Notes to the Consolidated Financial Statements
Delivery services SaskEnergy has the exclusive right to distribute natural gas within the province of Saskatchewan. 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 is 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. While delivery service can occur without commodity sales, as evidenced in Gas Retailer transactions, commodity sales can only arise with the associated delivery service. Customers may choose to purchase commodity gas from a Gas Retailer, where the Corporation provides delivery service to the customer without supply of natural gas to the customer. In this case, SaskEnergy earns only delivery revenue from the Gas Retailer customer. SaskEnergy acts as an agent in regards to the Gas Retailer commodity charges, therefore no commodity revenue is recorded by SaskEnergy. A receivable is recognized when natural gas is delivered to a customer at their meter point, as this is the point in time that commodity sales and delivery service payments are due. The transaction price will be allocated to the commodity sales and delivery service based on the applicable rates derived through the review process with the Saskatchewan Rate Review Panel and approved by Provincial Cabinet. ii. Natural gas sales Natural gas sales are non-regulated asset optimization activities. The Corporation uses its access to natural gas markets to execute sales with offsetting purchases of natural gas to generate margins. Forward natural gas sales are recognized at fair value until the contract is realized into revenue at the point in time the contract becomes due. In most cases, the sales and the associated purchases are executed at the same time, thereby mitigating much of the price risk that would normally be associated with such transactions. By utilizing off-peak transportation and storage capacity, the Corporation is able to find opportunities in the market to take advantage of pricing differentials between transportation hubs, delivery points and time periods while minimizing its exposure to price risk. The Corporation also uses sales and accompanying purchases of natural gas to mitigate transportation constraints, which are generally executed at a cost.
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