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Vesting contracts aim to enhance economic efficiency in the electricity market by mitigating the exercise of market power by the large power generation companies.
How Vesting Contracts Work
As the Market Support Services Licensee (MSSL), SP Services Ltd buys electricity from the wholesale electricity market at half-hourly prices for supply to non-contestable consumers at the regulated tariff.
From time to time, EMA may issue vesting contracts through the MSSL for hedging the price of energy to be procured from the Singapore Wholesale Electricity Market (SWEM) for supply to non-contestable consumers. The vesting contracts are structured as bilateral two-way Contracts-for-Differences between the MSSL and a holder who is typically a power generation company.
Setting the vesting price
The vesting price is determined based on the long run marginal cost of the most efficient technology that accounts for at least 25% of the total electricity demand in Singapore.
Please refer to the Documentation section for details on EMA's procedures for calculating the components of the vesting contracts for the respective vesting periods.