. The volume and magnitude of customer contribution revenue can vary significantly period-over-period as various factors influence their receipt and recognition as revenue. Customer capital contribution revenue for the three months ended June 30, 2020 was $7 million lower than 2019-20 due to less distribution system customer connections in the current period and the prior period including a large transmission customer contribution.
Other Expenses
SaskEnergy’s expenses are driven to a large degree by its investment in its transmission, distribution and storage systems. Depreciation expense, net finance expense and Saskatchewan taxes are directly tied to the investment in facilities. As the level of investment in these facilities increase, these expenses also increase. Employee benefit costs and operating and maintenance costs are also driven by the investment in assets, although less directly. As the number of customers increases, and infrastructure to serve those customers grows, the costs to operate and maintain the system increases. These expenses increase primarily because the amount of work to service and maintain the natural gas system increases as the kilometres of gas line, number of service connections, and amount of compression equipment increases. Additional regulatory requirements and changing public perceptions have resulted in accelerated prevention, detection and mitigation initiatives, adding pressure to transmission, distribution and storage rates.
Other expenses, net finance expenses and other gains, as reported in the condensed consolidated financial statements, were as follows:
Three months ended June 30,
(millions)
2020
2019
Change
Employee benefits
$
25 38 29
$
24 37 26
$
(1) (1) (3)
Operating and maintenance Depreciation and amortization
Saskatchewan taxes
3 2
3
-
Impairment loss
-
(2) (7)
$
97
$
90
$
Net finance expenses
$
13
$
13
$
-
Other gains
$
(2)
$
-
$
2
2020-21 First Quarter Report
12
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