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25 July 2011, TODAY
Changes in electricity tariff primarily driven by fuel cost movements
It is not surprising that the recent application by the two public transport operators to increase bus and train fares has raised the ire of some commuters.
Consumers do not welcome price increases for goods or services for which an alternative is out of their reach.
It is surprising, therefore, that households have generally accepted the electricity tariff without much fuss.
This may be due to most of them believing, somewhat mistakenly, that the tariff is closely correlated to the price of fuel and, as price-takers, there is nothing much they can do about the latter. And because the tariff has risen less rapidly than the price of fuel this year, perhaps it cannot be all that bad.
However, the cost of fuel accounts for about only half the tariff.
One component of the tariff that has received scant scrutiny is the non-fuel generating cost - the amount paid to the electricity generating companies to cover their non-fuel expenses (such as depreciation, staff costs, taxes) and profit.
For the first nine months of this year, the average non-fuel generating cost (excluding Goods and Services Tax) stands at 6.63 Singapore cents/kWh, an increase of almost 18 per cent from the 5.62 cents/kWh for the corresponding period last year.
These cents translate into about S$480 million annually for domestic consumers in total, compared to about S$410 million last year (annualised and based on last year's demand).
Domestic demand is less than one-fifth of total demand, however.
Including non-domestic consumers, the total non-fuel generating cost paid to the electricity generating companies may be as much as, if not more than, the S$1.4 billion in combined annual passenger revenues of SMRT and SBS Transit. The percentage increase, at least for domestic consumers, is much more than the proposed 2.8-per-cent increase in bus and rail fares.
How much of it goes towards the generating companies' profits?
Mr David Boey
Reply From EMA
In the letter "What about non-fuel cost?" (July 25), Mr David Boey commented that the average non-fuel generating cost for the first nine months of this year has increased compared to the same period last year.
In setting the non-fuel generating cost, the Energy Market Authority pegs it to the cost of the most efficient generating technology currently in our market.
This has helped to mitigate the impact of the increase in global oil prices on consumers, by encouraging generation companies to invest in more efficient technology, which in turn allows consumers to benefit from such efficiency gains.
The non-fuel generating cost includes the costs of operating the generating plants, manpower costs, capital costs and an adjustment component to account for any variation between forecasted and actual electricity consumption.
As these costs vary at different time intervals, changes in non-fuel generating costs should be considered over a longer time period. For example, over the last three years, the non-fuel generating cost has increased by around 3 per cent per annum.
Overall changes in the electricity tariff continue to be primarily driven by movements in fuel costs. The bulk of the increase in electricity tariff this year was due to rising oil prices.
Juliana Chow
Deputy Director (Corporate Communications)
Energy Market Authority |
More EMA's replies to letters in the media:
We provide information in a meaningful, timely manner
28 November 2011, TODAY
Liberalisation has its benefits
27 September 2011, TODAY
Changes in electricity tariff primarily driven by fuel cost movements
25 July 2011, TODAY
Factors do help cushion tariffs against oil price hikes
10 March 2011, TODAY
Put the brakes on electricity price hikes
31 December 2009, My Paper
Tariff increase might lead to repercussions
9 October 2009
Choice of electricity retailers
1 October 2009
Tariff-calculation formula online
29 December 2008, My Paper
Power tariff formula reviewed every 2 years
17 December 2008, TODAY
Doing the power math
10 December 2008, TODAY
Gencos don't make 'extraordinary profits'
9 December 2008, The Straits Times
Energy bill formula still being tweaked
13 November 2008, TODAY
Why HK pays a different price
30 October 2008, TODAY
Fairer comparisons - Japan and Ireland
27 October 2008, The Straits Times
Tariff Revision no benefit to power generation companies
20 October 2008, TODAY
Lower distribution cost moderated tariff increase
16 October 2008, Lianhe Zaobao
Why electricity price hike was needed
10 October 2008, The Straits Times
Lower Electricity Tariff if Price of Oil Continues to Fall
7 October 2008, My Paper
Price electricity properly and give focused help
7 October 2008, My Paper
Towards a more liberal electric mart
7 October 2008, My Paper
Quarterly tariff update accounts for time lag
2 October 2008, My Paper
Higher electricity prices will not adversely affect lower-income families
1 October 2008, Lianhe Zaobao
EMA explains spike
1 October 2008, The Straits Times
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