Delivery Revenue
Weather
The Corporation earns delivery revenue based on the volume of natural gas delivered to distribution customers plus a basic monthly charge. Delivery revenue is highly dependent on weather as natural gas is primarily used as heating fuel by residential and commercial customers during the cold winter months. Delivery revenue of $151 million was $12 million below 2014 as the first three quarters of 2015 were 2% warmer than normal, based on weather data for the past 30 years, compared to 16% colder than the same period in 2014. The warmer weather decreased customer consumption compared to 2014 resulting in lower delivery revenue. Additionally, the natural gas SaskEnergy is selling to customers has a much higher heating value in 2015, compared to 2014 which means that customers need to consume less gas by volume to heat their homes. Lower consumption due to weather
YTD 2015 - 2% warmer than normal YTD 2014 - 16% colder than normal
and heating value has reduced revenue, however this has been partially offset by a delivery rate increase effective September 1, 2014 and increased customer growth. A delivery rate increase planned for September 1, 2015, needed to meet SaskEnergy’s revenue requirements, has been deferred to January 1, 2016. During the third quarter of 2015, delivery revenue of $32 million was $3 million below the third quarter of 2014. There was a decrease in the volume of natural gas delivered to customers in 2015, slightly offset by the prior year’s third quarter rate increase.
Transportation and Storage Revenue
The Corporation’s subsidiary, TransGas, provides receipt and delivery transportation through the use of the TransGas Energy Pool (TEP), a notional point where producers, marketers and end-users can match supplies to demand. On the receipt side, the Corporation offers both firm and interruptible transportation from points of receipt to TEP. On the delivery side, the Corporation offers firm and interruptible service for gas delivered from TEP to consumers within Saskatchewan or for export. Integral to the Corporation’s transmission system are several strategically located natural gas storage sites with the capacity to provide operational flexibility along with a reliable and competitive natural gas storage service. Year-to-date, transportation and storage revenue of $89 million was $18 million above the same period in 2014. On a quarter- over-quarter basis, transportation and storage revenue of $31 million was also $7 million above the third quarter of 2014. This was primarily due to higher contracted demand volumes combined with a rate increase effective January 1, 2015, resulting in higher direct and receipt revenue, and increased recoveries for its service to import natural gas from Alberta. The higher direct and receipt revenue is a result of a number of customers moving from interruptible service to firm delivery contracts during the second quarter of 2014. When customers transfer from interruptible to firm contracts it increases demand revenue for TransGas and also improves revenue certainty which is more supportive of required pipeline expansions. Conversely, storage revenue was down slightly from the same period last year due to customer preference to buy/sell at the market rather than use storage, a result of the low natural gas price environment.
Customer Capital Contribution Revenue
The Corporation receives capital contributions from customers in exchange for the construction of new, customer-specific service connections. These contributions, less potential refunds, are recognized as revenue once the related property, plant, and equipment is available for use. The volume and magnitude of these contributions can vary significantly period over period as varying factors influence their receipt. Generally, customer capital contributions mirror the projects themselves – those related to the transmission system tend to be larger but less frequent than contributions related to the distribution system. Customer capital contribution revenue of $14 million, driven by the year-to-date distribution system customer connections, was $3 million below the same period last year due to a decline in customer connection activity. The third quarter customer capital contribution revenue of $9 million was $1 million higher than 2014, related to an increase in distribution system customer connections for the three month period ending September 2015.
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2015 THIRD QUARTER REPORT
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