Notes to the Consolidated Financial Statements
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iv. Unbilled revenue Unbilled revenue is estimated monthly for services provided but not yet billed using management’s judgments and assumptions. v. Customer contributions The Corporation builds customer-requested distribution and transmission facilities and the title, risks and rewards of these facilities remain with the Corporation at all times during and after construction, as permitted by The SaskEnergy Act . Any use or benefit that the customer obtains does not occur during the construction period, but thereafter when the connection is made to the customer’s property. It is at that point that the customer may use and benefit from the readily available natural gas service. Therefore, the performance obligation is satisfied at the point in time when the customer-specific facility connection is available for use by the Corporation and the service lines are available for the customer’s operations. Customer contributions received in advance of construction are initially recorded as a contract liability as they are generally paid at contract inception prior to construction commencing. When the construction of a customer connection reaches its in-service date, the customer contribution paid by the customer is removed from contract liabilities and is generally recognized into customer contribution revenue. There are cases when a refund is paid to the customer based on the customer contribution billed in advance exceeding actual construction costs. The transaction prices included in the contract with the customer are allocated to performance obligations based on the specific customer facility requests being made available for use. Customer contribution consideration is considered variable due to refunds issued to customers. Distribution service customer contributions With respect to distribution customer-specific facilities, customers agree to pay, to the Corporation, the sum detailed in the contract regarding the capital cost of assets which provide distribution services to the contributing customer. The contracts generally require the customer to pay all or a portion of the contract cost in advance of construction, in which case the Corporation records the deposit as contract liabilities until the point in time that the related assets are available for use. At this point, the Corporation reduces the contract liability and records customer contribution revenue. For some contract types, the Corporation may refund to a customer a portion of the contributions, depending on the volume of gas the customer consumes over a five-year period of time. At the in-service date, the difference between the customer capital contribution revenue recognized and the associated amount cumulatively billed to the customer is recognized as an account receivable. The account receivable is then recognized as a reduction of revenue over the term of the delivery service contract. Transmission service customer contributions With respect to transmission customer-specific facilities, customers agree to pay in advance to the Corporation the sum detailed in the contract regarding the capital cost of assets which provide transmission services to the contributing customer. The transmission customer contributions that are paid in advance of construction are initially recorded as a contract liability. The contributions received, less potential refunds, are recognized into revenue at the point in time the related assets are available for use. The Corporation may provide a refund to a customer for some or all of the contributions made, depending on the volume of gas transported through the system. There is a refund period on contributions received and the amount of contributions expected to be refunded are estimated and recorded as an adjustment to the contract liability until it is earned by the customer. Refund liabilities that are not returned to the customer are recognized as customer contribution revenue at the expiration of the eligible refund period. At the in-service date, the difference between the customer capital contribution revenue recognized and the associated amount cumulatively billed to the customer is recognized as an account receivable. The account receivable is then recognized as a reduction of revenue over the term of the transportation service contract. Contract liabilities Customer capital contributions received in advance of the construction of customer‑specific facilities are recorded as contract liabilities, as billing occurs prior to the construction beginning on the related assets. Upon the in‑service date of the customer facility, a construction cost true‑up is performed, which may result in either a rebate to the customer or the collection of additional customer capital contributions. Contract liabilities are recognized as revenue at the in‑service date, except for amounts that are potentially refundable to the customer over the applicable refund period, which continue to be deferred.
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