Delivery revenue is driven by residential and commercial heating, which is heavily influenced by weather. Weather throughout 2014 was 18 per cent colder than normal from January through June, based on weather data for the past 30 years. The colder than normal winter weather in 2013/14 resulted in SaskEnergy customers consuming approximately 25 per cent more natural gas. Saskatchewan experienced strong economic growth in 2014, which led to greater demand for SaskEnergy’s services, contributing not only to increased revenue but also to cost pressures. The Corporation continues to focus on safety and integrity programs, driving both capital investment and operating costs upward. These cost pressures were the primary drivers behind the increases in SaskEnergy’s delivery service rates effective September 1, 2013 and September 1, 2014. As part of its recommendation that Cabinet approve the rate increase, the SRRP recognized SaskEnergy’s significant progress on its productivity and efficiency programs intended to mitigate the magnitude of rate increases. The Corporation, through its alignment with the Crown Sector Priorities, remains committed to delivering safe, reliable services to its customers at competitive prices. 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.
The combination of the extremely cold weather, natural gas price volatility, high industrial usage, third-party restrictions at Alberta interconnect points, and a record level of storage withdrawals resulted in a number of system challenges for TransGas throughout the first quarter of 2014. In order to maintain firm delivery service to customers, TransGas introduced a number of key measures, such as system modifications, increased third-party transport contracts, and periodic curtailment of interruptible transportation service. The additional load did not have a substantial impact on total revenue for the first quarter of 2014, as the majority of the Corporation’s customers transport natural gas under firm contracts and are able to increase their transport volumes up to their daily contract limit without incurring significant additional charges. However, during the early part of 2014 a number of customers that were impacted by curtailment of interruptible service moved from interruptible service to firm contracts. Not only does this increase demand revenue for TransGas, it also improves revenue certainty, which is more supportive of required pipeline expansions. The low natural gas market prices continue to discourage natural gas drilling in Western Canadian conventional gas reservoirs, including those in Saskatchewan. At the same time, the low market prices and expansion of Saskatchewan’s economy have increased demand within the industrial sector as natural gas continues to become an important energy source in manufacturing and processing. The growth in the provincial economy and low natural gas prices present both challenges and opportunities for the Corporation. Transportation and storage revenue increased from $92 million in 2013 to $102 million in 2014 mainly due to the impact of rate increases effective March 1, 2013 and January 1, 2014 ($5 million) and higher contracted demand volumes ($4 million). Projects and strategies to increase Alberta border capacity have allowed the Corporation to continue to meet customers’ needs for greater natural gas receipts. At the same time, the Corporation’s expanding pipeline integrity programs focus on providing a safe and reliable system. Customer Capital Contributions 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 year over year as varying factors influence their receipt. Generally, customer capital contributions mirror the underlying construction projects — those related to the transmission system tend to be large but less frequent than contributions related to the distribution system. SaskEnergy’s distribution system customer capital contribution revenue of $21 million was $3 million lower in 2014 due to customer connections declining from 7,687 in 2013 to 7,332 in 2014. Transmission system customer capital contribution revenue was $12 million in 2014, and zero in 2013 due to the timing of the recognition of contributions related to transmission projects. The transmission system contributions include $4 million of contributions recognized in 2014 that related to past
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2014 Annual Report SaskEnergy
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