Alberta Energy Regulator
Financial Statements
For the Year Ended March 31, 2018

Statement of Management Responsibility
Independent Auditor's ReportStatement of Operations
Statement of Financial Position
Statement of Change in Net Debt
Statement of Cash Flows
Notes to the Financial Statements
Schedules to the Financial Statements

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying financial statements of the Alberta Energy Regulator and all other information
relating to the AER contained in this annual report have been prepared and presented bymanagement, who is responsible for the integrity and fair presentation of the information.
These financial statements are prepared in accordance with Canadian public sector accounting
standards. The financial statements necessarily include some amounts that are based on informed
judgments and best estimates of management. The financial information contained elsewhere in thisannual report is consistent with that in the financial statements.
Management is responsible for maintaining an effective system of internal controls designed toprovide reasonable assurance that financial information is reliable, transactions are properly
authorized, assets are safeguarded and liabilities are recognized.
The Auditor General of Alberta, the AER’s external auditor appointed under the Auditor General Act,
performed an independent external audit of these financial statements in accordance with Canadian
generally accepted auditing standards, and has expressed his opinion in the accompanying
Independent Auditor’s Report.
The Board of Directors is responsible for ensuring that management fulfills its responsibilities forfinancial reporting and internal controls. The Board of Directors exercises this responsibility throughthe Audit and Finance Committee, composed of Directors who are not employees of the regulator.
The Audit and Finance Committee meets with the internal auditors and the external auditors-both in
the presence and in the absence of management to discuss their audit, including any findings as tothe integrity of financial reporting processes and the adequacy of our systems of internal controls.
The internal and external auditors have full and unrestricted access to the Audit and FinanceCommittee.

[Original signed by Jim Ellis]
President and Chief Executive Officer[Original signed Tom Heywood]
Vice President, Finance and Chief Financial Officer

Date: May 10, 2018

Independent Auditor’s Report
To the Board of Directors of the Alberta Energy Regulator

Report on the Financial Statements
I have audited the accompanying financial statements of the Alberta Energy Regulator, which comprisethe statement of financial position as at March 31, 2018, and the statements of operations, change in net
debt, and cash flows for the year then ended, and a summary of significant accounting policies and otherexplanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements inaccordance with Canadian public sector accounting standards, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are freefrom material misstatement, whether due to fraud or error.

Auditor’s Responsibility
My responsibility is to express an opinion on these financial statements based on my audit. I conducted
my audit in accordance with Canadian generally accepted auditing standards. Those standards requirethat I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for myaudit opinion.

OpinionIn my opinion, the financial statements present fairly, in all material respects, the financial position of
the Alberta Energy Regulator as at March 31, 2018, and the results of its operations, its remeasurement
gains and losses, its changes in net debt, and its cash flows for the year then ended in accordance with
Canadian public sector accounting standards.
[Original signed by W. Doug Wylie FCPA, FCMA, ICD.D]
W. Doug Wylie FCPA, FCMA, ICD.D
Auditor General

May 10, 2018
Edmonton, Alberta

ALBERTA ENERGY REGULATORSTATEMENT OF OPERATIONSYear Ended March 31, 2018
(in thousands)

2017

2018
Budget(Note 3, Schedule 3)
Revenues
Industry levies and assessments
Information, services and fees
Government transfer - provincial grant
Investment income$

Expenses (Schedule 1)
Energy regulation
Orphan well abandonment (Note 4)
Climate leadership plan

274,8473,542
867
279,256

Actual$244,61930,5006,637
281,756

Actual

260,021
7,901
1,747
269,669$

249,752
15,7963,501
269,049

269,222
5,132
3,338
1,062
278,754245,959
31,0282,925
279,912Annual operating surplus (deficit)(2,500)620(1,158)

Accumulated surplus at beginning of year
Accumulated surplus at end of year

60,95358,453

60,953
61,573

62,111
60,953$$$

The accompanying notes and schedules are part of these financial statements.

1

ALBERTA ENERGY REGULATORSTATEMENT OF FINANCIAL POSITION
As at March 31, 2018
(in thousands)

2018
Financial assets
Cash and cash equivalents (Note 5)
Accounts receivable (Note 6)
Pension assets (Note 12)$

Liabilities
Accounts payable and accrued liabilities (Note 7)
Payable to Orphan Well Association
Deferred lease incentives (Note 10)
Net debt
Non-financial assets
Tangible capital assets (Note 13)
Prepaid expenses and other assets
Net assets
Accumulated surplus (Note 14)

$

2017

15,644
7,548
738
23,930$32,975
7,982
510
41,467

17,023806
19,03236,861(12,931)

19,29914,115
20,64854,062(12,595)

62,718
11,78674,50462,426
11,12273,54861,573$

60,953

Contingent liabilities and contractual obligations (Note 15 and Note 16)
The accompanying notes and schedules are part of these financial statements.

2

ALBERTA ENERGY REGULATORSTATEMENT OF CHANGE IN NET DEBT
Year Ended March 31, 2018
(in thousands)

2017

2018
Budget(Note 3)
Annual operating surplus (deficit)$$(12,595)(12,595)

Actual$620$(14,268)
13,848
128
(664)
(336)
(12,595)(12,931)(9,000)11,500Acquisition of tangible capital assets (Note 13)
Amortization of tangible capital assets (Note 13)
Loss on disposal and write-down of tangible capital assets
Increase in prepaid expenses and other assets(Increase) decrease in net debt
Net debt at beginning of year
Net debt at end of year

(2,500)

Actual$(1,158)$(12,109)
14,03776(145)
701(13,296)(12,595)

The accompanying notes and schedules are part of these financial statements.

3

ALBERTA ENERGY REGULATORSTATEMENT OF CASH FLOWS
Year Ended March 31, 2018
(in thousands)

2018
Operating transactions
Annual operating surplus (deficit)
Non-cash items
Amortization of tangible capital assets (Note 13)
Loss on disposal and write-down of tangible capital assets$

Change in pension obligations
Amortization of deferred lease incentives (Note 10)
Decrease in accounts receivable(Increase) in prepaid expenses and other assets(Decrease) increase in accounts payable and accrued liabilities(Decrease) in grant payable to Orphan Well Association
Cash (applied to) provided by operating transactions
Capital transactions
Acquisition of tangible capital assets (Note 13)
Cash applied to capital transactions
Financing transactions
Proceeds from line of credit
Debt repayment
Cash applied to financing transactions(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

$

2017

620

$

(1,158)

13,848128(228)(1,616)
12,752434(664)(2,276)(13,309)(3,063)

14,03776(1,202)(1,616)
10,137
10,167
(145)
1,052
(978)
20,233(14,268)(14,268)(12,109)(12,109)-

16,138(16,138)-(17,331)
32,975
15,644

8,124
24,851
32,975$The accompanying notes and schedules are part of these financial statements.

4

ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2018
(in thousands)
Note 1

Authority and purpose
The Alberta Energy Regulator (AER) is an independent and quasi-judicial organization of the Government of Alberta. The AER
operates under the Responsible Energy Development Act. The AER's mandate provides for the safe, efficient, orderly, andenvironmentally responsible development of hydrocarbon resources over their entire life cycle. This includes allocating andconserving water resources, managing public lands, and protecting the environment while providing economic benefits for all
Albertans.

Note 2

Summary of significant accounting policies and reporting practices
These financial statements are prepared in accordance with Canadian Public Sector Accounting Standards (PSAS).
(a)

Revenues
All revenues are reported on the accrual basis of accounting. Cash received for which services have not been provided byyear end is recognized as unearned revenue.
Government transfers
Transfers from the Government of Alberta, without stipulations for the use of the transfer, are recognized as revenue when
the transfer is authorized and the AER is eligible to receive the funds.

(b)

Expenses
Expenses are reported on an accrual basis. The cost of all goods consumed and services received during the year isexpensed.

(c)

Employee future benefits
The AER maintains its own defined benefit Senior Employees Pension Plan (SEPP) and two supplementary pension plans
to compensate senior staff who do not participate in the government management pension plans. Retirement benefits are
based on each employee's years of service and remuneration.
Pension assets represent the sum of the accumulated cash contributions less the sum of the current and prior years'
pension expense.
Accrued benefit obligations are actuarially determined using the projected benefit method prorated on length of service andmanagement's best estimate of expected plan investment performance, projected employees' compensation levels andretirement age of employees.
Accrued benefit obligations and pension benefit cost for the year are calculated using the expected rate of return on plan
assets as its discount rate. The expected return on plan assets is determined using market values of plan assets.
Actuarial gains and losses are amortized over the average remaining service period of the active employees, which is 10.9
(2017 - 10.5) years.
Past service cost arising from plan amendments is accounted for in the period of the plan amendments.

5

ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2018
(in thousands)
Note 2

Summary of significant accounting policies and reporting practices (continued)(c) Employee future benefits (continued)
The AER participates in the Government of Alberta's multi-employer pension plans: Management Employees Pension Plan,
Public Service Pension Plan and Supplementary Retirement Plan for Public Service Managers. Defined contribution planaccounting is applied to these plans as the AER has insufficient information to apply defined benefit plan accounting.
Accordingly, pension expense is comprised of employer contributions to the plans that are required for its employees during
the year, which are calculated based on actuarially pre-determined amounts that are expected to provide the plans' future
benefits.
(d)Valuation of financial assets and liabilities
The AER's financial assets and liabilities are generally measured as follows:
Financial Statement Component
Cash and cash equivalents
Accounts receivable
Accounts payable and accrued liabilities
Payable to the Orphan Well Association
Deferred lease incentive

Measurement
Cost
Lower of cost or net recoverable value
Cost
Cost
Amortized cost

The AER has not designated any financial assets or liabilities in the fair value category, has no significant foreign currencytransactions and does not hold any derivative contracts. The AER has no significant remeasurement gains or losses andconsequently has not presented a statement of remeasurement gains and losses.
(e)Financial assets
Financial assets are assets that could be used to discharge existing liabilities or finance future operations and are not for
consumption in the normal course of operations.
Financial assets are AER's financial claims on external organizations and individuals at the year end.
Cash and cash equivalents
Cash is comprised of cash on hand and demand deposits.
Accounts receivable
Accounts receivable are recognized at the lower of cost or net recoverable value. A valuation allowance is recognized whenrecovery is uncertain.

(f)Liabilities
Liabilities are present obligations of the AER to external organizations and individuals arising from transactions or eventsoccurring before the year end, the settlement of which is expected to result in the future sacrifice of economic benefits.
They are recognized when there is an appropriate basis of measurement and management can reasonably estimate theamounts.
Liabilities include all financial claims payable by the AER at fiscal year end.
Deferred lease incentives
Deferred lease incentives, consisting of leasehold improvement costs, reduced rent benefits and rent-free periods, areamortized on a straight-line basis over the term of the lease.

6

ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2018
(in thousands)
Note 2

Summary of significant accounting policies and reporting practices (continued)
Liability for contaminated sites
Contaminated sites are a result of contamination of a chemical, organic or radioactive material or live organism thatexceeds an environmental standard, being introduced into soil, water or sediment. The liability is recognized net of any
expected recoveries. A liability for remediation of contaminated sites normally results from an operation that is no longer inproductive use and is recognized when all of the following criteria are met:
- an environmental standard exists;- contamination exceeds the environmental standard;- the AER is directly responsible or accepts responsibility;- it is expected that future economic benefits will be given up; and- a reasonable estimate of the amount can be made.
(g)

Non-financial assets
Non-financial assets are acquired, constructed or developed assets that do not normally provide resources to discharge
existing liabilities, but instead:- are normally employed to deliver AER services;- may be consumed in the normal course of operations; and- are not for sale in the normal course of operations.
Non-financial assets of the AER are limited to tangible capital assets and prepaid expenses and other assets.
Tangible capital assets
Tangible capital assets are recognized at cost, which includes amounts that are directly related to the acquisition, design,
construction, development, improvement or betterment of the assets and are amortized over their estimated useful lives
using the following methods:
Leasehold improvements
Furniture and equipment
Computer hardware
Computer software - purchased
Computer software - developed

Straight line
Straight line
Straight line
Straight line
Declining balanceTerm of the lease5 - 12 years
4 years
4 years
5 years

Amortization is only expensed when the tangible capital asset is put into service.
Work-in-progress, which includes developed computer software and leasehold improvements, is not amortized until aproject is complete and the asset is put into service.
Tangible capital assets are written down when conditions indicate that they no longer contribute to the AER's ability toprovide goods and services, or when the value of future economic benefits associated with the tangible capital assets isless than their net book value. The net write-downs are accounted for as an expense in the Statement of Operations.
Prepaid expense
Prepaid expense is recognized at cost and amortized based on the terms of the agreements.

7

ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2018
(in thousands)
Note 2

Summary of significant accounting policies and reporting practices (continued)(h) Measurement uncertainty
Measurement uncertainty exists when there is a variance between the recognized or disclosed amount and anotherreasonably possible amount. The amounts recognized for amortization of tangible capital assets are based on estimates of
the useful life of the related assets. Accrued defined benefit obligations are subject to measurement uncertainty due to theuse of actuarial assumptions. The resulting estimates are within reasonable limits of materiality and are in accordance with
the AER's significant accounting policies.
(i)Change in accounting policy
The AER has prospectively adopted the following standards from April 1, 2017: PS 2200 Related Party Disclosure, PS
3420 Inter-Entity Transactions, PS 3210 Assets, PS 3320 Contingent Assets and PS 3380 Contractual Rights.
The adoption of these new standards did not have a material impact on the financial statements.

(j)

Future accounting changes
The Public Sector Accounting Board has issued the following accounting standards:
PS 3430 Restructuring Transactions (effective April 1, 2018)
This standard provides guidance on how to account for and report restructuring transactions by both transferors andrecipients of assets and/or liabilities, together with related program or operating responsibilities.
PS 3280 Asset Retirement Obligations (effective April 1, 2021)
This standard provides guidance on how to account for and report a liability for retirement of a tangible capital asset.
Management is currently assessing the impact of these standards on the financial statements.

Note 3

BudgetThe budget is based on the AER Business Plan for the year ended March 31, 2018. The budget and budget adjustments havebeen approved by the Government of Alberta.

Note 4Orphan well abandonment
The Government of Alberta has delegated the authority to manage the abandonment and reclamation of wells, facilities andpipelines that are licensed to defunct licensees to the Alberta Oil and Gas Orphan Abandonment and Reclamation Association(Orphan Well Association). The AER transfers all of its orphan well revenues (levy and application fees) to the Orphan Well
Association. During the year ended March 31, 2018, the AER collected $15,106 (2017 - $30,448) in levies and $690 (2017 $580) in application fees.

Note 5

Cash and cash equivalents
Cash and cash equivalents are held in an account with a Canadian chartered bank and earn interest calculated based on the
average monthly cash balance. The funds are available to be withdrawn upon request. During the year ended March 31, 2018,
the AER earned interest at the rate of 1.4% (2017 - 1.0%).

8

ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2018
(in thousands)
Note 6

Accounts receivable
2018

Accounts receivable
Note 7Gross amount$
10,701

2017

Allowancefor doubtful Net realizable Net realizableaccounts
value
value
$
(3,153) $7,548 $
7,982

Accounts payable and accrued liabilities
Accounts payable$2018
4,992 $

2017
6,194

$

10,191
1,840
17,023

11,108
1,997
19,299Accrued liabilities
Unearned revenue

Note 8$Financial instruments
The AER has the following financial instruments: accounts receivable, accounts payable and accrued liabilities, and payable to
the Orphan Well Association.
The AER has exposure to the following risks from its use of financial instruments:(a) Liquidity risk
Liquidity risk is the risk that the AER will encounter difficulty in meeting obligations associated with financial liabilities. The AER
does not consider this to be a significant risk as the AER collects funding at the beginning of the year to meet all obligations thatarise during the year. In addition, the available credit facility provides financial flexibility to allow the AER to meet its obligations if
funding cannot be collected on a timely basis.
(b) Credit risk
The AER is exposed to credit risk from potential non-payment of accounts receivable. Accounts receivable include balances duefrom operators in the oil and gas industry and are subject to normal industry credit risk. The AER regularly monitors the financial
status of operators and assesses the collectability of accounts receivable. The AER's maximum exposure to credit risk is limited
to the carrying amount of accounts receivable at the reporting date and presented in the Statement of Financial Position. The
AER established a valuation allowance that corresponds to the specific credit risk of operators, historical trends and economic
circumstances.

Note 9

Revolving line of credit
During 2018, the AER had an unsecured $50,000 revolving line of credit. Amounts borrowed can only be applied to general
corporate purposes and exclude the funding of operating deficits and/or capital expenditures. Bank advances on the line of credit
are payable on demand and bear interest at prime less 0.5%. As at March 31, 2018, the outstanding balance for the revolving lineof credit was $nil (2017 -$nil).
For the year ended March 31, 2018, interest expense on the revolving line of credit was $nil (2017 - $13).

9ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2018
(in thousands)
Note 10 Deferred lease incentives
The AER has entered into various lease agreements which provide for lease incentives comprised of reduced rent benefits, rentfree periods and leasehold improvement costs. These amounts are included in deferred lease incentives and are amortized on astraight line basis over the term of the lease.

Balance at beginning of year
Additions during the year
Amortization
Balance at end of year

2018
Reducedrent benefits
Leaseholdimprovement and rent-free
periods
costs$
16,647 $
4,001 $
(1,252)(364)$
15,395 $3,637 $

2017

Total
20,648 $(1,616)
19,032 $Total
22,264(1,616)
20,648Note 11 Liability for contaminated sites
As at March 31, 2018, the AER is not responsible, nor has it accepted responsibility, for performing remediation work at
contaminated sites. As at March 31, 2018, the AER's liability for contaminated sites was $nil (2017 - $nil).
Note 12 Employee future benefits
The AER participates in the Government of Alberta's multi-employer pension plans: Management Employees Pension Plan,
Public Service Pension Plan and Supplementary Retirement Plan for Public Service Managers. For the year ended March 31,
2018, the expense for these pension plans is equal to the contribution of $17,540 (2017 - $17,766). The AER is not responsible
for future funding of the plan deficit other than through contribution increases.
In addition, the AER maintains its own defined benefit Senior Employees Pension Plan (SEPP) and two supplementary pension
plans to compensate senior staff who do not participate in the government management pension plans. Retirement benefits are
based on each employee's years of service and remuneration.
All the information presented in the note below is related to the AER's defined benefit pension plans.
The effective date of the most recent actuarial funding valuation for SEPP was December 31, 2016. The accrued benefit
obligation as at March 31, 2018 is based on the extrapolation of the results of this valuation. The effective date of the next
required funding valuation for SEPP is December 31, 2019.
Pension plan assets are valued at market values. During the year ended March 31, 2018 the weighted average actual return onplan assets was 4.8% (8.5% in 2017).
Significant weighted average actuarial and economic assumptions used to value accrued benefit obligations and pension benefit
costs are as follows:
Accrued benefit obligations
Discount rate

Rate of compensation increaseLong-term inflation rate

2018

2017
5.0%

4.6%

0% until
0% untilSep 30, 2019, Mar 31, 2018,
3.5% thereafter 3.5% thereafter
2.0%
2.0%

10

ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2018
(in thousands)
Note 12 Employee future benefits (continued)
Pension benefit costs for the year
Discount rate
Expected rate of return on plan assets

Rate of compensation increase

2018

2017
4.6%
4.6%

4.7%
4.7%

0% until
0% until
Mar 31, 2018, Mar 31, 2017,3.5% thereafter 3.5% thereafter

The funded status and amounts recognized in the Statement of Financial Position are as follows:

Market value of plan assets
Accrued benefit obligations
Plan surplus (deficit)
Unamortized actuarial (gains)/losses
Pension assets

$

$

2018
61,932 $58,9193,013(2,275)738 $

201756,63358,200(1,567)
2,077
510

2018
4,267 $
2,824
(2,711)560
4,940 $

2017
4,302
2,690
(2,358)
861
5,495

2018
5,169
875
3,544

2017
6,697
840
3,001

The pension benefit costs for the year include the following components:
Current period benefit cost
Interest cost
Expected return on plan assets
Amortization of actuarial losses$$
Additional information about the defined benefit pension plans is as follows:
AER contribution
Employees' contribution
Benefits paid$$

The asset allocation of the defined benefit pension plans' investments is as follows:

Equity securities
Debt securities
Alternatives
Other

2018
44.3%
23.3%
18.7%
13.7%
100.0%

2017
48.8%
36.0%
0.0%
15.2%
100.0%

11

ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2018
(in thousands)
Note 13 Tangible capital assets
2017

2018

Estimated useful life

Land

Leaseholdimprovements

Furniture andequipment

Computerhardware andsoftwareIndefinite

Term of thelease

5-12 years

4-5 years

Total

Total

Historical cost
Beginning of year$

Additions

282

$

-

Disposals, including write-downs

39,642$

195

14,810$124,146

639$

13,434

178,880$

181,106

14,268

12,109-(2)(1,219)(5,093)(6,314)(14,335)

282

39,835

14,230132,487

186,834

178,880

Accumulated amortization
Beginning of year$

Amortization expense

-

$

-

Effect of disposals, including writedowns

12,413

$

8,536

$

95,505$

10,208116,454$

116,676

2,509

1,131

-

(2)

(1,177)(5,007)(6,186)(14,259)-

14,9208,490

100,706

124,116

116,454

Net book value at March 31, 2018

$

282

$

24,915

$

5,740

$

31,781

Net book value at March 31, 2017

$

282

$

27,229

$

6,274

$

28,641

13,848$14,03762,718$62,426

Historical cost includes work-in-progress at March 31, 2018 totaling $6,650 (March 31, 2017 - $4,659) comprised of: computer
hardware and software $6,646 (March 31, 2017 - $4,617) and leasehold improvements $4 (March 31, 2017 - $42).
Note 14 Accumulated surplus
The accumulated surplus of the AER is calculated as the sum of the net debt of the AER and its non-financial assets. The
accumulated surplus represents the net assets of the AER. Accumulated surplus is comprised of the following:

Balance at beginning of year
Annual operating surplus (deficit)
Net investment in capital assets
Balance at end of year
(a)

2018

2017

Investments intangible capital Unrestricted Accumulated
assets (a)net assets
surplus15,174 $60,953$45,779 $620
620(1,544)
1,544$
47,323 $14,250 $61,573

Accumulated
surplus$62,111(1,158)$60,953

Excludes leasehold improvement costs received by the AER as a lease incentive.

12

ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2018
(in thousands)
Note 15 Contingent liabilities
The AER, in the conduct of its normal activities, is a defendant in a number of legal proceedings. While the ultimate outcome andliability of these proceedings cannot be reasonably determined at this time, the AER believes that any settlement will not have amaterial adverse effect on the financial position or the results of operations of the AER. Based on legal advice, management has
concluded that none of the claims meet the criteria for recognizing an accrued liability under PSAS.
Note 16 Contractual obligations
As at March 31, 2018, the AER had contractual obligations totalling $183,751 (2017 - $189,462).
Contractual obligations are obligations of the AER to others that will become liabilities in the future when the terms of thosecontracts or agreements are met.
Estimated payment requirements for obligations under operating leases and contracts for each of the next five years andthereafter are as follows:
2018
$

2019
2020
2021
2022
2023
Thereafter$

34,133
21,311
16,62913,454
13,151
85,073
183,751

Note 17 Assets under administration
The AER administers security deposit programs in accordance with specified acts and regulations. Security deposits are held on
behalf of depositors with no power of appropriation and therefore are not reported in these financial statements. The AER does
not have any financial risk associated with security collected. Security, along with any interest earned, will be returned to thedepositors upon meeting specified refund criteria.
As at March 31, 2018, assets under administration included security deposits held under the following programs:
2018

Licensee Liability Rating program
Mine Financial Security program
Other programs

$

$

Cash
86,574
41,567
7,189
135,330

2017

2018

2017

Cash
$ 114,146
40,993
7,162$ 162,301

Letters of
Credit$189,910
1,351,072
5,414$ 1,546,396

Letters of
Credit$232,255
1,345,974
5,408$ 1,583,637

13

ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2018
(in thousands)
Note 18 Related party transactions
Related parties are those entities consolidated or accounted for on the modified equity basis in the Government of Alberta's
financial statements. Related parties also include key management personnel and close family members of those individuals. In
2018, there were no outstanding amounts or transactions other than compensation, between the AER and its key management
personnel. Key management personnel compensation is disclosed in Schedule 2.
The AER had the following transactions with related parties recognized in the Statement of Operations and the Statement of
Financial Position at the amount of consideration agreed upon between the related parties:
Entities in the
Ministry of Energy
2018
2017
Revenues
Government transfer - provincial grant
Information, services and fees

$
$

67
67

$
$

Other entities
2018
2017

3,338
66
3,404

$
$

Entities in the
Ministry of Energy
2018
2017
ExpensesComputer services
Buildings
Administrative
Consulting services

$

$

2,373
2,373

Receivable from$

Payable to

$

$

17

$

$

588

Unearned revenue$

Contractual obligations (a)

$

(a)

$

417
417

$

Other entities
2018
2017

2,199
2,199

$

1,365
1,365

$

$

2,511
602
1,458
915
5,486

$

1,651
617
1,290
1,371
4,929

3,505

$

922

$

12

$

509

$

1,501

$

692

-

$

-

$

131

$

583

4,515

$

4,377

$

3,705

$

4,279

Contractual obligations are obligations of the AER to related parties that will become liabilities in the future when the termsof those contracts or agreements are met.

Note 19 Comparative figures
Certain 2017 figures have been reclassified to conform to the 2018 presentation.
Note 20 Approval of financial statements
These financial statements were approved by the AER Board of Directors on May 10, 2018.

14

ALBERTA ENERGY REGULATORSCHEDULE TO THE FINANCIAL STATEMENTS
Expenses - Detailed by Object
Year Ended March 31, 2018

Schedule 1(in thousands)

2018
Salaries, wages and employee benefits
Buildings
Computer services
Orphan well abandonment
Consulting services
Amortization of tangible capital assets
Administrative
Travel and transportation
Equipment rent and maintenance
Loss on disposal and write-down of tangible capital assets
Abandonment and enforcement

$

$

2017
178,362
18,47918,094
15,796
14,463
13,848
4,582
4,471
815
128
11
269,049$$

176,443
16,936
16,742
31,02814,302
14,037
5,320
4,115
884
76
29
279,912

15

ALBERTA ENERGY REGULATORSCHEDULE TO THE FINANCIAL STATEMENTS
Salary and Benefits Disclosure
Year Ended March 31, 2018
(in thousands)

Schedule 2

2017

2018
Base
salary (a)Position
Board of Directors
Chairman
Board Director (f)Board Director (g)Board Director (g)Board Director (h)Board Director (i)Board Director (h)Board Director (j)Board Director (k)Board Director (l)Board Director (l)Executives
President and Chief Executive Officer (m)Chief Hearing Commissioner
Executive Vice-President, Corporate Services
Executive Vice-President and General Counsel (q)Former Executive Vice-President, Operations (n,q)
Executive Vice-President, Operations (o,q)
Executive Vice-President, Stakeholder & Government Engagement
Former Executive Vice-President, Strategy & Regulatory (p,q)
Executive Vice-President, Strategy & Regulatory (o,q)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)

$

216
92
91
86
45
44
40
42
-

525
209
273
273
55
247
273
70
247

Other
non-cashbenefits (c)Other cash
benefits (b)

$

-

68
18
87
77
15
62
93
15
61

$

Total (d)

4
3
4
3
3
2
4
1
-

135
57
74
105
18
57
78
10
88

$

220
95
95
89
48
46
44
43
-

Total (e)

$

233
110
50
48
48
24
54
26
25

728
284
434
455
88
366
444
95
396

695
291
438
466
527
446
404
-

Includes retainers and per diems for Board Directors. Members of the Board of Directors do not participate in the AER's pension plans. Includes pensionable basepay for Executives.
Payments in lieu of vacation and health benefits, vehicle allowances, and short term incentive payments for Executive Vice-Presidents.
Contributions to all benefits as applicable including employer's share of Employment Insurance, Canada Pension Plan, Government of Alberta and AER pension
plans, health benefits or payments made for professional memberships, tuition fees and fair market value of parking.
Salaries and benefits for the Board of Directors are presented in descending order.
The 2017 figures have been restated by a total of $31 to include the fair market value of parking provided to Executives to conform to the 2018 presentation.
The incumbent left the position effective February 19, 2018.
The incumbent held the position effective October 1, 2016.
The incumbent held the position effective October 18, 2017.
The incumbent held the position from October 1, 2016 to September 30, 2017.
The incumbent left the position effective June 16, 2016 and was rehired effective October 18, 2017.
The incumbent left the position effective September 30, 2016.
The incumbent left the position effective June 16, 2016.
Automobile provided, no dollar amount included in other non-cash benefits.
The incumbent left the position effective June 2, 2017.
The incumbent held the position effective May 8, 2017.
The incumbent left the position effective July 4, 2017.

16

ALBERTA ENERGY REGULATORSCHEDULE TO THE FINANCIAL STATEMENTS
Salary and Benefits Disclosure
Year Ended March 31, 2018
(in thousands)

Schedule 2 (continued)(q) Under the terms of the AER's defined benefit SEPP and two supplementary retirement plans (SRP), employees may receive supplemental retirement payments.
Retirement arrangement costs as detailed below are not cash payments in the period but are the period expense for rights to future compensation. Costs shownreflect the total estimated cost to provide annual pension income over an actuarially determined post-employment period. The SEPP and SRP provide future
pension benefits to participants based on years of service and remuneration. The cost of these benefits is actuarially determined using the projected benefit
method pro-rated on service, a market interest rate, and management's best estimate of expected costs and the period of benefit coverage. Net actuarial gains
and losses of the benefit obligations are amortized over the average remaining service life of the employee group. Current service cost is the actuarial present
value of the benefits earned in the fiscal year. Prior service and other costs include amortization of past service costs, amortization of actuarial gains and losses,
and interest accruing on the actuarial liability. The costs detailed below are only for those employees included in Schedule 2 who participate in the SEPP and
SRP maintained by the AER to compensate senior staff who do not participate in the government management pension plans.

2018

Position
Executive Vice-President and General Counsel
Former Executive Vice-President, Operations (s)Executive Vice-President, Operations (t)Former Executive Vice-President, Strategy & Regulatory (u)Executive Vice-President, Strategy & Regulatory (t)Current service
Prior service and other
cost
costs
$
41
$
2
9
1
12
1
9
26
2

Position
Executive Vice-President and General Counsel(s)
Former Executive Vice-President, Operations(t)Executive Vice-President, Operations
Former Executive Vice-President, Strategy & Regulatory (u)Executive Vice-President, Strategy & Regulatory (t)Accrued obligation
April 1, 2017
$
525
270
30
1,180
375

Changes in accrued
obligation
$
47
(270)
12
124
43

2017

Total

Total
$

43
10
13
9
28

Accrued obligation
March 31, 2018
$
572
42
1,304
418

(r)

$

53
61
12
24
34

2017 (r)
$

525
270
30
1,180
375

(r) The 2017 figures have been restated to include balances related to the incumbents who were appointed to their positions in 2018 as they were members of thepension plans prior to their appointment date.
(s) Includes service to June 2, 2017.
(t) Includes amounts for the year ended March 31, 2018 as the incumbents were members of the pension plans prior to their appointment date.
(u) Includes service to July 4, 2017.

17

ALBERTA ENERGY REGULATOR

Schedule 3

SCHEDULE TO THE FINANCIAL STATEMENTS
Actual Results Compared with Budget
Year Ended March 31, 2018
(in thousands)

Budget(Note 3)
Revenues
Industry levies and assessments
Information, services and fees
Investment income$

Expenses
Energy regulation
Orphan well abandonment
Climate leadership plan

Net capital investment
Surplus274,8473,542
867
279,256$

244,61930,500CapitalCapital investment
Less: Amortization
Loss on disposal and write-down of tangible capital assets(15,000)(15,000)$

Actual259,847
3,542
867
264,256$

260,021
7,901
1,747
269,669

6,637
281,756(2,500)(15,000)(15,000)-

244,619
15,5006,637
266,756(2,500)249,752
15,7963,501
269,049620

9,000(11,500)-

9,000(11,500)

14,268(13,848)(2,500)(128)
292(2,500)$AdjustedbudgetAdjustments (a)

-

$

-

$

-

$

328

(a) The Adjustments reflect the reduction in orphan well levy required to consolidate issuance of two orphan levies into one and to startcollecting a single levy at the beginning of the fiscal year.

18