SaskPower & SaskEnergyBudgetary Submissions

GSPP 835 Alternative Saskatchewan BudgetProf. John Wright

Sean McConnachie 200 270 499

Wednesday, April 15th, 2009

INDEX

SaskEnergyMandate Governance and StructureHistoryCorporate Overview

Non-Financial Financial

SaskPowerMandate Governance and StructureHistoryCorporate Overview

Non-FinancialFinancial

Strategic IssuesPolicy ActionsCommunications StrategyConclusion

SASKENERGY

Mandate

The focus of SaskEnergy, as outlined in the SaskEnergy Act, is the distribution of natural gas to Saskatchewan residents. This was the original mandate placed on SaskPower for the provision of natural gas services in the 1950s. Though the basic mandate of the corporation, and its services, has not changed, they have become more complex over time. The main expansion of mandate has been into the areas of reliability and international market availability. Further, based on political influence, since the mid 1990s, has become ever more focused on insuring that Saskatchewan consumer rates are affordable.

Governance and Structure

Like most other crown corporations in Saskatchewan, SaskEnergy is a subsidiary of the Crown Investment Corporation (CIC) and its subject governance regulations and policies. The governance of SaskEnergy is also subject to the SaskEnergy Act as stipulated by the legislature of Saskatchewan. The main governance structures of SaskEnergy are its Board of Directors, Executive, and the CIC (Appendix A).

The governance structure of SaskEnergy also incorporates the various subsidiary crowns that operate both within and outside of Saskatchewan on behalf of SaskEnergy. Table 1 lists these subsidiaries and outlines their activities.

Table 1: Subsidiary Components of SaskEnergySubsidiary Crown ActivitiesTransGas Limited - The transmission and storage of natural gas extracted from

Saskatchewan for the purpose of international trade.Bayhurst Gas Limited - The production and selling of natural gas for the Saskatchewan

market- the holding of gas reserve properties in Saskatchewan and Alberta

SaskEnergy International Incorporated

- Holds SaskEnergy investments and assets in the Chilean and Mexican markets.

Swan Valley Gas Corporation

- Ownership of transmission services in Manitoba.

Saskatchewan First Call Corporation

- Provides information to the public as to the location of oil and gas infrastructure in the province.

SaskEnergy Nova Scotia Holdings Ltd.

- 50.1% equity share in Heritage Gas Limited in Nova Scotia.

History

The history of natural gas transmission and distribution within the province is relatively short in comparison to the other major crowns. Not until the late 1940s and early 1950s did natural gas present the possibility of provincial wide distribution as many of these companies began to expand their markets outside of their localized markets. The issue of provincial distribution and use grabbed the government’s attention and resulted in the newly created Saskatchewan Power Corporation (SaskPower) entering the gas market. As it did with the electivity generations, transmission, and distribution, SaskPower began its process of taking over all components, with the exception of extraction, of the provincial gas market.

The operations of the gas utility under SaskPower from the 1950s to the 1980s saw the rise of consumer demand falling suit with the expansion of provincial distribution systems entering all major urban areas and then spreading to rural markets. Not until the 1980s did the major possibility of natural gas exporting become present with the finding of some of the largest deposits in North America. As the export market in Saskatchewan continued to develop, the government of Saskatchewan created TransGas in 1987 to provide greater access to interprovincial and American markets for firms operating in Saskatchewan.

In 1988 the domestic natural gas distribution services of SaskPower and TransGas where packaged into the new corporation of SaskEnergy. The purpose of creating this new entity was to privatize it. However, the reasoning for this policy action was met with extreme public hostility and privatization was abandoned. With the passing of the SaskEnergy Act, 1992, the government of Saskatchewan established SaskEnergy as the sole transmitter and distributor of natural gas and propane within Saskatchewan.

Corporate Overview

Non-Financial

SaskEnergy currently has a highly unionized workplace, comparable with that of other provincial crowns. The major union that represents all non-administrative, policy and management staff is that of the Communications, Energy and Paperwork’s Union (CEPU), Local 649. As will be noted later, this same union represents many of the workers at SaskPower. The CEPU represents roughly around 900 workers within SaskEnergy with a collective bargaining agreement that expires in 2010.

Based on its balanced scorecard, SaskEnergy is meeting or surpassing many of its employee related targets. For the previous fiscal year, SaskEnergy met or exceeded 6 of its 11 targets on employment, with its strongest achievements in employee safety and employee satisfaction. According to a survey conducted by the Hay Group in 2007, overall employee satisfaction with the corporation and was 73%.

SaskEnergy is performing quite well in the areas of service and product provision as all but one. Based on its reliability index, which measures measure response times, outages, and planned maintenance among others, TransGas exceeded its targets, while SaskEnergy was under. One of SaskEnergy’s strongest indicators has been its level of consumer satisfaction with the crown, with a 95% approval rating from their consumers. To further this, an Ipsos-Reid survey conducted in 2007 indicated that SaskEnergy received the highest approval ratings out of all major gas suppliers in Canada.

The demand side market composition for the crown over the last five-years is provided in Graph 1. Over the past decade, while residential and farm composition of the overall market has remain consistent, while industrial gas usage has increased.

2007 2006 2005 2004 2003 2002 2001 2000 19990

10

20

30

40

50

60

70

80

Graph 1: SaskEnergy - Distribution and Transmission volumeshart Title

Residental Commercial Farm Industrial

Financial

Concerning financial indicators of success, the scorecard examines net income derived from current investment and new operations, and the employment levels that are generated from these initiatives. For 2007, the corporation surpassed its targets within the income category by almost $1million, but was well under its target for employment generated by 30 positions.

Though SaskEnergy has met more than half of their targets in the other three areas, they have fallen below concerning strategic initiatives. Under the strategic component, SaskEnergy has only met 8 out of 18 targets, largely within the areas of financial viability and community investment. Most notably are the corporation’s below par rates of return of equity at 15.4%.

Based on its third quarter report, SaskEnergy is above its previous year revenue levels by $40million. Graph 2 highlights the current composition of these revenues. As can be seen within the graph, exports to other provinces and the United States have become the largest revenue source of SaskEnergy representing approx 50%. However, this is not indicative of the overall distribution of revenue source of SaskEnergy over the past decade. Prior to 2005, provincial delivery represented between 50 and 60% of revenues with volume of gas provided to the domestic market was the main driver for revenues.

27%

50%

14%

6% 2% 1%Graph 2: SaskEnergy Revenues, 2008

Commodity sales

Gas marketing sales

Delivery

Transportation and storage

Revenue from municipal-ities

Other

Graph 3 highlights the composition of SaskEnergy’s expenditures as of September 2008. Since the beginning of SaskEnergy’s expansion into major export activities, commodity costs and marketing costs have been the largest components of expenditures. Prior to 2006, the largest cost driver was that of operating and maintenance expenditures. However, it needs to be noted that prior to 2006 interest payments and amortization represented nearly 40% of all expenditures. Currently the main driver behind operating expenses is that of wages and benefits paid out to employees, representing 67% of these costs.

31%

46%

11%

4%5% 2% 1%Graph 3: SaskEnergy Expenditures, 2008

Commodity cost of gas soldGas marketing costsOperating and Main-tenanceInterest paymentsAmortizationPayments to municipali-tiesProvincial taxes

The main financials of SaskEnergy are provided in Table 2. Though SaskEnergy has run profits after dividend payments between 2004 and 2007, the Crown may have a net loss in retained earnings based on current dividend obligations. This may change, as revenues are usually much higher during the winter

months. An increase in net income realized in 2007 was due to decline in natural gas costs associated with purchasing. This factor may also result in higher net income in 2008 relative to current projections.

Table 2: SaskEnergy Main Financial Indicators(millions of dollars)

2008* 2007 2006 2005 2004Revenue 892 1171 1254 1299 994Expenditures 883 1,083 1,201 1,222 886

Net income 9 88 53 77 108Dividends 37 53 35 29 70Retained Earnings -28 35 18 48 38

Return on Equity - 6.2% 4.0% 6.0% 8.7%Percent debt ratio - 48.9% 77.4% 131.2% 27.8%* as of 3rd Quarter

Due to the relative size of SaskEnergy, it also holds the largest amount of assets. Appendix B shows the development of the value of SaskEnergy’s held assets over the past decade. Currently the net worth of SaskEnergy’s assets is $1,281million with transportation and storage representing the largest proportion at $469million.

SASKPOWER

Mandate

As stipulated by the 1929 Power Commission Act, the main policy purpose the Saskatchewan Power Corporation (SaskPower) is the transmission and distribution of electricity. With the increase in electricity accessibility and evolving consumer demands, the mandate of SaskPower has evolved to one that is focused on consumer satisfaction, electrical sustainability, and electrical reliability.

Governance and Structure

As based on the governance regulations and policies that have been created and prescribed by CIC, SaskPower's governance structure is very similar to that of SaskEnergy. As outlined within the relevant amendments of the Power Corporation Act and the Crown Corporations Act, the main governance mechanism of SaskPower is its Board of Directors.

SaskPower, and its governance and administrative structures, also oversee the operation of its two subsidiary crowns. These subsidiaries and their activities are outlined in Table 3.

Table 3: Subsidiary Components of SaskPowerSubsidiary Crown ActivitiesSaskPower International - Holds ownership interests in three generation facilities: PCS

Potash Division (Saskatchewan), Muskeg River Mine (Alberta), and Centennial Wind Power Facility (Saskatchewan).

NorthPoint - Provides generation and load management services for SaskPower as well as its export and import functions.

- Also manages SaskPower’s natural gas supplies and generation facilities.

History

Prior to the establishment of SaskPower, electricity generation and transmission was conducted by private firms, municipal governments, and co-operatives. The first electrical generation facility was created by a private company, the Regina Electricity Light and Power Company, in 1890 (Saskatchewan 2009 and Champ 2001). By the end of the First World War 20% of the province’s population was receiving electricity from a verity of private and municipal providers (IEEE Canada 2000).

Based on the findings of the Saskatchewan Power Resources Royal Commission the Saskatchewan Power Commission was created in January 1929 by the passing of the Power Commission Act. The Royal Commission recommended that the province establish a regulatory agency to oversee the production and transmission of power across the province (IEEE Canada 2000). By 1948, The Commission was operating 35 generation stations with 8.800 Kilometres of transmission lines surviving both urban and rural communities (Saskatchewan 2009). Once this consolidation was achieved, the government transformed the Commission into the Saskatchewan Power Corporation through the Rural Electrification Act, 1949.

The main objective of rural electrification would be almost completely met by 1961 as nearly 58,000 rural and farm residence receiving electricity from the grid. From this point forward, SaskPower began to concentrate their efforts towards meeting future electricity demands through the establishment of new generation facilities. From this, CIC began to focus on the price rate of power being provided by SaskPower resulting in the creation of the Saskatchewan Rate Review Panel.

Corporate Overview

Non-Financial

Currently SaskPower employs 2,500 people on a fulltime basis with all non-administrative, policy and management staff being represented by the Communications, Energy and Paperwork’s Union (CEPU), the Local 649. The employees that are represented will be entering into a new collective bargaining process this year.

Through their balanced scorecard, SaskPower has largely focused on employee safety, engagement, and diversity. For 2007, SaskPower was under its targets for overall employee safety with an injury severity rate of 59 and frequency rate of 1.7. SaskPower, however, meet or exceeded its employment engagement indicator targets. It also met most of its diversity targets.

Though SaskPower largely satisfied its targets for employees, it missed all but one on its consumer scorecard. Consumer satisfaction was five points higher than its targets as based on a customer satisfaction index created by SaskPower. Conversely, SaskPower missed its targets regarding system and service reliability and annual rate increases.

SaskPower generation composition is provided in Graph 4. This highlights total grid electricity by generation source over the past decade. As Graph 4 shows, two major trends have been occurring the amount of imported energy provided on to the grid has decreased while purchased power has increased. Graph 5 shows electricity consumer composition over the past decade. This shows that there has not been a significant change in the market composition. Current power generation represents almost 40% of all electricity generated or purchased by SaskPower.

2007 2006 2005 2004 2003 2002 2001 2000 1999 19980

2000

4000

6000

8000

10000

12000

14000Graph 4: SaskPower Generation by source

Purchaced Power Coal Gas Hydro Wind Imports and Other

2007 2006 2005 2004 2003 2002 2001 2000 1999 19980

1000

2000

3000

4000

5000

6000

7000

Graph 5: SaskPower Consumption by source

Residental Farm Commercial Oilfield Power Reseller

Financial

SaskPower, as the largest utility provider in Saskatchewan, is also the largest crown financially, with annual revenues over $1.5billion in 2007 and $1.2billion in the 3rd quarter of 2008. SaskPower, as the sole distributor and major generator derives the largest portion of its revenues from the provincial market at 87% of total revenues, as is identified by Graph 6. This heavy reliance on the domestic market is largely a result of the corporation’s inability to sell a significant portion of its electricity to other jurisdictions.

87%

2%

8%3%

Graph 5: SaskPower Revenues by source

Domestic Electricity Sales

Exports

Electricity Trading

Other Revenues*

Also as the largest subsidiary of CIC, SaskPower has the largest expenditures. As of the 3rd quarter of 2008, SaskPower's cumulative direct expenditures were $1.1billion. As Graph 7 indicates the largest component of the crowns expenditures are targeted towards the purchasing of fuel and electricity from other provincial providers. Also if is the costs of direct operations and maintenance. The major cost

driver for the crown dealing directly with generation is the fuel for and maintenance of solely owned generation facilities within the province.

36%

28%

16%

11%

7% 2%Graph 6: SaskPower Expenditures by source

Fuel and Power PurchasedOperating , maintenance and administrationDepreciationFinance changesElectricity Trading CostsTaxes

Currently the finances of SaskPower are sound and have resulted in large dividends being provided to the provincial government, without significantly reducing the operating capital of the firm. Within the financial category, the firm was able to meet all financial targets, resulting in a strong financial finish in 2007. Table 4 further illustrates SaskPower its finances since 2004.

Table 4: SaskPower Main Financial Indicators(millions of dollars)

2008* 2007 2006 2005 2004Revenue 1102 1583 1456 1326 1264Expenditures 1019 227 18 55 51

Net income 83 1,356 1,438 1,271 1,213Dividends 38 97 61 85 59Retained Earnings 45 1,259 1,377 1,186 1,154 Return on Equity - 9.3% 6.4% 9.2% 4.8%Percent debt ratio - 59.7% 61.0% 60.9% 58.2%

* as of 3rd Quarter

Due to the relative size of SaskPower, it also holds the largest amount of assets. Appendix B shows the development of SaskPower’s held assets over the past decade. Currently the net worth of SaskPower’s assets is $6.7billion with generation representing the largest proportion at $3.4billion.

Strategic Issues

Due to the similarities between the two crowns, the strategic issues affecting each crown will be examined as a single unit.

Currently SaskEnergy and SaskPower are confronted with many issues that will affect the vitality of natural gas and electricity sectors within the province. Before the major issues that are facing each corporation can examined, an outline of their Strengths, Weaknesses, Opportunities, and Threats (SWOT) is provided in Appendix C.

From this SWOT analysis three major issues have been identified that will affect Saskatchewan not only in the short-term, but in the log-run as well, three issues that have been highlighted in Appendix C.

POLICY ACTIONS

A. The Amalgamation of SaskPower and SaskEnergy

Recommendation:

It is recommended that the Crown Investments Corporation amalgamate SaskEnergy and TransGas under the corporate structure of SaskPower. The amalgamation will involve the removal or integration of many of the components of SaskEnergy’s corporate structure. SaskEnergy and TransGas will retain their corporate names and identities, but will be part of the crown structure of SaskPower. The new structure of SaskPower after this amalgamation is provided in Appendix E. The amalgamation of the two crowns is to be completed by the beginning of the 2010-2010 fiscal year with all necessary preparation to be undertaken this fiscal cycle.

Alternatives:

Status quo: The maintaining of SaskEnergy and SaskPower as separate entities under CIC. This would incur zero additional cost over the short-term, as no direct restructuring would be required. However, this would propitiate the inefficiencies and reduced effectiveness that is occurring under the current structure.

Outcomes and Implications:

The main implications from amalgamation will be the increase in efficiency and effectiveness through the utilization of larger economies. Though there will be substantive short-term costs associated with the merge, the long-term benefits will be substantial. Realized costs and benefits are highlighted within Table 5. The realization of benefits is based on a targeted increase in general administrative efficiency of 15% annually over the next four years. This will be realized through the streamlining of customer service operations and other labour and capital-intensive activities.

Table 5: Net Costs of SaskPower/SaskEnergy Amalgamation(millions of dollars)

2009-2010 2010-2011

2011-012 2012-2013 Total

Costs 4 8 - - 12Savings

- -50 -50 -50 -150

Total 4 -42 -50 -50 -138

The cost values that have been identified include strategic planning, transition (including union negotiation), and communications. This will also spread the financial risks of each crown.

During the strategic planning process, administration performance indicators will be devised that are in-line with those to be developed by CIC. This policy action will assist the government in achieving its achievement of its renewal objectives and will increase long-term effectiveness and efficiency in service provision.

B. EnerAction

Recommendation:

It is recommended that the government consolidate all expenditures related to the development, diffusion, and implementation of green energy technologies and practices to the newly created General Environmental Fund (GEF). All green initiatives focused on the increasing of demand-side efficiency at the household, farm, and business levels are consolidated under the provision of SaskPower. These initiatives will be placed under the new policy banner of EnerAction and will be administered through the newly created SaskPower division of Energy Efficient and the Environment.

Alternatives:

Status quo: The maintaining of the current structure of demand-side energy initiatives that are currently conducted by numerous ministries and crown corporations at current funding levels. This will continue current trends in consumer energy efficiency that has actually seen a decrease in aggregate efficiencies as the consumer based has expanded.

Expanding current expenditures: This would maintain the current structure of demand-side initiatives that are provide by the government, but with increased financial resources drawing from the GEF. Though this will increase the financial incentives presented by each program, it will not affect the current administrative inefficiencies and search costs associated with each program.

Outcomes and Implications:

Through the expansion and integration of the various demand-side efficiency programs, the government will be increasing the visibility of these initiatives while increasing incentives for consumers. In the long-term, this will result in an increase in the deployment of green technologies within homes and businesses reducing overall per consumer demand for electricity and natural gas. This will assist the government in its efforts to meet future environment and climate change targets. Through demand-side initiatives, the government will be able to reduce the province's energy consumption by 3% - 10% over the long-run (Marbek Resource Consultants Ltd. and MK Jaccard and Associates Inc. 2006).

This will not only have significant environmental benefits, but will provide economic remunerations as well. This will increase the overall consumption capacities of households by reducing the amount of income that is needed for electricity and heating. This outcome will be even more significant for firms operating in the province. Secondly, it will reduce overall long-term energy demand and reduce the level of future investment used to meet these projected demands. Lastly, once new emission standards are emplaced, both within Canada and the US, it will reduce the CO2 bill that would be incurred by the province.

EnerAction will increase initiative funding by $10million annually, with the largest portions being diverted will towards businesses and lower income family initiatives. Conversely, the consolidation of

these programs under the EnerAction banner will reduce the overall costs of provision by approximately $2million a year.

This new program will assist the government in its objective of increasing the long-term environmental stability of the province. The success of this program will largely be indicated by individual consumer energy consumption and per capita GHG emission intensity. The amount of funding provided to consumers will be assessed on a two-year basis against the marginal rate of returns from increased energy efficiency.

C. Transmission and Distribution Modernization

Recommendation:

It is recommended that SaskPower, that upgrade the current transmission and distribution system within in the province. This will involve the investing in modern transmission circuits, increase voltage transmission and distribution lines, and improved conductors. The modernization of the grid will begin in 2009 and will be completed by 2011.

Alternatives:

Status quo: The maintaining of current transmission and distribution infrastructure while providing incremental expansion when new markets develop. This will continue the current line losses of 9%.

Updating infrastructure: This will involve the investment of $2billion over the next five years to bring those components of infrastructure that are reaching or surpassing their current lifespan. This will only bring these components of infrastructure up to current standards and will only reduce line-loss of about 20%.

Outcomes and Implications:

The implementation of highly energy efficient transmission and distribution will increase the costs associated with infrastructure renewal over the next five years by an additional $1billion, resulting in a total cost of $3billion. Financing of this initiative will have largely come from loans, but will receive $500million from the General Environmental Fund. Though this is a substantial short-term cost, it will reduce total grid electricity lost by approx 4-6% (United States of America 2003)) in an approximate cost savings of $20million per year. Another benefit that potentially could be attributed to this investment is the decrease in GHG credit costs, which would also be in the millions of dollars annual.

As this project will reduce the supply of electricity that is need to meet current demand, while reducing costs associated will generation and the environmental footprint of the province, will assist the province in is an achievement of its sustainability goals. The success of this investment will be judge by per km line-loss and reductions in power generation based GHGs.

D. Public Commission on Alternative Energy

Recommendation:

It is recommended that the government establish a public consultation committee on alternative energy sources for Saskatchewan. The commission will focus its efforts towards providing unbiased information on the alternatives that are viable for the province (focusing on nuclear power, clean coal, and wind power) and will take feedback from participants. This will involve the holding of community participation

events and the receiving of consultation papers from stakeholders. The commission will operate throughout Saskatchewan 2009-2010 and will submit its final report and recommendations to the legislature within the spring session of the legislature in 2010.

Alternatives:

Status quo: maintaining the current process of policy development through internal mechanisms, such as the panel of value added nuclear industries. This limits public debate on the issue as the government is not directly engaging citizens for desirable policy development, as the current process is largely focus on major stakeholder engagement, most notability corporate and intergovernmental entities.

Outcomes and Implications:

The implementation of this royal commission will cost around $2million for the one year in which it is operational. Though there are no direct monetary benefits that are associated with this initiative, it will provide the government with invaluable information and will provide the public a greater understanding of the issues that surround alternative energy within the province.

Though the government does not necessarily need to act directly on the recommendations provided by the royal commission, these recommendations will limit the policy directions of the government. One benefit will be a greater public acceptance of the policy actions to be undertaken by the government, as they will have a better understanding of such actions.

This initiative will assist the government in its efforts for the establishment of a more environmentally sustainable province by providing direction for the implementation of alternative energy sources in the long-term.

E. Carbon Capture and Sequestration Research and Development

Recommendation:

It is recommended that the government cancel the proposed CCS project at the Boundary Dam coal fire generation station and transfer the $1.2billion in earmarked fund to the GEF. From this, the government will provide $190milion for the development and continued operation of the Saskatchewan/Montana CCS research and development project. An independent secretariat will be created with the mandate to work with provincial, national, and international researchers at the facility to provide information to the public and government on the economic and environmental capabilities of CCS in Saskatchewan, while providing policy and regulator advice for its possible implementation.

Alternatives:

Status quo: The maintaining of current commitments from the $1.2billion development at Boundary Dam and the $60million for the Saskatchewan/Montana CCS project. Due to the relative uncertainty of the technology at this station, the environmental benefits will be less then optimal. Further, the government does not have a proper regulatory regime to provide proper oversight for this technology throughout the CCS cycle.

Outcomes and Implications:

By investing in this research initiative, the Government of Saskatchewan will be creating strong national and international networks for the commercial export of technologies generated from this facility,

placing it as a global leader in market viable energy alternatives. This facility will be operational within two years, as opposed to the possible six years for the Boundary Dam facility, and will provide the province with first hand research in the drafting and implementation of policies and regulations for the market operation of CCS.

Through the focuses of financing to the research facility and the cancellation of the Boundary Dam project, the government will divert $1billion to other green initiatives that will assist the province in achieving its overarching environmental goals.

Through this diversion of funds, the government will be working towards the achievement of its goals of Economic development through innovation and environmental sustainability in a shorter timeframe. The indicators for this program will be based on the rate of technological development, market integration, and long-term reductions in GHGs.

F. Advisory Committee on Power Generation in Saskatchewan

Recommendation:

It is recommended that the government create an interdepartmental advisory committee for the submission of a white paper on possible policy alternatives to Saskatchewan’s current power generation market. The committee will provide one recommendation to the government with a full plan for implementation including potential market structure. One of the main alternatives that the committee will analyse is the possible full privatisation of all generation assets held by SaskPower. The main goals of this committee are to provide are to provide recommendations that will increase consumer choice in alterative energies, minimize costs to households, and meet future market demands.

Alternatives:

Status quo: maintaining the current market structure will prolong the current energy mix within the province with 87% market being controlled (directly and indirectly) by SaskPower and politicization of energy generation within the province. This will involve the maintenance and expansion of existing facilities without a comprehensive outline of alternatives to the current market structure.

Outcomes and Implications:

The recommendations that are provided will provide direction for the government and a working framework for possible implementation. The commissioning of this committee will cost approximately $500thousand over 2009-2010. This committee will submit its final recommendations to SaskPower in the fall of 2009 for possible policy action in 2010.

If the committee selects privatization, the province could incur substantial benefits. First, the costs associated will current plant maintenance and future expansion will be passed on to private owners, thus mitigating long-term costs. Second, this will result in increases in generation efficiency and will allow for greater entry of green power sources into the market. Lastly, the potential $1.6billion in revenues from the sale of current holdings can be used to finance the modernization and maintenance of Saskatchewan transmission and distribution system.

This will provide the first steps for SaskPower towards the government’s goals of sustainable economic development and improved public returns. Though the commission itself will not have performance

indicators associated to it, it will provided performance indicators for their recommendation so that the government may judge the performance of any potentially new market structures.

COMMUNICATIONS STRATEGY

Though each policy action recommended above is focused towards the government’s objectives of a stable and sustainable Saskatchewan, the complexity and differences of each action warrant their own communications strategy. These strategies are outlined in Appendix E.

CONCLUSION

Based on the policy recommendations provided, the government will not only be work towards its achievement of economic development in an environmentally sustainable manner, it will position Saskatchewan as a global leader in the development and diffusion of green technologies. This is an enormous step in the direction of sustainability, and will position the province as an international economic competitor. Over the next 4 years, the total costs/cost savings of these initiatives are provided in Table 6.

Table 6: Consolidated SaskPower/SaskEnergy Expenditures2009-10

2010-11 2011-12 2012-13 Total

Crown Amalgamation 4 -22 -30 -30 -78EnerAction 10 10 10 10 40Transmission and Distribution Modernization 3000 0 -10 -20 2965Public Commission 2 0 0 0 2Carbon Capture and Sequestration -1010 0 0 0 -1010Advisory Committee 1 0 0 0 1

Total 2013 -32 -50 -60 1860

Resources:

Canada. 2009. National Inventory Report: 1990-2004 – Greenhouse Gas Sources and Sinks in Canada. Ottawa: Environment Canada. http://www.ec.gc.ca/pdb/ghg/inventory_report/2004_report/ann11_e.cfm#sa11_8 (accessed: March 30, 2009)

Champ, Joan. 2001. Rural Electrification in Saskatchewan During the 1950’s. Regina: Western Development Museum.

Kee, Fred J. 2000. Electric Utilities in Canada, in Electricity: The Magic Medium, ed. Wallace S. Read. Dundas, ON: The Institute of Electrical and Electronics Engineers Canada.

Marbek Resource Consultants Ltd. And MK Jaccard and Associates Inc. 2006. Demand Side Management Potential in Canada: Energy Efficiency Study. Ottawa: Canadian

Richards, J.H. and M.V. Morgan. 1969. History and Development of Electricity Power Supply in Saskatchewan. Saskatoon: University of Saskatchewan.

Ruchton, Micheal. 2003. Should Saskatchewan adopt retail competition for electrify. Regina: Saskatchewan Institute for Public Policy.

Saskatchewan. 2004. SaskPower Board of Directors: Terms of Reference. Regina: SaskPower Incorporated

Saskatchewan. 2000. SaskEnergy 2000 Annual Report. Regina: SaskEnergy Incorporated

________. 2001. SaskEnergy 2001 Annual Report. Regina: SaskEnergy Incorporated

________. 2002. SaskEnergy 2002 Annual Report. Regina: SaskEnergy Incorporated

________. 2003. SaskEnergy 2003 Annual Report. Regina: SaskEnergy Incorporated

________. 2004. SaskEnergy 2004 Annual Report. Regina: SaskEnergy Incorporated

________. 2005. SaskEnergy 2005 Annual Report. Regina: SaskEnergy Incorporated

________. 2006. SaskEnergy 2006 Annual Report: SaskEnergy Incorporated

________. 2007. SaskEnergy 2007 Annual Report: clean energy, green future. Regina: SaskEnergy Incorporated

________. 2008. SaskEnergy Incorporated Board of Directors: Terms of Reference. Regina: SaskEnergy Incorporated

________. 2009. Power Museum. Regina: SaskPower. < http://www.saskpower.com/pm/timeline.shtml > (accessed: Wednesday, February 4, 2009)

United States of America. 2003. Technology Options. Washington, D.C.: US Climate Change Technology Program

White, Clinton O. 1976. Power for a Province: A History of Saskatchewan. Regina: Canadian Plains Research Centre.

APPENDIXES

APPENDIX A: Crown Governance and Corporate Structures

Figure 1: SaskEnergy Corporate Structure, 2007

As stipulated by these various acts, the Board of Directors (to be referred to as the Board) is the decision making body the corporation. The main responsibilities of the Board are to select and evaluate the strategic directions of the corporation within a democratic manner (SOURCE – SaskEnergy Act). The Board historically consists of members of the Saskatchewan community that are business inclined or political interest. Many of the members of the board also chair various sub committees which provide general direction for the operation of the various executive branches of the corporation. Pursuant the Board of Directors Terms of Reference (SOURCE), the Board delegates all management and specific policy responsibilities to the executive branches of the corporation. The structure of the executive is outlined in Appendix A.

Figure 2: SaskPower Governance Structure, 2007

Based on the authorities provided by the aforementioned acts, the Board of Directors (to be referred to as the Board) has the ability to set the strategic direction of the corporation, and its reporting and analysis activities. Through its chair, the Board is accountable to the people of Saskatchewan through its submission of performance and fiscal reports to the CIC.

Though the Board does delegate its responsibilities to the executive of the corporation, it does not remove its liability for the actions taken by SaskPower. Identical to the structure of SaskEnergy, the Board is provides strategic advice from the various committees that are outlines in Appendix A.

APPENDIX B: Crown Assets

2007 2006 2005 2004 2003 2002 2001 2000 19990

200400600800

100012001400160018002000

SaskEnergy Assest Values

Cost Accummulated depreciasionConstruction in process Net Worth

1999 2000 2001 2002 2003 2004 2005 2006 20070

1000

2000

3000

4000

5000

6000

7000 SaskPower Asset Values

Cost Accummulated depreciasionConstruction in process Net Worth

APPENDIX C: Crown SWOT Analysis

SaskEnergy SWOT AnalysisStrenghs

- Finalized collective bargainning agreement in 2007.- Strong transmission system through out the province for doemstic and

international purposes.- High levels of consumer satisfaction.

Weakness- The relative preformance of many of the assets held by SaskEnergy through

their subsiguaries.- Efficencies of current structure of adinistrationa and service delivery.

Opportunities- The ransmission of captrued CO2 both within and outside of Saskathcewan.- Strong provincial economy ensures stable consumer depamd.

Threats- Public opinion regarding the previous rate changes and relized natural gas

market prces.- Federal and US climate change policy proposals.- Rapidly expaning popluation based on current immigration and migration

rates.- Decreases in overall revenue based on increases in demand-side efficency.- Volitility of natural gas prices on the international market, affects both

revenues and costs.- Reliability of international and domestic natural gas supplies.

SaskPower SWOT AnalysisStrenghs

- High levels of consumer satisfaction.Weakness

- Efficencies of current structure of adinistrationa and service delivery.- Currently in the process of finalizing a new

Opportunities- The capturing of CO2 for transmission and sequestration.- Strong provincial economy ensures stable consumer depand.- Increase in rates as presented to the Rate Review Panel.

Threats- Federal and US climate change policy proposals.- Rapidly expaning popluation based on current immigration and migration

rates.- Volitility of fuel prices on the international market, affects both revenues

and costs.- Many compoinents of the Transmission and distribution network are

passed their respective expiory dates- Aging generation facilities.

Climate change: As indicated in Appendix C this is a multifaceted issue that affects the province both internally and externally. The issue, within an environmental, economical and political sense, will be one that remains persistent over the long-term. As of 2004 Saskatchewan represented 9.2 % (Canada 2009) of all Greenhouse Gases released in Canada; an increase of 62% above 1990 levels. This has resulted in the province begin the largest per capita emitter of CO2 and CO2 equivalent emissions in Canada. With new regulations being in both the US and Canada, Saskatchewan will be placed at a significant competitive disadvantage. This will have significant ramifications for both crowns on the demand-side and with specific consequences for SaskPower on the supply-side.

Transmission and Distribution: With the potential expansion of the provinces population by more the 15, 000 people (SOURCE) in the next year also, both crowns will need to focus on insuring that new consumer demand is met. The continual expansion of the provinces population presents a long-term problem in that this will require the establishment of new distribution which could occur at the expense of those distribution and transmission systems that need to be upgraded to meet current standards. This is also of significant importance to both crowns based on the stability and security and how increases in demand can adversely affect this.

Service Delivery Efficiency and Effectiveness: Due to the relative transparency of the crowns, it is difficult to know whether or not services are being provided in the best manner possible, thus justifying recent rate increase requests. There are many components that are associated with this, including administrative services and structure, product and service deliver, and investments. It is difficult to know precisely the extent to which this occurs within these crowns, but due to the environment in which they exists, it can be assumed that these losses are significant.

APPENDIX D: SaskPower/SaskEnergy Amalgamation

Crown Investment Corporation

Board of Directors

President & CEO

SaskEnergy

TransGas

Power Production Constumer Service

Transmission & Distribution

Planning and Regulatory Affairs

Energy Efficiency & the

Environment

APPENDIX E: Communications Strategy

SaskPower/SaskEnergy Communications StrategyAmalgamation of SaskPower and SaskEnergy

Lead - Premier and the Crown Investment CorporationMajor Audience - Provincial consumers/households, CEPUKey Messages - In its efforts to ensure cost effective and affordable services, the

government of Saskatchewan will amalgamate SaskEnergy with SaskPower. This will provide the consumers of Saskatchewan with the best energy services in the country.

- All savings associated with the union of will be provided back to the consumer.

Mediums - Consumer and general information campaign- Consumer and interest group consultation- Mass media campaign

EnerActionLead - SaskPower and the Ministry of the EnvironmentMajor Audience - Homeowners, farmers, and companiesKey Messages - The consolidation of the government’s various energy efficiency

initiatives is to insure the highest quality of services for the people of Saskatchewan by hosing everything under one roof.

- SaskPower is focused on ensuring that all Saskatchewanians have accessible access to financial assistance to not only improve their contribution to the environment, but to reduce their home heating and electricity costs.

Mediums - Consumer and general information campaign- Media campaign

Transmission and Distribution ModernizationLead - SaskPowerMajor Audience - General publicKey Messages - The government of Saskatchewan is committed to ensuring the highest

reliability in provision of electricity by improving the grid. This will provide ensures that Saskatchewan businesses will always have the power they need to compete.

- Through the improvement of Saskatchewan’s grid, SaskPower will be reducing the GHGs and while positioning itself as a world leader in the provision of electricity.

Mediums - Press release- Media interviews

Public Commission on Alternative EnergyLead - Premier and Minister of the Crown Investment CorporationMajor Audience - General public, stakeholders, and interest groupsKey Messages - Though the government is currently considering the establishment of a

nuclear generation and carbon capture in Saskatchewan, both amongst private industry and environmentalist groups, it is committed to engaging the public in this important debate.

- The Government of Saskatchewan and SaskPower are committed to

ensuring that the safety of all citizens is our first priority will attempt to address future energy demands.

Mediums - Mass Media campaign- General information campaign- Public announcement

Advisory Commission on Power GenerationLead - Minister of the Crown Investment Corporation and SaskPowerMajor Audience - The general public, stakeholders, interest groupsKey Messages - The government is committed to ensuring that electricity in this province

is being produced in a manner that is of the largest benefit to the people at the lowest possible cost.

- The government will examine all applicable alternatives to determine what the proper power generation mix for the province is in the long-term.

Mediums - General information campaign- Public announcement

Carbon Capture and Sequestration Research and DevelopmentLead - SaskPower and the Ministry of the EnvironmentMajor Audience - Stakeholders and interest groupsKey Messages - The government of Saskatchewan is committed to working with the

private sector and our research community to develop the most beneficial clean coal technologies for use within the province.

- SaskPower will work hand in hand with the University of Regina in developing clean coal technologies that are the most economically viable and environmentally beneficial for use in this province.

Mediums - Major Announcement- Press releases