Management’s Discussion and Analysis
Revaluation of Natural Gas in Storage The carrying amount of natural gas in storage is adjusted to reflect the lower of weighted average cost and net realizable value. At each reporting period, the Corporation measures net realizable value of natural gas in storage held for asset optimization transactions based on forward market prices and anticipated delivery dates. With near-term forward natural gas market prices increasing through 2022, asset optimization natural gas in storage was recorded at weighted average cost at December 31, 2022 and March 31, 2022. With both equaling net realizable value, the impact on 2022 net income was $nil. Revenue Delivery revenue, transportation and storage revenue and customer capital contributions, as reported in the condensed consolidated financial statements, were as follows:
Three months ended December 31,
Nine months ended December 31,
(millions)
2022
2021 Change 2022
2021 Change
$
102 $
14 $
202 $
Delivery revenue
88 $
182 $
20 24
59
177
Transportation and storage revenue Customer capital contributions
53
6
153
8
18
9
(1)
16
2
$
169 $
19 $
397 $
Revenue
150 $
351 $
46
Delivery Revenue Natural gas delivery rates are designed to recoup all distribution facility and operating costs necessary for delivery of natural gas to customers throughout the year. Natural gas storage and transportation costs — as well as ongoing investments related to safety, system integrity and growing infrastructure — are factored into delivery rates. Other considerations impacting natural gas delivery services include regulatory code compliance and industry best practices regarding safety. To minimize these impacts on delivery service customers, the Corporation strives to make the most effective use of resources and technology and to collaborate with other Crown corporations and executive government. Delivery revenue is primarily driven by the number of customers and the amount of natural gas they consume. Weather is the most significant external factor affecting delivery revenue, as residential and commercial customers consume natural gas primarily as heating fuel. Delivery revenue was $20 million higher than in 2021, primarily due to weather being 19 per cent, 25 per cent and five per cent colder than normal in April, November and December of this year. Rate increases effective August 1, 2022 are also contributing to the favourable results and help mitigate the effects of increasing costs related to safety, system integrity and infrastructure maintenance as the Corporation continues delivering safe and reliable service to customers. Transportation and Storage Revenue The Corporation generates transportation revenue by receiving gas from customers at various receipt points in Saskatchewan and Alberta and delivering natural gas to customers at various delivery points in the province. The transportation toll structure consists of a receipt service charge, which customers pay when they put gas onto the natural gas transportation system and a delivery service charge that customers pay when they take delivery off the natural gas transportation system. For receipt and delivery services, the Corporation offers both firm and interruptible transportation contracts. Under a firm service contract, the customer has a right to deliver or receive a specified quantity of gas on each day of the contract. With a firm contract, customers either pay for the amount of capacity they have contracted for, whether they use it or not, or may pay a basic monthly charge. Under an interruptible contract, customers may deliver or receive gas only when there is available capacity on the system and only pay receipt and delivery tolls when they deliver or receive gas. 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.
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