SINGAPORE - Large electricity users in Singapore, such as shopping malls and manufacturing facilities, will be cushioned from the recent volatility in the electricity market under a new scheme that will enable them to buy electricity at fixed rates.
The new Temporary Electricity Contracting Support Scheme, announced by the Energy Market Authority (EMA) on Monday (Dec 13), will allow such users to pay for electricity at a rate capped at 39.7 cents per kilowatt hour (kWh).
The actual rate they pay will depend on their negotiations with the three retailers involved in the scheme: Geneco, Sembcorp Power and Senoko Energy Supply.
This fixed-price contract will be valid for the month of January 2022, EMA said, although it could be extended if there is demand in the months ahead.
It is not mandatory for large consumers to participate in this scheme.
"(The scheme) provides a viable option for companies which want to reduce their exposure to volatile electricity prices but face difficulty in securing electricity contracts," said EMA.
Large electricity users refer to commercial consumers with an average monthly consumption of at least 4,000kWh - about 10 times the average monthly consumption of a four-room Housing Board flat.
Currently, such users can only buy electricity from retailers, or from the wholesale market - where electricity prices fluctuate every half-hour.
Households, on the other hand, have a third option – buying electricity from grid operator SP Group at the regulated tariff, which is currently at 25.80 cents per kWh. This has not been an option for large electricity users, as they have greater bargaining power to negotiate with retailers for better rates.
In October - the month the energy crisis was felt worldwide, including in Singapore - the average wholesale market rate shot up to almost 50 cents per kWh. The rate was about 16 cents per kWh in September. Around 1 per cent of consumers buy electricity directly from this market and are exposed to the volatile prices.
EMA said it has also received feedback that some large businesses are facing difficulties in renewing their contracts or obtaining new contracts, especially for the next three months.
The volatile gas and electricity prices, and risk of piped natural gas disruptions, have limited the retailers' ability to offer fixed price contracts, EMA said.
The three retailers involved in the Temporary Electricity Contracting Support Scheme have collectively offered around 300 megawatts of power capacity for it, EMA added.
Large businesses can buy electricity for fixed prices in Jan 2022 | THE BIG STORY
About 95 per cent of Singapore's energy mix comes from natural gas, all of which is imported into the country via pipes from its neighbours or in liquefied form from all over the world.
But there are a number of factors that are affecting the supply of gas into Singapore.
Globally, pandemic-recovery economic activity and countries entering the cooler seasons are nudging up demand for the gas.
Piped natural gas supply into Singapore has also been affected due to upstream production issues in Indonesia's West Natuna gas fields and low gas landing pressure from South Sumatra, which affects the amount of gas that can be imported into the country.
"As a result, the Singapore wholesale electricity market has experienced unprecedented volatility," EMA added.
The prices in the wholesale market fluctuate every 30 minutes. This depends on demand and supply factors.
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In October, EMA announced new measures to boost the country's energy security amid the global fuel crunch, including establishing standby fuel facilities which generation companies here can draw upon to generate electricity, reducing the risk that disruptions to piped natural gas may present.
In an update on Monday, EMA said it has also directed generation companies to maintain sufficient fuel for power generation, based on their available generation capacity for power generation, from January to March next year.
"This requirement is in addition to the existing requirement of having fuel reserves that they are required to maintain under their licences," the authority added.
EMA said that it will also direct generation firms to generate electricity using the gas from the standby liquefied natural gas facility pre-emptively if there are potential shortages in the wholesale market, so as to maintain power system security and reliability.
EMA said it has consulted the gencos on the framework and will be issuing a final determination soon.
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Second Minister for Trade and Industry, Dr Tan See Leng, said Singapore cannot be completely insulated from higher energy prices due to the ongoing global energy crunch.
"But we can and will continue to ensure that consumers have access to the electricity supply and plans they need. (The new scheme) is another step in this direction."
He added: "We will also help vulnerable consumers cope with the higher costs. We hope that consumers can also help us in conserving electricity use where they can."
OCBC Bank economist Howie Lee said the new scheme would bring about greater price stability for the affected companies, although it may not necessarily translate to cost savings as this depends on each firm’s consumption patterns.
“For example, if his peak consumption typically coincides with periods of price spikes, then he may see cost savings compared to buying at wholesale prices,” he said. “(The new scheme) would result in lesser volatility in the consumer’s electricity costs, for the month of January at least.”
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