Gas Marketing Fair Value Adjustments The Corporation enters into various natural gas contracts (swaps, options and forwards) in its gas marketing strategies, which are subject to volatility of natural gas market prices. The fair value adjustment at March 31, 2017 on gas marketing derivative instruments reduced the gas marketing margin by $2 million compared to $11 million for the same period in 2015-16. When the AECO near month spot price dropped to a 20-year low prior to March 2016, the Corporation entered into buy/sell transactions, utilizing the price differential between spot prices and forward prices. Between April 2016 and the end of March 2017, the near month price increased $1.53 per GJ and at the same time older purchase and sales contracts matured. At the end of March 2017, the volume of outstanding sales contracts was 2.3 PJs less than at March 31, 2016. The favourable impact of the lower volumes of contracts outstanding was more than offset by the unfavourable impact of average market prices increasing above the deal price on outstanding sales contracts resulting in a net unfavourable impact of $2 million. Revaluation of Natural Gas in Storage At each reporting period, the Corporation measures the net realizable value of gas marketing natural gas in storage based on forward market prices and anticipated delivery dates. The carrying amount of natural gas in storage is adjusted to reflect the lower of weighted average cost and net realizable value. Purchases made in the low market price environment at the beginning of the year have reduced the average cost of gas in storage; however, lower forward market prices continue to adversely affect net realizable value. Consequently, the net realizable value of gas marketing natural gas in storage was $21 million below cost as at March 31, 2017, which is a $13 million improvement from the revaluation adjustment at March 31, 2016. Revenue The delivery revenue, transportation and storage revenue, customer capital contributions and other revenue, as reported in the consolidated financial statements, were as follows:
12 Months
12 Months
3 Months
15 Months
Ended March
Ended March
Ended March
Ended March
31, 2017 1
31, 2016 1,2
Change
31, 2015
31, 2016 2
(millions)
Delivery Revenue
$ 80
$ 289
$ 240
$ 209
$ 31
Transportation and storage revenue
30
151
134
121
13
Customer capital contributions
3
61
55
58
(3)
Other revenue
2
14
10
12
(2)
$ 115
$ 515
$ 439
$ 400
$ 39
1 See note under table of Consolidated Net Income (loss) on page 27. 2 Certain comparative amounts have been reclassified to conform to the current fiscal year’s presentation.
Delivery Revenue Delivery revenue is driven by the number of customers and the amount of natural gas they consume. As residential and commercial customers consume natural gas primarily as heating fuel, weather is the external factor that most affects delivery revenue. The weather in 2016-17 was seven per cent warmer than normal, but five per cent colder than 2015-16, which was an exceptionally warm year. The colder weather together with a 4.5 per cent rate increase effective January 1, 2016 and an 8.6 per cent increase effective November 1, 2016 contributed to delivery revenue of $240 million for the 12 months ending March 31, 2017, which was $31 million higher than the 12-month period ending March 31, 2016.
Delivery Revenue
7000
$300
6000
$250
5000
$200
4000
$150
3000
$100
2000
$50
1000
$0
0
Dec. 2012
Dec. 2013
Dec. 2014
Dec. 2015
Mar. 2016
Mar. 2017
Distribution system growth also contributed to the higher delivery revenue. The Corporation added 4,000 customers through the 12 months of 2016-17, which was less than the 5,090 customers added during the previous fiscal period. The addition of new customers is estimated to have contributed an additional $2 million of revenue in the current year. Delivery 12 months ending
Heating Degree Days
30
Management’s Discussion & Analysis
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