facility and operational risk include system integrity, public awareness and safety programs; employee and operator training; and, environmental policies and procedures. The financial impacts of these risks are also mitigated, where possible and appropriate, through insurance. Commodity Rate Over the last few years, SaskEnergy and its customers have enjoyed the benefits of relatively low natural gas prices as natural gas has traded in the open market at prices below the long-term average price. As natural gas prices, like other commodity prices, tend to be “mean reverting,” the expectation is that prices will rise in the future. Natural gas prices are also characteristically volatile and unseasonal weather can result in rapid changes to natural gas prices. As SaskEnergy’s commodity rates ultimately reflect the market price of natural gas, the commodity rate could increase. The magnitude of an increase in natural gas could drive increases that are seen as unacceptable or unmanageable from a customer’s perspective. SaskEnergy cannot control or manage the market price of natural gas, but through its price risk management strategy it can minimize the short- term impact of price changes on customers by hedging the purchase price of natural gas and passing the benefits onto customers through the commodity rate. Infrastructure Delivery In recent years, economic growth has put pressure on the Corporation’s capacity to deliver services and infrastructure on a timely basis to meet stakeholder and customer expectations. To reduce the risk on delivery of services and infrastructure, the Corporation has focused on building relationships with key industry associations, project execution processes and project management, tendering practices and advanced planning and preliminary design. SaskEnergy also has cost containment strategies to ensure that rising construction and maintenance costs do not significantly exceed the growth of the distribution and transmission systems. The Corporation has policies requiring new customers to contribute to the cost of service connections to ensure that existing customers are not unduly affected by the addition of new customers. External Resource Management Strong economic growth in the Province may result in a shortage of resources or expertise that could adversely affect the Corporation’s ability to secure effective external resources. This could impact the execution of key projects or business strategy, leading to delays and cost overruns. As part of the Strategic Plan, SaskEnergy prioritizes activities in advance to ensure that resources are available when required. The Corporation then develops partnership agreements and long-term contracts, thereby reducing the risk of resource shortages on critical projects. In addition, the New West Partnership Trade Agreement and modifications to the tendering process have further assisted the Corporation in meeting its external resource requirements.
ERM. The Executive Committee is responsible for formally identifying strategic risks that impact the Corporation’s goals, actively participating in the risk assessment process and developing strategic risk management plans. The Board of Directors is responsible for the Corporation’s risk management policy and framework. The Board executes its role in the risk management process by participating in the risk assessment process. The Board also reviews an annual report that identifies the top corporate-wide risks, along with the processes and controls in place to manage and monitor each risk, the designated control owner(s) and the link to the Strategic Plan. The top risks as identified in this annual risk assessment process are discussed below. Interest Groups SaskEnergy is exposed to the risk of higher costs, delays or even project cancellations due to pressure by landowners and other interest groups. In recent years, the ability of landowners and interest groups to make claims and oppose projects in regulatory and legal forums has increased. This “not in my back yard” philosophy could impact the Corporation’s ability not only to develop new facilities, through delays and additional costs, but also to operate existing facilities, and could potentially affect the integrity and reliability of its system. Through various programs and strategies, including stakeholder engagement, aboriginal consultation, environmental assessments and public awareness, SaskEnergy works proactively with landowners and other interest groups to identify and develop appropriate responses to concerns regarding expansion and development of infrastructure. Security of Supply The transition from a net natural gas exporter to a net natural gas importer, a consequence of the substantial decline in natural gas production within Saskatchewan, has added complexity and increased costs for the transmission system to ensure that supply is available when and where needed. TransGas manages this risk through the business planning process, supply and demand forecasting and stakeholder consultation with existing and potential large customers. For the Distribution Utility, this adds complexity from a supply planning perspective that is managed through its gas procurement strategy. Pipeline, Facility and Operational Failure Pipeline, facility and operational failure could disrupt the effective operation of SaskEnergy’s natural gas storage, distribution and transmission infrastructure, negatively impacting public safety, the environment and customers. Operational hazards include severe weather conditions, fire, human error, mechanical failures, third-party pipeline encroachment, hazardous materials and acts of civil disobedience and sabotage. The occurrence of any of these events, many of which are outside the control of the Corporation, could impact financial results through increased operating costs and/or reduced revenues. Some of the primary processes used to mitigate the Corporation’s pipeline,
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2014 Annual Report SaskEnergy
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