Management’s Discussion and Analysis
31
Net Commodity Sales Subject to Section 16 of The SaskEnergy Act , SaskEnergy’s charges, rates, terms and conditions are outlined in the Terms & Conditions of Service Schedule. This schedule sets natural gas commodity rates, approved by the provincial cabinet, based on the recommendations of the Saskatchewan Rate Review Panel. The commodity rate is designed on rate-setting principles to recover the realized costs associated with the sale of natural gas to distribution customers. Regulatory principles require utilities to neither earn a profit nor incur losses on the sale of gas to customers over the long term. Consequently, SaskEnergy accumulates differences between the commodity revenue earned and the cost of natural gas sold in a Gas Cost Variance Account (GCVA). The balance in the GCVA, which is not included in SaskEnergy’s financial statements, is either recovered from or refunded to customers as part of future commodity rates. SaskEnergy prepares its financial statements on a consolidated basis while applying IFRS Accounting Standards. Consequently, the amounts determined for rate-setting purposes are different than those reported within its IFRS Accounting Standards consolidated financial statements, most notably related to intercompany charges for transportation services. As such, results reported in the Corporation’s consolidated financial statements may not be reflected in the GCVA. SaskEnergy’s natural gas price risk management program aims to reduce the impact of price volatility on the cost of gas and to support rates that are competitive with other utilities. Establishing certainty in the cost of gas helps mitigate price volatility, while competitive rates often require natural gas purchase prices to follow market prices. As a result, the balance between the two opposing objectives may shift based on current market conditions. To ensure a secure supply of natural gas, SaskEnergy uses non-financial derivatives, known as forward or physical natural gas contracts, for the physical delivery of natural gas. The purchase price in these forward contracts may be fixed or based on a variable index price. While fixed price contracts mitigate natural gas price volatility, variable or market prices can offer competitive rates depending on the pricing environment. SaskEnergy also uses financial derivatives and physical swaps to manage future natural gas purchase prices.
(millions)
March 31, 2026
March 31, 2025
Change
$
200 $
Commodity sales
209 $
(9) (9)
155
Commodity cost of sales
164
45
Net commodity sales realized Unrealized fair value adjustments
45
-
(13)
8
(21) (21)
$
32 $
Net commodity sales
53 $
The net commodity sales realized excludes the impact of unrealized fair value adjustments on derivative instruments, which can fluctuate significantly between periods and do not reflect the settlement amount of the related natural gas contracts. The Corporation’s net realized commodity sales for the 12 months ended March 31, 2026, were consistent with 2024-25 at $45 million. The net realized margin was $0.70 per GJ in 2025-26, compared with $0.64 per GJ in the prior year. Lower sales volumes to utility customers, attributed to warmer weather and a higher average cost of gas year over year, due to increasing market prices, negatively affected the realized margin. However, these impacts were offset by a higher average revenue per GJ in 2025-26. In 2024-25, the sale of excess gas at below-typical market
prices reduced average revenue by approximately $0.19 per GJ. The absence of these low-priced excess gas sales in 2025-26 resulted in a more favourable sales mix, contributing to an improvement in average revenue per GJ, and thereby brought the overall margin in line with the prior year. The GCVA balance was $15 million owing to customers at March 31, 2026, compared to $10 million owing to customers at March 31, 2025. Natural gas prices, although higher on average than the prior year, are still lower than the Corporation had anticipated, resulting in a lower cost of gas than planned and increasing the balance owed to customers in the short term.
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