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 contribution revenue can significantly vary period-over-period, as various factors influence their receipt and recognition as revenue. Customer capital contributions were $1 million lower in 2024, resulting from timing differences of distribution utility customer capital contributions in 2024 compared to 2023. Other Expenses SaskEnergy’s expenses are driven to a large degree by its investment in its transmission, distribution and storage systems. Depreciation and amortization expense, 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 benefit expenses, and operating and maintenance expenses, are also driven by the Corporation’s investment in facilities, although less directly. As the number of customers increases, infrastructure to serve those customers grows, and the costs to operate and maintain the system rise in correlation with the increasing kilometres of gas lines, number of service connections and amount of compression equipment. Additional regulatory requirements and changing public perceptions have resulted in accelerated prevention, detection and mitigation initiatives - adding pressure to transmission and storage, and delivery service rates. Other expenses, net finance expenses and other net (gains) losses, as reported in the condensed consolidated financial statements are as follows:
Three months ended June 30,
(millions)
2024
2023 Change
$
32 49 34
$
$
(4) (1)
28 48 35
Employee benefits
Operating and maintenance Depreciation and amortization
1
5
-
5
Saskatchewan taxes
$ $ $
120 $
$ $ $
(4)
116
19
-
$ $
19
Net finance expenses
-
1
1
Other net losses
Employee Benefits Employee benefit costs were $4 million higher in 2024 than in 2023 as the new Collective Bargaining Agreement was effective February 2024 resulting in increased employee compensation in 2024, while full-time equivalents are trending higher due to the Corporation filling previously vacant positions. Operating and Maintenance Operating and maintenance expenses were $1 million higher than in 2023, primarily due to inflationary impacts and third- party transportation costs increasing. The Corporation utilizes third-party transportation to serve customer needs when it is more cost effective than developing new assets. With growing system requirements — resulting from customers continuing to choose, and other customers transitioning to, natural gas as their energy source — transportation costs are increasing as additional demand service contracts have been placed with third-party transportation providers. Depreciation and Amortization Depreciation and amortization were $1 million lower than the same period in 2023, as a major information system asset was fully depreciated in 2023-24, resulting in reduced depreciation. This was partially offset by increased depreciation on asset additions geared toward balancing safety and system integrity with the growing demand for natural gas services. Strategic capital investments required the necessary infrastructure be put in-service to meet this growing customer demand.
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