With the introduction of the Open Electricity Market (“OEM”), all household consumers can switch to become a contestable consumer and buy electricity from aretail electricity licensee. Those who remain as non-contestable consumers (“NCCs”) continue to buy electricity from SP Group at the regulated tariff. As of end-Feb 2021, about 51% of consumer accounts remain as NCCs. Most of the NCC accounts (89%) are household consumers while the remaining (11%) are business consumers.

EMA has put in place the liquefied natural gas (“LNG”) vesting contracts to mitigate the risk of the commercial power generation companies (“gencos”) procuring LNG for power generationto support the start-up of the LNG terminal in 2013. The vesting contracts are structured as bilateral hedging contracts (referred to as Contracts-for-Difference or“CfDs”) between each genco and SP Services (“SPS”) which is the Market Support Services Licensee (“MSSL”). They have fixed hedging quantities and a strike price that is administratively set by EMA at the long run marginal cost (“LRMC”) of a combined cycle gas turbine (“CCGT”) generating unit. The CfDs effectively hedge the wholesale purchase of electricity by SPS from the Singapore Wholesale Electricity Market (“SWEM”) for supply to NCCs at the LRMC. This in turn allows EMA to set a relatively stable regulated electricitytariff offered by SPS to NCCs, with the energy cost component being the LRMC to reflect the full cost of producing electricity.

The LNG vesting contracts are set to expire on 30 June 2023. EMA intends to implement a new voluntary scheme for SPS to continue offering a stable regulated tariff to NCCs after the expiry of the LNG vesting contracts. This consultation is to seek comments to the high-level design of the scheme set out in this paper before finalising it for implementation.