MANAGEMENT’S DISCUSSION AND ANALYSIS
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 various factors influence their receipt and recognition as revenue. The contributions received, less potential refunds, are recognized as revenue once the related property, plant and equipment is available for use. The Corporation may refund a customer for some or all of the contributions they make depending on how much gas the customer consumes or transports through the system. The amount of contributions expected to be refunded is estimated and recorded in deferred revenue until the eligible refund period expires or a refund is earned by the customer. Customer capital contribution revenue for the 12 months ending March 31, 2018 was $34 million below 2016-17 with lower distribution and transmission customer connections year-over-year. Also, customer capital contribution revenue in 2016-17 includes a $27 million customer contribution relating to a potash production plant project. There were no projects of comparable size in 2017-18 in which customer contribution revenue was recognized.
Other Revenue Other revenue primarily consists of gas processing fees and natural gas liquids sales from two natural gas liquids 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 and as a result of low natural gas prices. Other revenue of $7 million for the 12 months ending March 31, 2018 was $3 million lower than 2016-17, a result of lower throughput on gas processing plants. Other Expenses SaskEnergy’s expenses are driven to a large degree by its investment in its transmission, distribution and storage systems. Depreciation expense, net finance expense and Saskatchewan taxes are directly tied to the investment in facilities. As the level of investment in pipeline facilities increases, these expenses also increase. Employee benefit costs and operating and maintenance costs are also driven by the investment in assets, although less directly. As the number of customers increases, and infrastructure to serve those customers grows, the costs to operate and maintain the system increases. These expenses increase primarily because the amount of work to service and maintain the pipeline system increases as the kilometres of pipeline, number of service connections, and compression equipment increases. The cost of maintaining the safety, integrity and reliability of the Corporation’s transmission, storage and distribution systems increases with the age of the pipeline system and adds pressure to transmission, distribution and storage rates.
CUSTOMER CAPITAL CONTRIBUTIONS
$50 $40 $20 $30 $10 $0 $60 $70
12 months ending
31
Made with FlippingBook Ebook Creator