Notes to the Consolidated Financial Statements
Revenue is recognized when control of the product is transferred to the customer or transportation service has been completed. This is generally at the point in time when the customer obtains legal title to the natural gas at its custody transfer point or the transportation service has been completed at the customer’s natural gas line location and collection is reasonably assured. The amount of revenue recognized is based on the consideration specified in the contract. The Corporation’s principal sources of revenues and methods applied to the recognition of these revenues in these financial statements are as follows:
i. Commodity sales and delivery service Commodity sales
Commodity sales contracts with customers generate revenue from the sale of natural gas to customers. Revenue is recognized at a point in time when the Corporation sells natural gas to customers, who consume the natural gas to heat their homes or operate their businesses. Title to natural gas purchased from SaskEnergy, and all related risks, remain with SaskEnergy until the gas is transferred at a meter point. At the meter point, the customer takes ownership of the natural gas and the performance obligation is satisfied. The commodity charge is then billable to the customer as there are no further performance obligations outstanding. Delivery services A delivery service contract generates revenue from the transportation of natural gas to customers. Delivery revenue is recognized at the point in time when natural gas is transferred to customers at their meter point. Delivery services, as stated in the SaskEnergy Terms and Conditions of Service, include both a basic monthly charge (BMC) and a delivery service charge: A BMC is a fixed monthly charge payable by the customer for Natural Gas Services provided by SaskEnergy or made available to the customer irrespective of the volume of gas consumed. As such, this charge can benefit the customer on its own and it is regularly sold separately to customers to enable on-demand access to the other services provided. A delivery charge reflects the distribution of natural gas to customers. The delivery charge is incurred when gas is distributed through the natural gas line system to the customer. As customers can contract for supply from Gas Retailers, SaskEnergy regularly provides the delivery service separately from other services and the customer can benefit from the delivery service on its own or in conjunction with other services provided to the customer. The BMC is distinct within the context of the contract as it is not affected by any of the other services provided to customers. It is recognized at a point in time and it is charged to customers monthly, regardless of whether there are any other charges associated with delivery and supply of natural gas. The delivery and commodity sales charges have no bearing on the BMC. The basic monthly charge relating to delivery service is a single performance obligation and is distinct from commodity sales. Delivery without supply (Gas Retailer customer) is a single performance obligation. Commodity sales and delivery charge Commodity sales are the provision or sale of natural gas, as opposed to the delivery service being the transportation of the natural gas. The delivery service charge and commodity sales are highly interrelated.
68
Made with FlippingBook Ebook Creator