MANAGEMENT’S DISCUSSION AND ANALYSIS
Efficient Operations Continued focus on efficiency initiatives and aggressive cost management favourably impacted the results for the efficiency metrics in 2017-18. However, many of the initiatives implemented in response to the provincial government’s directive for fiscal restraint in the past few years were deemed to be temporary in nature. The Corporation will need to return to a more sustainable level for certain operating expenses for future years in order to maintain customer service levels. In alignment with the Crown Sector Priority of financial stability and a continued emphasis on operational efficiency, SaskEnergy is committed to the cost-effective delivery of natural gas services to its customers. The Corporation realized approximately $4.2 million in 2017-18 ($4.0 million in 2016-17) in efficiency and process improvement savings. These efforts are reflected in the measure Operation, Maintenance and Administration Costs per Customer and SaskEnergy’s continued ability to successfully offer competitive residential delivery rates to its customers. A typical residential customer in Saskatchewan paid $529 for delivery service in 2017-18 ($500 in 2016-17), which is the second lowest of the major utilities across Canada. Residents of Hamilton, Ontario paid the lowest rate at $409. SaskEnergy had the fourth lowest total residential natural gas utility rate (delivery and commodity combined) in Canada. SaskEnergy provides its distribution customers with price protection through the practice of hedging natural gas purchases. As a result, in a low and declining natural gas price environment, customers typically pay higher costs for natural gas but are not subject to the volatility of market prices. SaskEnergy does not earn a profit or incur losses on the sale of natural gas to its customers; therefore, the costs associated with the supply of natural gas are recovered over time. Customers have consistently provided very positive survey responses to questions about stable natural gas prices as opposed to prices that move with the market. The TransGas metric Operation, Maintenance and Administration Costs (OM&A) per Book Value of Assets Managed is a proxy for the relative efficiency of the transmission utility operations. In 2017-18, TransGas OM&A results continued to reflect strong resource management efforts and a commitment to efficient operations throughout the year.
Safety/Vigilance The Corporation’s efficiency focus does not conflict with its ongoing commitment to maintaining a safe and reliable system. System integrity programming is actively managed to maintain positive results in the areas of gas leaks, pipeline failures, third-party line hits and other integrity measures. The Corporation participates in industry working groups to ensure its operations reflect industry best practice. One of the key initiatives SaskEnergy continued in 2017-18 was the service upgrade program. This major integrity initiative inspects and upgrades service lines to ensure safe and reliable gas service to communities. This program, together with enhanced leak survey processes and damage prevention initiatives, is aimed at reducing leaks. Despite these efforts, the unique ground conditions of a long winter with many freeze and thaw cycles started to cause failures of a certain type of fitting used during early system installations. This resulted in the metric for leaks being higher than target. TransGas continued to reduce risks for its transmission pipelines through in-line inspections, visual inspections, damage prevention initiatives and the cathodic protection program. In 2017-18, there were two specialized inspections performed for cracking and corrosion. One of these was a first for the TransGas system, utilizing innovation and technology to ensure a safe and reliable system. Pipeline failures on the transmission system were higher than target for 2017-18. There were two leaks reported, up from the one in the previous year. The first leak was a pinhole leak detected through an on-site inspection and was repaired immediately. The second was an unreported line hit and was not detected until it ruptured. SaskEnergy and TransGas invested $109 million toward safety and integrity initiatives in 2017-18, including capital and operating ($91 million in 2016-17).
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