2015-16 SaskEnergy Annual Report

due to the revised estimate of deferred contributions. The increase in contribution revenue was partially offset by a decrease in customer contributions associated with new transmission system customer connections, a result of fewer capital projects in 2015. New distribution system customer connections declined from 7,332 in 2014 to 5,090 in 2015. However, contribution revenue is consistent with 2014 due to a larger number of commercial and industrial projects in 2015. Customer contribution revenue was $24 million for the three months ended March 31, 2016, primarily due to the completion of a large industrial capital project and the effect of revising the estimate of deferred transmission project customer capital contributions. Other Revenue Other revenue primarily consists of gas processing fees and natural gas liquid sales from two natural gas liquid extraction plants. Compression and gathering service revenue and royalty revenues comprise the remaining balance of other revenue. Royalty revenues are generated from a gross overriding royalty on several natural gas-producing properties in Saskatchewan and Alberta, which have diminished due to the continuing decline of conventional natural gas production, a result of low natural gas prices. Other revenue of $12 million for the 12 months ended December 31, 2015 was $4 million lower than 2014 — a result of natural gas liquid prices declining on average by 56 per cent year-over-year. Other Expenses Increasing investment in safety and integrity, strong customer growth and the need to import more natural gas from Alberta as Saskatchewan natural gas production declines, are key factors contributing to increases in other expenses. With strong growth in the provincial economy in recent years, the Corporation has experienced significant growth in its customer base and pipeline facilities. The increasing investment in facilities directly increases operating and maintenance costs, depreciation and amortization expenses and corporate capital taxes. Public expectations and the importance of system safety, integrity and reliability – both within the Corporation and across the industry – continue to increase. While the safety, integrity and reliability of the Corporation’s transmission and distribution systems comes at a considerable cost, it is essential to the Corporation’s successful operations and the safety of the people of Saskatchewan. The Distribution Utility serves nearly 387,000 customers and the Transmission Utility serves 133 customers, with each experiencing significant growth in system safety and integrity requirements in recent years. Transmission system throughput has also grown. Innovation, creativity and collaboration are key leadership qualities promoted at SaskEnergy and are vital to the Corporation’s cost management and safety initiatives. Becoming a net importer of natural gas has affected operations of the transmission system. Load growth from industrial demand has required the Corporation to move more natural gas, and with a substantial amount of that natural gas coming from Alberta, the Corporation is transporting natural gas greater distances. To meet the rising demand on the system, the Corporation has made capital infrastructure investments to facilitate operational changes to the transmission system and continues to focus on the development of mobile compression in order to improve flexibility and operating efficiency. Other expenses, net finance expenses before fair value adjustments (FVA) and other (losses) gains, as reported in the consolidated financial statements, were as follows:

15 Months

3 Months

12 Months

12 Months

Ended March

Ended March





31, 2016 1

31, 2016

31, 2015

31, 2014



Employee benefits

$ 92

$ 1

$ 115

$ 24

$ 91

Operating and maintenance






Depreciation and amortization






Saskatchewan taxes






Other expenses

$ 312

$ 4




Net finance expenses (before FVA)

$ 44

$ (2)




Other (losses) gains

$ 1

$ 1

$ (3)

$ (3)


1 See note under table of Consolidated net income (loss) on page 31.



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