Asset Optimization Fair Value Adjustments
The Corporation enters into various natural gas contracts in its asset optimization strategies, which are subject to volatility of natural gas market prices. For the nine months ended December 31, 2020, the fair value adjustment on asset optimization derivative instruments increased the margin on asset optimization sales by $8 million compared to a decrease of $33 million for the same period in 2019-20. Stronger natural gas market prices resulted in the price differential between contract prices and market prices on future asset optimization purchase contracts improving to $0.10 per GJ favourable at December 2020 compared to an unfavourable price differential of $0.20 per GJ at March 31, 2020. This $0.30 per GJ favourable change in the price differential on asset optimization purchase contracts in 2020-21 resulted in a $9 million favourable fair value adjustment, which was partially offset by the $1 million unfavourable variance related to a $0.17 per GJ increase in the unfavourable price differentials on outstanding asset optimization sale contracts.
Revaluation of Natural Gas in Storage
At each reporting period, the Corporation measures the net realizable value of natural gas in storage held for asset optimization transactions based on forward market prices and anticipated delivery dates. The carrying amount of natural gas in storage is adjusted to reflect the lower of weighted average cost and net realizable value. Near term forward natural gas market prices increased since March 2020, consequently, the net realizable value of asset optimization natural gas in storage was $1 million below cost at December 31, 2020, which is a $6 million favourable adjustment to net income from the $7 million unfavourable revaluation adjustment recorded as at March 31, 2020.
Revenue
Delivery revenue, transportation and storage revenue and customer capital contributions, as reported in the consolidated financial statements, were as follows:
December 31, Three months ended
Nine months ended December 31,
2020
2019 Change
2020
2019 Change
(millions)
$
185 139
$
86 46
$
$
185 141
$
-
Delivery revenue
$
90 47
(4) (1)
(2)
Transportation and storage revenue Customer capital contributions
18
8
28
(10)
8
-
$
342
$
140
$
$
354
$
(12)
Revenue
$
145
(5)
Delivery Revenue
Delivery revenue is driven by the number of customers and the amount of natural gas they consume. As residential and commercial customers consume natural gas primarily as heating fuel, weather is the external factor that most affects delivery revenue.
Delivery revenue of $185 million for the nine months ended December 31, 2020 equaled the same period in 2019 as weather for both nine month periods were 5 per cent colder than normal.
2020-21 Third Quarter Report
11
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