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2 October 2008, My Paper Review calculation method for power prices IT IS the season for price increases. Bus rides, food and even newspapers have gone up in price. However, the increase in electricity tariffs is the last straw. Among the reasons cited for the 21-per-cent price hike - the highest one-time increase in seven to eight years - is higher oil prices. On Sept 29, The Associated Press reported that oil prices had gone down more than US$5 (S$7)to almost US$101 a barrel, due to concerns that global economic growth would slow down despite the possibility of a US$700-billion bailout package from the United States government to stabilise the US financial system. I urge the authorities to review the methods used to determine electricity tariffs.There is much talk of the advantages of liberalising the energy markets and being more market-oriented. However, consumers have been failed when it comes to pricing. While the increases may seem trifling to the wealthy, it is a hard burden for the man in the street to bear in these difficult and challenging times. For ordinary people, every cent counts. Michael Leong Tuck Meng 2 October 2008, My Paper Open energy market to give S'poreans better deal SINGAPOREANS are greatly concerned about the electricity-tariff hike, which took effect earlier this week, as it affects their daily lives. I urge the authorities to recalculate the electricity tariff, which is based on an oil price of US$155 (S$224) per barrel. Current crude-oil prices are below US$100 per barrel. Since the last round of adjustments of electricity tariffs, we have not seen any reduction in charges, even though oil prices have been going down. This latest increase will impact everyone in the next three months. There are also no signs as to whether the rates will go up or down next year. Will government rebates be spent solely on alleviating the burden of electricity tariffs? How about increases in transport fares, and the price of food and raw materials? The Government should liberalise the energy market soon so that Singaporeans can enjoy better electricity-tariff rates. Paul Fong Reply From EMA IN THE letters, "Review calculation method for power prices" (my paper, Oct 2) and "Open energy market to give Singaporeans better deal" (my paper, Oct 3), Mr Michael Leong and Mr Paul Fong asked why the electricity tariff was revised upwards despite the decline in the price of oil. The electricity tariff is updated by SP Services every quarter, based on the forward fuel-oil price quoted three months earlier. This means that there is a time lag between changes in the fuel-oil price and the actual tariff revision. When the fuel-oil price rises unexpectedly, the tariff will not go up immediately. Likewise, when the fuel-oil price falls, the tariff will not go down right away. For example, households did not experience a steep increase in the electricity tariff in July despite the record-high oil price then. This is because SP Services used the forward fuel-oil price quoted earlier in April (US$83 per barrel) to set the tariff. For the recent tariff revision, SP Services used the forward fuel-oil price quoted in July, which was at a peak of US$115 per barrel. This time lag explains why the tariff has increased even though the oil price has now fallen to below US$100 per barrel. If the oil price continues to stay down, then the tariff would also fall, but after a lag in time. We agree with both Mr Leong and Mr Fong about the advantages of liberalising the electricity market to ensure competitive pricing. The liberalisation of the electricity market for industrial use has already resulted in real benefits for consumers, as electricity providers compete to offer better services and new products. Going forward, the Energy Market Authority plans to open up the domestic-household sector for competition. We have embarked on a pilot project to test the viability of the Electricity Vending System (EVS). If the EVS is implemented, it would allow households to purchase electricity from competing providers, based on a price plan that best suits their usage needs. This will allow more scope for product innovation, better customer service and competitive pricing. |
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