COVID-19 crisis hasn’t affected SaskEnergy’s demand much

You don’t use your furnace much in spring or summertime, and as a result, SaskEnergy has not seen much of an impact on its demand for natural gas since the COVID-19 crisis which took hold in mid-March.

Minister Responsible for SaskEnergy Bronwyn Eyre and SaskEnergy president and CEO Ken From presented the Crown corporation’s 2019-2020 annual report, ending March 31, 2020, on July 7 in Regina.

article continues below

Eyre pointed out that over the last year, SaskEnergy had the lowest price for natural gas for its customers over the last 20 years, and that was the third lowest rate in the country.

Eyre said, “Let me be clear. No rate change is being contemplated this year. And let's not forget that we implemented that lowest commodity rate in 20 years, last year, which is an important commitment, when you consider the effect of the federal carbon tax which negated that decrease.

“Our decrease also neutralized the effect of the carbon tax. This, as many gas companies have increased rates to make up for the carbon tax. We at SaskEnergy went the opposite direction. We decreased rates. That is something we should be proud of.”

Meanwhile, demand from industrial transmission customers had increased for the fifth straight year.

“With nearly 2,500 distribution customers added in 2019-20, the corporation expects to reach the milestone of 400,000 customers in the next fiscal year. That's why it is vital that SaskEnergy continue to focus on its core operation system expansion and safety and integrity efforts in 2019-20,” Eyre said.

SaskEnergy set a consumption record three days in a row this past January, with January 15 culminating in 1.55 petajoules of gas transmitted through the system.

Individual residential customers are becoming more efficient, with higher efficiency furnaces, better insulation and windows. The result has been a two per cent decrease in residential annual average usage.

SaskEnergy had earnings of $66 million. That was a decrease from the previous year’s $134 million, but From noted that in the past few years, natural gas pricing in Alberta had gone into negative pricing numerous times. As a result, SaskEnergy was able to take advantage of those low prices.

Eyre said the $66 million in earning was “a return to traditional earning levels after a record high year in 2018-19.”

As a result, a $24 million dividend was paid to the Crown Investments Corporation for the 2019-2020 fiscal year.

The 20-inch diameter, 62-kilometre long South Saskatoon Transmission Line roughly double the utilities capacity south and east of Saskatoon. It was completed over two years. “It is the first step in a two-part plan to increase industrial capacity for new residential, small business and large industry customers in the Saskatoon area, as well as the surrounding areas such as Humboldt and even as far away as Prince Albert,” the annual report noted.

The impact of the COVID-19 crisis, and its associated crash of oil demand resulting in turmoil in oil and gas production has not gone unnoticed. Most of Saskatchewan’s natural gas production comes from “associated natural gas,” as in gas that is produced when oil is produced.

Eyre, who is also Minister of Energy and Resources, said, “In addition to the global economic impact of the COVID-19 pandemic, the oil industry, of course, has experienced a significant downturn, which has a number of implications for SaskEnergy as our province and our people continue to show their resilience through these challenging times SaskEnergy's efforts to safely deliver reliable and affordable natural gas has become more important than ever.”

Drilling for oil in Saskatchewan has come to an absolute standstill since the pandemic hit. While it usually shuts down for spring breakup, in May and June, the number of active drilling rigs typically rises to 30 to 55 during June and July. As of July 7, there was one rig drilling in Saskatchewan, and it was looking for helium.

The result is that natural declines in oil production will result in declines in gas production, according to From. SaskEnergy is looking at a 10 per cent decline in that regards, but given that the TC Energy mainline runs through Saskatchewan and SaskEnergy has about a half dozen receipt points from Alberta for natural gas, From did not anticipate a problem with gas supply.

“It’s all about the long term, with SaskEnergy,” Eyre said, noting that contracts are entered into years before to anticipate vagaries in the market. “It’s never a matter of the immediate drilling taking place, because the contracts are a security that have been in place many, many months prior.”

On March 18, SaskEnergy implemented an interest waiver to help out customers with an outstanding balance. Eyre said, “At the close of the six-month program any outstanding account balance can be paid back over the following 12 months, through equal monthly installments, with no additional interest charged on those amounts. This provides customers with a period of 18 months to recover from the impact of the pandemic to their finances.”

From noted that current deliveries haven’t been affected much, but prospective increased need for natural gas may be put off as projects are put on hold due to the oil crisis this year. SaskEnergy continues to be in contact with those customers to see how their needs will be affected.