SASKENERGY 2018-19 ANNUAL REPORT
Other Revenue Other revenue primarily consisted of gas processing fees and natural gas liquid sales from two natural gas liquid extraction plants. Compression and gathering service revenue comprised the remaining balance of other revenue. Other revenue of $4 million for the 12 months ending March 31, 2019 was $3 million lower than 2017-18 as the Corporation sold the two natural gas liquid extraction plants, effective October 1, 2018. 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 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 natural gas system grows as the kilometres of gas lines, number of service connections, and amount of compression equipment increases. Additional regulatory requirements and changing public perceptions have resulted in accelerated prevention, detection and mitigation initiatives, adding pressure to transmission, distribution and storage rates. Other expenses, net finance expenses and other gains (losses), as reported in the consolidated financial statements, were as follows:
(millions)
March 31, 2019
March 31, 2018
Change
$
89 $
Employee benefits
86 $
(3)
161
Operating and maintenance Depreciation and amortization
127 100
(34)
99 15
1
Saskatchewan taxes
14
(1)
2
Impairment loss on trade and other receivables
5
3
$ $ $
366 $ 52 $ 11 $
332 $ 48 $ (13) $
(34)
Net finance expenses Other gains (losses)
(4)
(24)
Employee Benefits Operational and business reviews have identified moderate full-time equivalent increases in key strategic areas as part of the Corporation’s success in meeting current and future business needs. In addition, the Corporation began to transition functions currently being performed by contracted resources to full-time equivalent positions in order to bring key skill sets into the organization and reduce overall resourcing costs. Ongoing efficiency efforts and management of planned overtime and vacancies resulted in a reduction of full-time equivalents in some areas; however, employee benefit costs of $89 million were $3 million higher than 2017-18 primarily due to the cost of transitioning some contract resources to employees.
Operating and Maintenance Higher transportation on the TCPL mainline system resulted in an increase in operating and maintenance expenses to $161 million in 2018-19, $34 million higher than in 2017-18. With the growing demand for imported natural gas from Alberta, the Corporation’s transition to a net importer of natural gas has resulted in more natural gas being transported and over greater distances. Rate increases on the third-party transportation systems are also increasing transportation expenditures. Safety and integrity expenditures increased in 2018-19, compared to the prior year, to address increasing regulatory requirements and growing transmission and distribution systems. SaskEnergy was able to mitigate the impact of higher transportation and safety and integrity expenditures through continued efficiency efforts and cost saving measures.
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