Management’s Discussion and Analysis
Customer Capital Contributions The Corporation receives capital contributions from customers to 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 vary significantly period-over-period, as numerous factors influence their receipt and recognition as revenue. Customer contribution revenue was $18 million lower than in the same period of 2025. The decrease was primarily due to the completion of several transmission customer connection projects in the prior year, which generated significant contribution revenue. No transmission customer projects of a similar scale were completed during the same period in 2026. 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 expenses 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, infrastructure to serve those customers grows, and the costs to operate and maintain the system rise in correlation with the increasing kilometres of gas lines, number of service connections and amount of compression equipment. Additional regulatory requirements and changing public perceptions have resulted in accelerated prevention, detection and mitigation initiatives – adding pressure to transmission and storage, and delivery service rates. Expenses, net finance expenses and other net losses, as reported in the condensed consolidated financial statements, are as follows:
Three months ended June 30,
(millions)
2026
2025 Change
Employee benefits
$
32 55 37
$
33 57 35
$
1 2
Operating and maintenance Depreciation and amortization
(2)
Saskatchewan taxes
4
5
1 2 1 1
$ $ $
128 $
130
$ $ $
Net finance expenses
19
$ $
20
Other net losses
-
1
Employee Benefits Employee benefit costs are lower in 2026 than in 2025, primarily due to fewer full-time equivalents than the previous year. Operating and Maintenance Operating and maintenance expenses were $2 million lower than in 2025. The decrease was primarily due to lower costs associated with business technology initiatives, including application management services, and reduced consulting expenditures on advanced metering infrastructure and enterprise support service initiatives. Expenses were also lower as a result of decreased third-party transportation costs, reflecting lower transportation rates, as well as the absence of carbon levy costs incurred in the prior year. These favourable variances were partially offset by higher software licensing and maintenance costs, driven by inflationary price increases and the Corporation's continued reliance on technology solutions to support business operations and enhance customer service. Operating expenses were also impacted by higher rebate payments under energy efficiency initiatives, as customer participation in the Homes Beyond Code programs exceeded expectations. Depreciation and Amortization Depreciation and amortization charges were $2 million higher than the same period in 2025, as the Corporation continues to balance the safety and system integrity of its natural gas infrastructure with the demand of its residential, commercial and industrial customer base. Strategic capital investments required that necessary infrastructure be put into service to meet this
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