Management’s Discussion and Analysis
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. Transportation and Storage revenue for the nine months ended December 31, 2023 equaled the prior year results, as higher delivery service revenues are resulting from industrial customers executing higher contract demand and interruptible transportation services to meet their operating requirements. This was partially offset by customers decreasing export transportation service contracts in 2023 compared to 2022. High natural gas market prices in Canada through 2022 created incentives for customer to increase export services and supply Eastern Canada with natural gas as the region was experiencing higher natural gas market prices than Western Canada. This opportunity did not present itself in 2023 and export services are returning to normal levels. Storage revenue of $9 million, for the nine months ended December 31, 2023, equaled prior year results. Customers leverage storage services for balancing their transportation account and inject natural gas into storage in the summer to meet higher loads and demands in the winter. Customer Capital Contributions The Corporation receives capital contributions from customers to partially offset the cost of constructing facilities to connect them to the transmission and distribution systems. Generally, contributions related to transmission system projects tend to be larger but less frequent than contributions related to the distribution system. The volume and magnitude of contribution revenue can significantly vary period-over-period, as several factors influence their receipt and recognition as revenue. Customer capital contributions equaled the prior year as installations in the distribution utility are comparable year-over-year. Other Expenses SaskEnergy’s expenses are driven to a large degree by its investment in its transmission, distribution and storage systems. Depreciation and amortization expense, net finance expense and Saskatchewan taxes are directly tied to the investment in facilities. As the level of investment in facilities increases, these expenses also increase. Employee benefit expenses and operating and maintenance expenses are also driven by the Corporation’s investment in facilities, although less directly. As the number of customers increases and infrastructure to serve those customers grows, the costs to operate and maintain the system increases. These expenses increase primarily because the amount of work to service and maintain the natural gas system grows as the kilometres of gas lines, number of service connections and amount of compression equipment increases. Additional regulatory requirements and changing public perceptions have resulted in accelerated prevention, detection and mitigation initiatives, adding pressure to transmission, distribution and storage rates. Other expenses, net finance expenses and other losses (gains), as reported in the condensed consolidated financial statements are as follows:
Three months ended December 31,
Nine months ended December 31,
(millions)
2023
2022 Change 2023
2022 Change
$
$
82 $
28 $
27 52 32
$
(1) (1) (3) (1)
78
$
(4) (7)
Employee benefits
148 105
53 35
141
Operating and maintenance Depreciation and amortization
94 14
(11)
15
4
(1)
Saskatchewan taxes
3
(Recovery) impairment loss on trade
(3)
(2)
and other receivables
4
7 1
5
7
$
117 $
$
348 $
332
$
(16)
118
$
$
59 $
$
21 $
19
$
(2)
54
$
(5)
Net finance expenses
$
3
$
2
$
(1)
$
(3)
$
-
$
(3)
Other losses (gains)
Employee Benefits Full-time equivalents are trending higher in 2023 than 2022 levels, resulting in employee benefit costs increasing $4 million compared to 2022, as the Corporation was able to fill previously vacant positions.
10
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