SaskPower’s net income drops significantly in ’21-22

The state of SaskPower’s finances dimmed during the 2021-22 fiscal year.

The Crown corporation’s annual report, released Wednesday, showed a net income of $11 million — down significantly from $160 million in the previous year.

“These modest earnings were anticipated as our company continued to defer increasing customer electricity rates in the face of rising cost pressures due to capital spending and higher fuel and purchased power expense,” the report said.

According to the minister responsible for SaskPower, Don Morgan, a lot of that drop was due to the drought.

Water levels in Lake Diefenbaker were too low to produce as much hydroelectricity, so SaskPower had to buy more coal and natural gas to make up the difference — and had to pay the carbon tax on those as well.

“I think it shows the vulnerability we have to weather conditions as well as the good work that SaskPower and its partners have done with regard to diversifying the electrical supplies that we have,” Morgan said during a media conference.

The company also saw higher expenses because power demand returned to more normal levels in the year, which the government believes is a strong indicator of economic recovery.

In 2021-22, SaskPower did a lot of work on expanding its power capacity from renewable resources – the first-ever utility-scale solar project in the province came on line, the largest wind generation facility was commissioned, and competition was announced for the next-largest solar facility.

“SaskPower is on track to reduce greenhouse gas emissions by 50 per cent from the 2005 levels by 2030. This exceeds the previous goal of 40 per cent over the same time frame,” said Morgan.

Part of the push toward more renewables is the federal timelines for provinces to get to net zero, which is proposed to move from a 2050 deadline to 2035.

“It’s going to make it more and more challenging for us as a utility to continue to deliver our mandate, which is reliable, sustainable, cost-effective power,” said Rupen Pandya, the new CEO of SaskPower.

Morgan said it’s just not possible.

“What (federal authorities) are imposing on SaskPower is something that’s impossible to comply with and it’s going to make some difficult times for our province,” said Morgan.

Morgan said he hopes the provincial government can sit down with federal officials and get them to understand the issues Saskatchewan faces, which include not having many options to get baseload power from renewables.

“I’m a Canadian, I’ve always been a Canadian, a proud Canadian (and) I don’t like having this level of disagreement with the federal government. I think most Saskatchewan residents feel the same way,” said Morgan.

With the problems hydro created last year and the possible new regulations, it may be making nuclear a more attractive option for SaskPower. Saskatchewan is in the midst of a years-long process to evaluate the feasibility of putting small modular reactors (SMRs) into Saskatchewan’s power mix.

“That is really the solution to the problem. There needs to be a non-emitting baseload that backstops the intermittent nature of renewables for us to move forward,” said Pandya.

Saskatchewan is expected to make a decision on whether to use SMRs by 2029 and could have the first in place by 2034.

There are a lot of regulatory hoops to jump through, particularly because Saskatchewan has never had nuclear before. But Morgan seemed interested in speeding up the timeline, if possible.

“Ontario’s goal is to have their facilities (by) late 2028 (or) early 2029. If we could be somewhat closer behind that, it would be wonderful,” said Morgan.

SaskPower reported $2.885 billion in revenue in the 2021-22 fiscal year, up from $2.771 billion in 2020-21. Expenses were $2.874 billion, an increase from $2.611 billion in the previous year.

The company’s capital expenditures increased from $693 million in 2020-21 to $922 million last year. Projects included $385 million to repair and upgrade aging generation, transmission and distribution infrastructure, and $490 million on growth projects such as new generation facilities and expanded grid capacity.

The corporation’s financial picture could change next year if a proposed rate hike is approved.

“With the provincial economy showing signs of recovery, we have turned our attention to the need to solidify our company’s financial position,” the report said. “This has resulted in SaskPower proceeding with a multi-year rate application — our first since our last rate increase in March 2018.”

SaskPower has asked the Saskatchewan Rate Review Panel for average rate increases of four per cent starting Sept. 1 and four per cent as of April 1. The panel is expected to deliver its response this month.

Morgan said he wasn’t in a position to comment on that as he said SaskPower is working through a “variety of options” with the rate review panel.

The increase this year would add $60 million to the Crown’s revenues. If the increase isn’t approved, Morgan said that would have to be added to the provincial deficit.

— With files from 980 CJME’s Lisa Schick