SaskEnergy Incorporated First Quarter Report 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. The contributions received, less potential refunds, are recognized as revenue once the related property, plant and equipment is available for use. Customers may earn a refund of some or all of the contributions they make depending on how much gas they flow. The amount of contributions expected to be refunded is estimated and recorded in deferred revenue until the eligible refund period expires or a refund is earned by the customer. Customer capital contribution revenue for the nine months and three months ended December 31, 2016 was $18 million and $15 million below the same periods in 2015. The downturn in the provincial economy is translating into lower distribution and transmission customer connections in 2016 compared to 2015. Customer capital contribution revenue in the December 2015 quarter also included the impact of changing the estimate of deferred transmission customer contributions.
March 31, 2011
Other Revenue
Other revenue was $2 million below the same nine month and three month periods in 2015 and primarily consists of gas processing fees and natural gas liquid sales from two natural gas liquid extraction plants. Compression and gathering service revenue and royalty revenues comprise the remaining balance of other revenue. Royalty revenues are generated from a gross overriding royalty on several natural gas-producing properties in Saskatchewan and Alberta, which have diminished due to the continuing decline of conventional natural gas production, a result of low natural gas prices.
Other Expenses and Net Finance Expense (before FVA)
December 31
December 31
2016
2015 Change
2016
2015 Change
(millions)
$
21 34 24
$
62 95 71
Employee benefits
$
22 32 23
$
(1)
$
66 90 66
$
(4)
Operating and maintenance Depreciation and amortization
2 1
5 5
2
9
Saskatchewan taxes
3
(1)
9
-
$
81
$
237
Other Expenses
$
80
$
1
$
231
$
6
$
12
$
34
Net finance expense (before FVA)
$
13
$
(1)
$
37
$
(3)
Increasing expenditures in safety and integrity initiatives, strong customer growth, and the need to import more natural gas from Alberta as Saskatchewan natural gas production declines are key factors contributing to increases in other expenses. Employee benefits expense of $62 million for the nine months and $21 million for the three months ending December 31, 2016 are $4 million and $1 million lower, respectively, than prior year. Productivity and efficiency initiatives over the last few years have enabled the Corporation to more effectively schedule work, and manage overtime and vacant positions. Additionally, as the pace of the Provincial economy slows the volume of work required declines as demands for service diminish. Operating and maintenance expense of $95 million year-to-date and $34 million for the quarter are $5 million and $2 million higher than the same periods in 2015, due to rising third party transportation costs as additional cross border transportation capacity is required to import gas from Alberta. This was partially offset by an elevated focus on managing operating costs. Depreciation and amortization of $71 million for the nine months and $24 million for the three months ending December 31, 2016 are $5 million and $1 million above prior year as capital additions increase the asset base and depreciation and amortization. Net finance expenses, before the impact of fair value adjustments, were $3 million lower year-to-date and $1 million lower for the quarter compared to the same periods in 2015. Lower interest rates allowed the Corporation to replace maturing long-term debt with debt bearing a lower interest rate. As a result of higher interest rates on fixed-rate investments, SaskEnergy recognized a $1 million unfavourable fair value adjustment on debt retirement funds at December 31, 2016.
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2016-17 THIRD QUARTER REPORT
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