While risk management is the responsibility of all levels of management, the Board of Directors and Executive Committee set the tone and provide leadership direction for ERM. The Executive Committee is responsible for formally identifying strategic risks that impact the Corporation’s goals, participating in the risk assessment process and developing strategic risk management plans. As many of the risks facing the organization change frequently, the Corporation’s risk management plans remain adaptive and flexible in addressing risks. The Board of Directors is responsible for the risk management policy and framework. The Board oversees risk management efforts by reviewing annual reports on risk management processes and controls, and ensuring that key corporate initiatives appropriately address the identified risks.
At the beginning of the fiscal year, the following risks were identified as those requiring strategic focus:
Carbon Focused Society SaskEnergy’s business is the transportation, storage, distribution and sale of natural gas, a fossil fuel which emits carbon dioxide when burned to generate energy. Not appropriately addressing the carbon reduction expectations could result in financial costs and affect the competitiveness of the services SaskEnergy offers. For example, a tax on carbon emissions would directly increase operating costs to ship gas through pipelines and, indirectly, could reduce customer consumption of natural gas, reduce revenue, and leave parts of the transmission and distribution systems underutilized. In response to this risk, the Corporation continues to monitor developing regulations, has initiated stakeholder engagement strategies and works with industry groups to communicate its position and strategies for dealing with carbon dioxide emissions. In addition, SaskEnergy has implemented strategies to reduce its carbon footprint, which includes maintaining and upgrading facilities, improved training, and operating practices designed to minimize greenhouse gas emissions. Natural gas remains the “greenest” of fossil fuels, producing less carbon dioxide that most other carbon based sources of energy and therefore may have a significant role in any transition towards greener fuels. Pipeline, Facility or Operational Failure Pipeline, facility or operational failure could disrupt the effective operation of SaskEnergy’s natural gas storage, distribution and transmission infrastructure, and have potentially negative effects on employee and public safety, the environment and customers. Operational hazards include severe weather conditions, fire, human error, mechanical failures, third-party pipeline encroachment, hazardous materials and acts of civil disobedience and sabotage. The occurrence of any of these events, many of which are not within control of the Corporation, could increase operating costs or reduce revenues. Some of the primary processes used to mitigate the Corporation’s pipeline, facility and operational risks include system integrity programs, public awareness and safety programs, employee and operator training, plus environmental policies and procedures. The financial impacts of these risks are also mitigated, where possible and appropriate, through insurance. Supply Access As natural gas production within Saskatchewan declines, SaskEnergy becomes increasingly reliant on importing natural gas from outside the province. Importing natural gas creates a reliance on interconnecting pipelines, which becomes more critical as the amount of imported gas increases. It also increases the complexity of supply planning, increases operating costs, and has potentially negative impacts on Saskatchewan end users. SaskEnergy manages this risk through long-term supply and demand forecasting, and consultation with large existing and potential customers. For the distribution utility, declining provincial natural gas production adds complexity to the supply planning process that is managed through the natural gas procurement strategy. Specific strategic initiatives undertaken to mitigate this risk include utilization of storage facilities to support transmission capabilities, development of a provincial flare gas capture strategy, and utilization of liquefied natural gas to meet peak demand. Interest Groups Public objection to industry infrastructure development from a cultural, safety, environmental, or societal perspective exposes SaskEnergy to the risk of higher costs, delays or even project cancellations. In recent years, the ability of landowners and interest groups to make claims and oppose projects in regulatory and legal forums has increased. This “not in my backyard” philosophy could impact the Corporation’s ability not only to develop new facilities, through delays and additional costs, but also to operate existing facilities, and could potentially affect the integrity and reliability of the natural gas pipeline distribution system. Through various programs and strategies, including stakeholder engagement, Aboriginal consultation, environmental assessments and public awareness, SaskEnergy works with landowners and other interest groups to identify and develop appropriate responses to concerns regarding expansion and development of infrastructure.
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2016-17 ANNUAL REPORT SASKENERGY
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