COVID-19 and oil collapse are risks for Saskenergy, but no hike to rates
Saskenergy won’t hike gas rates this year despite “extremely impactful situations” due to COVID-19 and the oil price collapse.
Bronwyn Eyre, minister responsible for Saskenergy, made that commitment as the natural gas transmission and distribution utility presented its 2019-20 annual report on Tuesday.
With $66 million in net income, Saskenergy reported its lowest profits over at least the past five fiscal years. That was before market value adjustments, which shaved off another $23 million due to price movements that changed the value of contracts. The 201819 figure was $134 million before adjustments.
Eyre still cast the results as strong for Saskenergy, saying they represent a return to normal after an unusual 2018-19.
“It’s important to look at the $66 million in recorded income as really much more in the normal, traditional range,” Eyre said. “In 2018-19, it was an extremely unique year. As you’ll recall, it was a bitterly cold winter.”
Gas usage varies wildly with the elements, and the 2019-20 fiscal year wasn’t as chilly.
The annual report pegged the financial impact of the warmer weather at about $15 million compared to the year before.
Eyre boasted about Saskenergy’s $330 million in capital spending to boost storage and delivery capacity. She noted that demand from industrial transmission customers increased for the fifth straight year, partly due to gas usage at the new Chinook Power Station. Daily natural gas consumption broke records on three days. The highest was Jan. 15, with a peak of 1.55 petajoules.
One petajoule, or one quadrillion joules, is equal to about 31.6 million cubic metres of natural gas.
Eyre noted the current commodity rate for gas is the lowest in 20 years and the third-lowest in Canada. She said there are no plans to hike it.
“No rate change is occurring in 2020,” Eyre said.
“That assists customers to manage their energy dollars during these unprecedented times. So let me be clear, no rate change is being contemplated this year.”
Both COVID-19 and the oil downturn are expected to create “uncertainty” for Saskenergy over 2020-21. Ken From, president and CEO of Saskenergy, said the Crown utility’s clients could pull back on capital spending. That could affect demand going forward.
There are also credit risks as customers bear the brunt of the economic downturn. Saskenergy, like other utilities, has given customers a deferral on their energy bills and it’s anyone’s guess how many will default.
The oil collapse also could cut gas supply. About 60 per cent of natural gas in Saskatchewan comes from associated oil production. Rock-bottom crude prices are devastating drilling activity and prompting producers to shut down wells.
That could result in higher natural gas prices, the report noted. But From said Saskenergy’s supply will remain secure.
“With the reduction in drilling for oil and the associated gas production, we are seeing a bit of a slowdown there,” he said. “That’ll be a normal decline, 10 per cent perhaps, which for us is not a large deal at all.
“With the diversity that we have with receipt points to bring gas into the system. We’re not concerned at all about the security of supply,” he added.
The annual report did not mention the 17-day Crown-sector strike that ended in October. Officials said it did not have a significant impact and did not lead to major delays.
Saskenergy sustained writeoffs during the 2019-20 fiscal year: $9 million spent on a storage project in a salt formation north of Regina; and the other writeoff came as Saskenergy discovered it could not produce all of the gas from one of its storage facilities before its decommissioning date.