Management Discussion and Analysis
Expenses SaskEnergy’s expenses are driven to a large degree by its investment in the Corporation’s transmission, distribution and storage systems. Depreciation and amortization, 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 benefits and operating and maintenance expenses are also driven by the Corporation’s investment in facilities, although less directly. Work to service and maintain the natural gas system grows as infrastructure, specifically the kilometres of gas lines, number of service connections, and amount of compression equipment, to serve an increasing number of customers grows. Additional regulatory requirements and changing public perceptions are accelerating prevention, detection and mitigation initiatives, adding pressure to transmission, distribution and storage rates.
Three months ended June 30
(millions)
2021
2020
Change
$
27 37 30
Employee benefits
$
25 38 29
$
(2)
Operating and maintenance Depreciation and amortization
1
(1)
3 2
Saskatchewan taxes
3 2
- -
Impairment loss on trade and other receivables
$
99
$
97
$
(2)
15
$
Net finance expenses
$
13
$
(2)
$
-
$
$
(2)
Other gains
(2)
Employee Benefits Employee benefit costs were $2 million higher in 2021 compared to 2020 due to filling certain vacant positions in strategic areas of the business as the Corporation continues to focus on meeting current and future business needs. Operating and Maintenance Operating and maintenance expenses were $1 million lower than 2020, a result of reducing the allowance for doubtful accounts estimate in 2021 as relaxed COVID-19 restrictions in 2021 improved the provincial economic outlook. This was partially offset by higher transportation expenses as the Corporation increased transportation contracting on TC Energy’s transportation system, resulting in increased operating and maintenance expenses in 2021 compared to 2020. Growing demand and increasing natural gas imports from Alberta continue to result in more natural gas being transported, and over greater distances. Depreciation and Amortization Balancing safety and system integrity with the demand for service continued through 2021. Strategic capital investments required to ensure the necessary infrastructure is in place to meet current customer demand continues and is resulting in increased depreciation and amortization. Depreciation and amortization was $1 million higher than the same period in 2020. Net Finance Expenses Net finance expenses for 2021 were $2 million higher than 2020 with lower debt retirement fund earnings contributing to the year over year variance. In addition, long-term debt interest expenses increased in 2021 as additional long-term debt is used to fund a portion of the current year’s capital investment in the Corporation’s natural gas line infrastructure.
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