Vector Annual Report 2021

VECTOR ANNUAL REPORT 2021 /

Notes to the Financial Statements

7. Revenue continued 7.1 Revenue from contracts with customers continued

Revenue streams

Satisfaction of performance obligation

Regulated networks – third party contributions

The group receives contributions from residential and commercial customers towards the construction of distribution system assets in the Auckland electricity or gas distribution networks.

Third party contributions are recognised as revenue over time, reflecting the percentage completion of the underlying construction activity. The group recognises a contract liability to account for consideration received from the customer but where the agreed construction activity is not completed; and conversely a contract asset is recognised to account for activities completed not billed. The transaction price for third party contributions is netted against estimated rebates payable to commercial customers. A contract liability is recognised to account for payments received from customers for construction activities completed but who are eligible for rebates in the future based on completion of developments. In the event that a contract combines a contribution towards an agreed construction activity with sale of electricity or gas distribution services, the group unbundles the contract into two performance obligations and recognises revenue in accordance with each obligation’s accounting policy.

Gas trading sales

Gas trading sales comprises predominantly three revenue streams: sale of natural gas, and distribution and sale of LPG.

Revenue streams

Satisfaction of performance obligation

Sale of natural gas

The group receives revenue from business customers for providing a supply of natural gas over a contracted time period.

Revenue is recognised over time that corresponds with the customer’s consumption of natural gas and measured at the transaction price of the contract. The transaction price for a gas supply contract includes variable consideration in the form of indexed pricing, volume pricing, and take or pay arrangements. The group estimates the amount of variable consideration present in each contract using the expected value method. Customers are billed monthly. A contract asset is recognised to account for natural gas supplied but not billed to the customer at balance date. Revenue is recognised at a point in time when LPG is delivered to a customer’s site. Billing to a customer occurs after completion of deliveries and at the end of each month with payment terms ranging from 60 days to 90 days. Revenue is recognised over time in line with a customer’s consumption of monthly tolling and storage volumes and measured at the transaction price of the contract. The transaction price for a monthly tolling and storage contract includes variable consideration in the form of volume pricing and take or pay arrangements. The group estimates the amount of variable consideration present in each contract using the expected value method.

Sale of LPG

Sale of LPG comprises bulk LPG sales to commercial customers and bottled LPG sales to both commercial and residential customers.

Distribution of LPG

The group provides services in the areas of bulk LPG storage, distribution and management.

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