Wholesale Electricity Prices, Tariffs May not Move in Tandem

08 Apr 2013

In his letter, “Why did electricity tariffs rise when wholesale price had fallen?” (April 1), Mr Raymond Chiam asked why tariffs increased in the second quarter when wholesale prices fell in February.

Wholesale electricity prices are not used to set electricity tariffs. As such, the two do not necessarily move in tandem.

Wholesale prices are determined every 30 minutes and fluctuate according to demand and supply conditions in the electricity market. These prices have fallen in recent months due to an increase in generation capacity, which increased competition in the market.

There were periods in previous years when market conditions were tight, and wholesale prices had increased while the regulated tariff went down.

Unlike wholesale prices, the electricity tariff is reviewed quarterly, and forward fuel prices have been on an uptrend since January, peaking at $127.50 per barrel in mid February before receding slightly last month.

This led to a 2.9 per cent increase in the fuel cost for generation companies. As a result, the tariff for the second quarter increased by an average of 1.5 per cent compared to the previous quarter.

We thank Mr Chiam for the opportunity to clarify these points.

Juliana Chow (Ms)
Director, Corporate Communications
Energy Market Authority

Today Voices: Why did electricity tariffs rise when wholesale price had fallen? (1 Apr)

The latest data shows that the wholesale electricity price fell to S$151 megawatt per hour in February, the lowest monthly level since September 2010.

Can the relevant authority explain why electricity tariffs have been raised, and not lowered, for the April to June period?

Raymond Chiam

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