MANAGEMENT’S DISCUSSION AND ANALYSIS
Decision Making Process Despite constant demands for change, the decision- making process grows in importance since a corporation operates by people making decisions. The entire decision making process is dependent upon the right information being available to the right people at the right times. Managers plan, organize, staff, lead, and control teams by executing decisions. The effectiveness and quality of those decisions determine how successful a corporation will be. For making routine operational decisions, related to well-known and well-defined problems, standard operating procedures are applicable. This type of decision may be made by managers at lower organizational levels, immediate managers, and even non-managers. For adaptive decision making, referring to moderately unspecified problems and alternative solutions, analysis of critical factors are pertinent. These decisions are mostly made by functional managers at the middle management level. For innovative or strategic decisions, referring to unusual and unspecified problems, decisions are made by managing authorities and managers at higher organizational levels. The Corporation has appropriate decentralization and autonomy in decision making along with clearly defined tasks, controls, and accountability of each employee. In addition to the top strategic risks identified above, the Corporation’s financial results are subject to the following risks: Climate Change Climate change is considered a global, community and corporate concern. Climate change also proposes a significant risk to many governments, resulting in the passing of new climate change legislation. The legislation may result in additional costs and reduced profits for corporations as guidelines relating to emission levels and energy efficiency become more stringent. In the electricity industry, new climate change guidelines are creating a trend towards a transition from coal-fired electricity units to natural gas fired units. With respect to SaskEnergy, increasing construction of natural gas facilities will affect the Corporation and will generate an opportunity to provide incremental natural gas transmission service.
Recent developments surrounding the implementation of a carbon tax in the province of Saskatchewan will take effect April 1, 2019. The Corporation itself has limited exposure to the tax as internal charges related to the tax will be recovered through rates charged to customers. The Corporation will, however, calculate consumption from customer meter points and apply the tax to customer bills. The Corporation will be responsible for monthly remittances to Canada Revenue Agency, similar to collecting and remitting the Goods and Services Tax. Physical risks associated with climate change may include an increase in extreme weather events such as heavy rainfall, floods, wildfires, extreme winds and ice storms, or changing weather patterns that cause ongoing impacts to seasonal temperatures. Natural gas transmission and distribution assets above ground or on water crossings are exposed to extreme weather events. Managing physical risks involves preparing for these extreme weather events. Regular maintenance and insurance focus on mitigating extreme conditions. A structured capital expenditure program aimed at system integrity and safety ensure the long-term strength of the Corporation’s natural gas system. The majority of the Corporation’s natural gas infrastructure is underground, which also helps mitigate the effects of extreme weather conditions. Weather SaskEnergy has designed its transmission and distribution system, and operating plans, based on a severely cold winter that is expected to occur once every 20 years. Financial projections, as well as commodity and delivery rates, are based on a “normal” or typical winter. To the extent that weather differs from normal, SaskEnergy will generate more revenue (colder than normal) or less revenue (warmer than normal). A severely cold winter can also result in significantly higher operating costs, as such a winter puts more stress on equipment and requires more labour and material to manage. SaskEnergy has mitigated some of the risk of weather by increasing the amount of delivery revenue recovered through the basic monthly charge to customers but still retains a significant amount of this risk.
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