Management’s Discussion and Analysis
The net commodity sales to customers, as reported in the condensed consolidated financial statements, was as follows:
Three months ended December 31,
Nine months ended December 31,
(millions)
2024
2023 Change 2024
2023 Change
$
69 57 12
$
114 $
Commodity sales
$
70 62
$
(1) (5)
128 100
$
(14)
93 21
Commodity cost of sales
(7) (7)
Net commodity sales realized Unrealized fair value adjustments
8
4
28
3
(2)
(24) (16)
27 31
(35)
33 26
$
15
$
19
Net commodity sales
$
$
$
(7)
$
The net commodity sales realized exclude the impact of unrealized fair value adjustments on derivative instruments. These adjustments can fluctuate significantly from one period to the next and do not necessarily represent the amount that will be paid upon settlement of the related natural gas contract. The Corporation’s net commodity sales realized for the nine months ended December 31, 2024, was $7 million lower than in 2023, primarily resulting from the recovery per GJ declining to $0.53 per GJ through 2024 compared to $0.71 per GJ for the same nine months ended December 31, 2023. The declining market prices for natural gas, as well as the Corporation’s continued focus on natural gas price risk management, resulted in the Corporation receiving approval to decrease its commodity rate to $3.20 per GJ effective October 1, 2023, which further reduced commodity sales revenues in 2024 compared to 2023. Decreasing natural gas prices, from an average of $2.32 per GJ through the nine months ended December 31, 2023, to $1.06 per GJ for the same nine months in 2024, favourably decreased commodity cost of sales compared to 2023. In addition, 6 per cent warmer than normal weather through the nine months ended December 31, 2024, was 10 per cent colder than the same period in 2023, with both partially offsetting the impact of the lower commodity rate. The GCVA balance was $9 million owing to customers at December 31, 2024, compared to $8 million owing to customers at March 31, 2024 — as additional lower priced natural gas was purchased in 2024, which reduced the average cost of gas, increasing the GCVA balance owing to SaskEnergy’s customers. Commodity Fair Value Adjustments For the nine months ending December 31, 2024, the unrealized fair value adjustment on commodity derivative instruments decreased the net commodity sales realized by $2 million. The unfavourable price differential of $0.29 per GJ between contract prices and market prices on future commodity purchase contracts at March 31, 2024, further declined $0.12 per GJ, to an unfavourable price differential of $0.41 per GJ at December 31, 2024. SaskEnergy segregates a portion of its natural gas purchase contracts for gas that will ultimately be sold to commodity customers. Under IFRS Accounting Standards , such own-use contracts are not required to be reported at market value. Asset Optimization Margin SaskEnergy uses its access to natural gas markets to execute purchases and sales of natural gas to generate margins. By utilizing off-peak transportation and storage capacity, SaskEnergy is able to find opportunities in the market to take advantage of pricing differentials between transportation hubs, delivery points and time periods. In most cases, the Corporation executes purchase and sales contracts at the same time, thereby mitigating much of the price risk that would normally be associated with such transactions. SaskEnergy also uses purchases and sales of natural gas to mitigate transportation constraints, which are executed at a cost.
8
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