Management’s Discussion and Analysis
The commodity margin on sales to customers, as reported in the consolidated financial statements, was as follows:
(millions)
March 31, 2024
March 31, 2023
Change
$
225 $
Commodity sales
302 $
(77) (74)
183
Commodity purchases
257
42
Realized margin on commodity sales Unrealized fair value adjustments
45
(3)
(32)
(67)
35 32
$
10 $
Margin on commodity sales
(22) $
The realized margin on commodity sales excludes the impact of unrealized fair value adjustments on derivative instruments. These adjustments can fluctuate significantly from one period to the next and do not represent the amount that will be paid upon settlement of the related natural gas contract. The Corporation’s realized margin on commodity sales for the 12 months ending March 31, 2024 was $3 million lower than in 2022-23, with a commodity margin of $0.57 per GJ through 2023-24 being slightly lower than the $0.59 per GJ for the same period ending March 31, 2023. To address AECO daily index prices trending upwards in 2022, SaskEnergy received approval to increase its commodity rate to $4.20 per GJ from $3.20 per GJ effective August 1, 2022. The Corporation was able to maintain the $4.20 per GJ commodity rate through 2022, while market prices climbed as high as $8.32 per GJ, largely due to its commodity price risk management strategy. Subsequently, the AECO daily index dropped significantly in 2023-24, averaging $2.33 per GJ through the 12 months ending March 31, 2024, compared to $4.68 per GJ in the same period ending March 31, 2023. The substantial decrease in natural gas market prices reduced average commodity purchase costs below the commodity rate and increased the amounts owing to customers in the GCVA. Consequently, the Corporation received approval to decrease its commodity rate to $3.20 per GJ effective October 1, 2023. Reduced commodity rates and lower natural gas prices have decreased both commodity sales and commodity cost of sales compared to the prior year.
Furthermore, nine per cent warmer than normal weather in 2023-24 led to lower natural gas consumption compared to the prior year when weather was seven per cent colder than normal, but was partially offset by increased sales to the 2,579 customers added to SaskEnergy’s distribution system. The GCVA balance was $8 million owing to customers at March 31, 2024, compared to $2 million owing to customers at March 31, 2023, as the declining AECO daily index reduced commodity purchase costs below the rate decrease implemented effective October 1, 2023. Commodity Fair Value Adjustments For the 12 months ending March 31, 2024, the fair value adjustment on commodity derivative instruments decreased the margin on commodity sales by $32 million. The favourable price differential of $0.30 per GJ between contract prices and market prices on future commodity purchase contracts at March 31, 2023 decreased $0.59 per GJ, to an unfavourable price differential of $0.29 per GJ at March 31, 2024. SaskEnergy segregates a portion of its natural gas purchase contracts for gas that will ultimately be sold to commodity customers. Under IFRS, such own-use contracts are not required to be reported at market value.
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