Management’s Discussion and Analysis
Delivery revenue is primarily driven by the number of customers and the amount of natural gas they consume. Weather is the most significant external factor affecting the amount of natural gas customers consume, as residential and commercial customers consume natural gas primarily as heating fuel. In recent years, rate increases were implementedto address rapidly rising inflation and while the rates of inflation have levelled off to within the Bank of Canada target range, the Corporation continues to seek out operational efficiencies to slow the pace of rate increases for its customers. Delivery revenue was $15 million higher than 2023, primarily due to higher residential and commercial consumption of three PJs, as weather was 10 per cent colder than prior year. November and December 2024 were 16 per cent and 33 per cent colder, respectively, than the prior year. In addition, industrial customer’s consumption increased by three PJs to meet growing industrial demand for natural gas service. Rate increases implemented October 1, 2023, to address increasing natural gas transportation costs — as well as ongoing investments related to safety, system integrity and growing infrastructure, also The Corporation generates transportation revenue by receiving gas from customers at various receipt points in Saskatchewan and Alberta and delivering natural gas to customers at various delivery points in the province. The transportation toll structure consists of a receipt service charge, which customers pay when they put gas onto the natural gas transportation system, and a delivery service charge that customers pay when they take delivery from the natural gas transportation system. For receipt and delivery services, the Corporation offers both firm and interruptible transportation contracts. Under a firm service contract, the customer has a right to deliver or receive a specified quantity of gas on each day of the contract. With a firm contract, customers pay for the amount of capacity they have contracted for, whether they use it or not. Under an interruptible contract, customers may deliver or receive gas only when there is available capacity on the system and only pay receipt and delivery tolls when they deliver or receive gas. Integral to the Corporation’s transmission system are several strategically located natural gas storage sites, which have the capacity to provide operational flexibility along with a reliable and competitive natural gas storage service. contributed to the favourable results. Transportation and Storage Revenue Transportation and storage revenues of $187 million, for the nine months ending December 31, 2024, are $10 million higher than the same period in 2023. Higher intra-provincial delivery service revenues resulted from higher volumes transported in the third quarter of 2024 than the same three-month period in 2023. In addition, a 2 per cent average rate increase for transportation and storage services was implemented effective April 1, 2024, to address expansion of the transmission system and meet growing demand for natural gas services in Saskatchewan. 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 contribution revenue can significantly vary period-over-period, as various factors influence their receipt and recognition as revenue. Customer capital contributions were $9 million higher in 2024, resulting from increased activity of distribution utility customers in 2024 compared to 2023. Other Expenses SaskEnergy’s expenses are driven to a large degree by its investment in its transmission, distribution and storage systems. Depreciation and amortization expense, net finance expenses and Saskatchewan taxes are directly tied to the investment in facilities. As the level of investment in facilities increases, these expenses also increase. Employee benefit expenses, and operating and maintenance expenses, are also driven by the Corporation’s investment in facilities, although less directly. As the number of customers increases, infrastructure to serve those customers grows, and the costs to operate and maintain the system rise in correlation with the increasing kilometres of gas lines, number of service connections and amount of compression equipment. Additional regulatory requirements and changing public expectations have resulted in accelerated prevention, detection and mitigation initiatives - adding pressure to transmission and storage, and delivery service rates.
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