2019-20 SaskEnergy Annual Report

Notes to the Consolidated Financial Statements

Distribution service customer contributions With respect to distribution customer specific facilities, customers agree to pay, to the Corporation, the sum detailed in the contract with regard to the capital cost of assets which provide distribution services to the contributing customer. The contracts generally require the customer to pay all or a portion of the contract cost in advance of construction, in which case the Corporation records the deposit as contract liabilities until the point in time that the related assets are available for use. At this point, the Corporation reduces the contract liability and records customer contribution revenue. For some contract types, the Corporation may refund to a customer, a portion of the contributions depending on the volume of gas the customer consumes over a five year period of time. The potential refund amount is removed from the contract liability and reported as a refund liability. At the in-service date, the difference between the customer capital contribution revenue recognized and the associated amount cumulatively billed to the customer is recognized as an account receivable. The account receivable is then recognized as a reduction of revenue over the term of the delivery service contract. Transmission service customer contributions With respect to transmission customer specific facilities, customers agree to pay in advance to the Corporation, the sum detailed in the contract with regard to the capital cost of assets which provide transmission services to the contributing customer. The transmission customer contributions that are paid in advance of construction are initially recorded as a contract liability. The contributions received, less potential refunds, are recognized into revenue at the point in time the related assets are available for use. The Corporation may provide a refund to a customer for some or all of the contributions made depending on the volume of gas transported through the system. There is a refund period on contributions received and the amount of contributions expected to be refunded are estimated and recorded as a refund liability until it is earned by the customer. Refund liabilities that are not returned to the customer are recognized as customer contribution revenue at the expiration of the eligible refund period. At the in-service date, the difference between the customer capital contribution revenue recognized and the associated amount cumulatively billed to the customer is recognized as an account receivable. The account receivable is then recognized as a reduction of revenue over the term of the transportation service contract. Five year refund period At the in-service date, a customer may begin to flow natural gas and earn a refund over a five year refund period. The amount potentially refundable to the customer is removed from contract liability and is recognized as a refund liability and reviewed annually. If the customer’s actual flow of natural gas exceeds what they committed to at contract inception, the customer will earn an annual refund. The refund liability is reduced and a rebate is paid to the customer. If they flow less natural gas than they committed to at contract inception, the customer does not earn their rebate and the Corporation recognizes the annual refund liability amount as customer capital Advance receipt of customer capital contributions are recorded as a contract liability, as billing occurs prior to the construction of the associated customer facility. At the in-service date, a construction cost true-up is determined, with either a rebate issued to the customer or additional customer capital contribution collected from the customer. The contract liabilities are recognized as revenue at the in-service date of the customer facility with the exception of the potentially refundable amount over the applicable refund period. The refund period is generally over five years. Refund liabilities contribution revenue. Contract liabilities At the construction in-service date of a customer facility, a portion of the customer capital contribution may be refundable to the customer over a five year refund period, if the customer meets or exceeds a predetermined flow of natural gas. At the in-service date, the potential refund remaining over the five year refund period is no longer presented as a contract liability but is presented as a refund liability. Annually, the actual volume of natural gas flowed is compared to the predetermined flow and the annual rebate is paid to the customer if actual flow exceeds the predetermined flow amount. In contrast, if the actual flow is less than the predetermined flow, the rebate is recorded as customer contribution revenue.

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