have contracted for whether they use it or not. Under an interruptible contract, customers may deliver or receive gas only when there is available capacity on the system and pay receipt and delivery tolls when they deliver or receive gas.
SaskEnergy Incorporated First Quarter Report
March 31, 2011
Integral to the Corporation’s transmission system are several strategically located natural gas storage sites, which have the capacity to provide operational flexibility along with a reliable and competitive natural gas storage service.
Transportation and storage revenue was $46 million for the three months ending June 30, 2019, $9 million higher than in 2018-19. Industrial customer and power generation related load growth continues to increase demand for natural gas within the province and is driving higher transportation revenue. Storage revenue is comparable with the previous year as the decline in contracted demand for storage services has stabilized. The apparent abundance of natural gas, coupled with small or even negative differentials between current and forward gas prices, limits the demand for natural gas storage to those customers with relatively low load factors who use the service to mitigate receipt transportation charges.
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. The Corporation may refund a customer for some or all of the contributions they make depending on how much gas the customer consumes or transports through the system. Many of the customer contributions are received in advance of construction and are initially recorded as a contract liability in the statement of financial position. The amount of contributions expected to be refunded is estimated and recorded as a refund liability until the eligible refund period expires or a refund is earned by the customer. Customer capital contribution revenue for the three months ending June 30, 2019 was $6 million above 2018-19 with higher transmission customer connections.
Other Revenue
Other revenue primarily consisted of gas processing fees and natural gas liquid sales from two natural gas liquid extraction plants. Compression and gathering service revenue relating to these plants comprised the remaining balance of other revenue. The Corporation sold the two natural gas liquid extraction plants effective October 1, 2018.
Other Expenses
SaskEnergy’s expenses are driven to a large degree by its investment in its transmission, distribution and storage systems. Depreciation expense, net finance expense and Saskatchewan taxes are directly tied to the investment in facilities. As the level of investment in these facilities increase, these expenses also increase. Employee benefit costs and operating and maintenance costs are also driven by the investment in assets, although less directly. As the number of customers increases, and infrastructure to serve those customers grows, the costs to operate and maintain the system increases. These expenses increase primarily because the amount of work to service and maintain the natural gas system increases as the kilometres of gas line, number of service connections, and amount of compression equipment increases. Increased regulatory requirements and changing public perceptions have resulted in accelerated prevention, detection and mitigation initiatives, adding pressure to transmission, distribution and storage rates.
Other expenses, net finance expenses and other gains (losses), as reported in the consolidated financial statements, were as follows:
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2019-20 FIRST QUARTER REPORT
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