Management’s Discussion and Analysis
Revenue Delivery revenue, transportation and storage revenue, and customer capital contributions, as reported in the condensed consolidated financial statements, were as follows:
Three months ended June 30,
(millions)
2024
2023 Change
61 62
$
Delivery revenue
$
57 59
4 3
$
Transportation and storage revenue Customer capital contributions
3
4
(1)
126 $
$
Revenue
120
6
$
Delivery Revenue SaskEnergy provides reliable energy and competitive rates to customers, as they value low delivery charges. Natural gas delivery rates are designed to recoup all distribution facility and operating costs necessary for delivery of natural gas to customers throughout the year and earn a return for its shareholders. Natural gas storage and transportation costs — as well as ongoing investments related to safety, system integrity and growing infrastructure — are factored into delivery rates. Other considerations impacting natural gas delivery services include regulatory code compliance and industry best practices regarding safety. To minimize the financial impacts of these on delivery service customers, the Corporation strives to make the most effective use of resources and technology, and to collaborate with other Crown corporations and executive government. SaskEnergy continues to focus on items within the Corporation’s control to embed efficiency into processes, such as identifying opportunities for standardization, simplification, and the elimination of waste from processes. SaskEnergy will continue to strive to provide customers with access to low-cost energy sources compared to alternatives and delivery charges that are among the lowest in Canada. Delivery revenue is primarily driven by the number of customers and the amount of natural gas they consume. Weather is the most significant external factor affecting delivery revenue, as residential and commercial customers consume natural gas primarily as heating fuel. Delivery revenue was $4 million higher than 2023, primarily due to rate increases implemented effective October 1, 2023. Rate increases continue to address inflation, while the rate at which inflation is increasing is below the highs seen in 2022, prices continue to rise at a rate far above target. While economic forecasts anticipate a return to target in 2024, the ability to reach it remains to be seen. Transportation and Storage Revenue The Corporation generates transportation revenue by receiving gas from customers at various receipt points in Saskatchewan and Alberta and delivering natural gas to customers at various delivery points in the province. The transportation toll structure consists of a receipt service charge, which customers pay when they put gas onto the natural gas transportation system, and a delivery service charge that customers pay when they take delivery from the natural gas transportation system. For receipt and delivery services, the Corporation offers both firm and interruptible transportation contracts. Under a firm service contract, the customer has a right to deliver or receive a specified quantity of gas on each day of the contract. With a firm contract, customers pay for the amount of capacity they have contracted for, whether they use it or not. Under an interruptible contract, customers may deliver or receive gas only when there is available capacity on the system and only pay receipt and delivery tolls when they deliver or receive gas. Integral to the Corporation’s transmission system are several strategically located natural gas storage sites, which have the capacity to provide operational flexibility along with a reliable and competitive natural gas storage service. Transportation and storage revenues of $62 million, for the three months ending June 30, 2024, are $3 million higher than the same period in 2023. Higher delivery service revenues resulted from increased contracted demand volumes, as customers are executing higher contract demand services to meet their operating requirements. In addition, a 2 per cent average rate increase for transportation and storage services was implemented effective April 1, 2024, to address expansion of the transmission system and meet growing demand for natural gas services in Saskatchewan. Lower contracted demand volumes on export services in 2024 partially offset the favourable results as low natural gas prices and lower price differentials between Eastern and Western Canada reduced incentives for customers to utilize export services and supply Eastern Canada with natural gas.
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