September 9, 2005

Record high market prices lead to
SaskEnergy rate increase request

As a result of record-high natural gas prices on the open market, SaskEnergy is applying to the Saskatchewan Rate Review Panel (SRRP) for a commodity rate increase to be effective November 1, 2005.

Under the proposal, the overall increase for all customer rate classes will average 27%, given normal weather conditions. SaskEnergy’s commodity rate would rise from $6.97/GJ to $9.50/GJ and will account for about 76% of a residential customer’s bill. The remainder of the bill, representing SaskEnergy’s delivery rate, will not change. The delivery rate, which reflects the corporation’s internal costs of operation, has not changed since 1997. The impact on any given customer will vary, depending upon their gas usage and rate class.

With winter markets trading well above $11.00 per GJ, all natural gas utilities across North America face the prospect of charging higher rates to consumers.

SaskEnergy does not profit over time from the sale of gas. SaskEnergy buys all of its customers’ natural gas on the open market and sells it to customers at cost, as per normal regulatory practice for natural gas utilities in Canada. Any difference between projected and actual costs, positive or negative, is captured by the Gas Cost Variance Account (GCVA) which is regularly monitored by the Provincial Auditor.

This rate proposal takes into account:
• the cost to buy natural gas for the coming year;
• the cost of gas SaskEnergy has put into storage for this coming winter;
• SaskEnergy’s price management activities; and
• the projected $25 million deficit in the GCVA by October 31, 2005.

“Natural gas prices continue to reach new highs, driven by increasing demand in North America, as well as factors such as weather,” said Doug Kelln, SaskEnergy’s President and Chief Executive Officer. “We hoped that time would alleviate these prices, but this did not materialize as summer was warmer than expected in North America, resulting in higher natural gas usage for the production of electricity.”

While natural gas remains a competitive energy source compared to other fuels in Saskatchewan, Kelln said the company will continue to focus on what steps can be taken to assist customers.

“We are in an environment where prices have been rising for several years. While we believe that eventually the market will correct somewhat, it is apparent these higher prices will exist for the near term,” he said.

“As in the past, we will work with our customers to assist them. Energy efficiency is one substantive way consumers can cope with rising energy costs. We’re continuing to stress conservation in our public awareness advertising, and hope that consumers, where possible, can use initiatives like the ENERGY STAR® Loan Program to purchase newer equipment which can cut the average bill by about $600.”

The ENERGY STAR® program, in effect until March 31, 2006, helps customers secure a Prime Rate Loan to purchase an ENERGY STAR® furnace with a high efficiency motor that can help save on their natural gas bill.

SaskEnergy assists customers with information on energy saving tips, and offers a number of home efficiency evaluation programs. Visit our website at www.saskenergy.com for more information on all our offerings, or call us at 1.800.567.8899.

All SaskEnergy customers will receive information on the rate application in their monthly bill.

Customers who wish to contact the SRRP can do so through the following methods:

- Public meetings hosted by the Rate Review Panel
- Email - input@saskratereview.ca
- Fax – 306.244.7037
- Toll free – 1.877.368.7075
- Written comments to:
The Saskatchewan Rate Review Panel
901 1st Avenue N
Saskatoon, SK
S7K 1Y4
website: www.saskratereview.ca/

Summary of SaskEnergy's Rate Application

Full copy of SaskEnergy's Rate Application

For further information, contact:

Ken From
Senior Vice President, Gas Supply
Regina
Phone: 306.777.9366