Delivery Revenue
Weather
1,200
The Corporation earns delivery revenue based on the volume of natural gas delivered to distribution customers plus a basic monthly charge. Delivery revenue is highly dependent on weather as natural gas is primarily used as heating fuel by residential and commercial customers during the cold winter months. Delivery revenue of $119 million was $9 million below 2014 as the first six months of 2015 were 2% warmer than normal, based on weather data for the past 30 years, compared to 18% colder than the same period in 2014. The warmer weather decreased customer consumption compared to 2014 resulting in lower delivery revenue, which was partially offset by a delivery rate increase effective September 1, 2014 and increased customer growth.
1,000
YTD 2015 - 2% warmer than normal
YTD 2014 - 18% colder than normal
800
600
400
200
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Jan Feb Mar Apr May Jun Jul
Aug Sep Oct Nov Dec
2015 Actual
2014 Actual
2015 Budget
During the second quarter of 2015, delivery revenue of $39 million was $4 million below the second quarter of 2014. There was a 2 PJ decrease in the volume of natural gas delivered to customers, a result of warmer weather in 2015, slightly offset by the prior year’s third quarter rate increase.
Transportation and Storage Revenue
The Corporation’s subsidiary, TransGas, provides receipt and delivery transportation through the use of the TransGas Energy Pool (TEP), a notional point where producers, marketers and end-users can match supplies to demand. On the receipt side, the Corporation offers both firm and interruptible transportation from points of receipt to TEP. On the delivery side, the Corporation offers firm and interruptible service for gas delivered from TEP to consumers within Saskatchewan or for export. Integral to the Corporation’s transmission system are several strategically located natural gas storage sites with the capaci ty to provide operational flexibility along with a reliable and competitive natural gas storage service. Year-to-date, transportation and storage revenue of $60 million was $11 million above the same period in 2014. On a quarter- over-quarter basis, transportation and storage revenue of $30 million was also $4 million above the second quarter of 2014. This was primarily due to higher contracted demand volumes combined with a rate increase effective January 1, 2015, resulting in higher direct and receipt revenue, and increased recoveries for its service to import natural gas from Alberta. The higher direct and receipt revenue is a result of a number of customers moving from interruptible service to firm delivery contracts during the second quarter of 2014. When customers transfer from interruptible to firm contracts it increases demand revenue for TransGas and also improves revenue certainty which is more supportive of required pipeline expansions. Conversely, storage revenue was down slightly from the same period last year due to customer preference to buy/sell at the market rather than use storage, a result of the low natural gas price environment.
Customer Capital Contribution Revenue
The Corporation receives capital contributions from customers in exchange for the construction of new, customer-specific service connections. These contributions, less potential refunds, are recognized as revenue once the related property, plant, and equipment is available for use. The volume and magnitude of these contributions can vary significantly period over period as varying factors influence their receipt. Generally, customer capital contributions mirror the projects themselves – those related to the transmission system tend to be larger but less frequent than contributions related to the distribution system. Customer capital contribution revenue of $5 million, driven by the year-to-date distribution system customer connections, was $4 million below the same period last year due to the expected decline in customer connection activity. Similarly, the second quarter customer capital contribution revenue of $2 million was $2 million lower than 2014, also related to the decline in distribution system customer connections.
Other Revenue
Other revenue primarily consists of revenues from natural gas processing operations and royalty revenues. The Corporation’s natural gas processing operations include gas processing at two separate gas plants and the sale of natural gas liquids from the processing operations. Royalty revenue is generated from a gross overriding royalty on several natural gas-producing properties in Saskatchewan and Alberta. Other revenue of $4 million for the first six months of 2015 is $3 million lower than 2014 as a result of lower natural gas liquid prices. The $2 million for the second quarter of 2015 was $1 million lower than 2014, also due to the decline in natural gas liquid prices.
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2015 SECOND QUARTER REPORT
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