Integral to the Corporation’s transmission system are several strategically located natural gas storage sites, which have the capacity to provide operational flexibility along with a reliable and competitive natural gas storage service.
The increased demand for natural gas within the Province, as well as higher volumes imported from Alberta and higher export deliveries outside the Province have increased transportation revenue. For the 12-month period ended December 31, 2015, transportation and storage revenue was $21 million higher than the same period in 2014. Higher industrial demand, particularly in the potash, electrical generation and enhanced oil recovery sectors have increased transportation throughput. This growth has placed pressures on transportation infrastructure as additional Alberta border capacity is required to meet customers’ needs for greater natural gas receipts. Transportation rate increases effective January 1, 2015 – necessitated by higher operating costs associated with pipeline expansion, system integrity expenditures and increasing third- party transportation costs – have also contributed to higher transportation revenue.
Transportation & Storage Revenue
Storage revenue is down slightly compared to last year due to approximately 2 PJ of storage being de-contracted in early 2015. Storage de-contracting is a consequence of the low natural gas price environment and the relative supply imbalance as customer preferences shift to buying and selling gas directly from the market rather than utilizing storage services. Transportation service rates increased by an average of 2.5 per cent effective January 1, 2016, while storage rates increased by an average of 5.8 per cent. The rate increases address growing capital and operating costs incurred to continue providing high quality, safe and reliable service to customers. To help mitigate the impact of increasing rate pressure from third-party transportation and increasing safety and integrity program costs, the Corporation continues to focus on efficiency initiatives to help minimize rate pressures. Transportation and storage revenue was $32 million for the three months ended March 31, 2016 as the Corporation continues to experience increasing contract demand resulting from provincial economic growth, and increasing costs associated with being a net importer of natural gas. In alignment with the Crown Sector Strategic Priorities, the Corporation continues to focus on providing the Province’s growing population and industrial customers with efficient and timely access to natural gas service, while keeping rates competitive. Customer Capital Contributions The Corporation receives capital contributions from customers to partially 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 customer contribution revenue can vary significantly period-over-period as varying factors influence their receipt and revenue recognition. The contributions received, less potential refunds, are recognized as revenue once the related property, plant and equipment is available for
use. Customers may earn a refund of some or all of the contributions they make depending on how much gas they flow. The amount of contributions that are likely to be refunded are estimated and recorded in deferred revenue until the eligible refund period expires or a refund is earned by the customer. During 2015, the Corporation refined its estimates of the amount of contribution deferred for potential refund. The new estimate is based on the customer’s requested delivery capacity rather than management’s estimate of customer’s future delivery, and is considered a more reliable estimate of the amounts likely to be refunded. Customer capital contribution revenue of $37 million for the 12 months ended December 31, 2015 was $4 million above the same period last year. This is comprised of $21 million relating to distribution system projects and $16 million relating to transmission system projects. The transmission system customer capital contribution revenue was $12 million higher
Customer Contribution Revenue
Management’s Discussion & Analysis
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