Measures in place to protect consumers’ interest in open electricity market: EMA
12 Apr 2018
In his letter, “With SP Group
operating national power grid, how competitive will prices be in open market”
(April 5), Mr Francis Cheng Choon Fei said that the Government should regulate
the prices charged by SP Group and power generation companies for the grid
services provided and electricity sold respectively.
The Energy Market Authority
(EMA) regulates the energy sector to protect the interests of Singapore
consumers. EMA also safeguards reliable energy supply to Singapore consumers
and promotes effective competition in the energy market.
SP Group is licensed by EMA
to develop and operate the national grid that delivers the electricity produced
by power generation companies to all consumers.
The grid charges that SP
Group can impose are regulated by EMA to ensure that SP Group delivers reliable
electricity supply at reasonable prices to all consumers.
All power generation
companies need to compete in the Singapore Wholesale Electricity Market to
generate and sell electricity on a half-hourly basis. This ensures that all
electricity retailers, who buy electricity in bulk from the Singapore Wholesale
Electricity Market at wholesale prices, have access to competitively priced
To further promote
competition, EMA introduced the electricity futures market in 2015. The
electricity futures market allows the retailers without generation assets (ie.
independent retailers) to hedge their price risks and compete effectively in
the retail electricity market.
We thank Mr Cheng for his feedback and assure
him that EMA will continue to safeguard consumer interests in the open
Soh Sai Bor (Mr)
Assistant Chief Executive
Energy Market Authority
With SP Group operating national power grid, how competitive will prices be in open
market? - Francis Cheng Choon Fei
6 April 2018
The opening of the electricity market via soft launch in April raises a
few questions of public interest, about whether it is indeed in the name of
First, the electricity produced by the power generation companies
requires utility provider SP Group to transmit and distribute it to consumers
through the national power grid.
That means, SP group will charge these power generation companies for
the facilities and infrastructure use to transmit and distribute electricity
via, for example, switchgears, transformers, transmission/power and
distribution cables and, in future, the underground tunnels that SP Group will
use for cables and other equipment.
Because there is the one and only power grid on this island, it is a
“natural monopoly”, meaning it is economically not viable to have more than one
grid to compete. Hence, these power generation companies would have to accept
whatever fees set by SP group without much or any bargaining power. The costs
would be passed on to consumers or retailers authorised to resell electricity.
For such a situation, it should then be regulated, just like how the
Energy Market Authority regulates electricity tariffs. The authority should do
more, perhaps audit and approve how much SP Group will charge the power
generation companies for the transmission and distribution of electricity?
Apart from this, there are now more players in the mix: The power
generation companies can sell electricity, and there are also retailers which
are not power generation companies but buy electricity from these companies to
resell to consumers.
Because these power generation companies also sell directly to
consumers, they are the first movers, unlike resellers which act as “middlemen”
buying and selling electricity. These power generation companies will therefore
have a competitive advantage in terms of pricing and plans.
Presently, some telecommunication service providers lease broadband
from Singtel. Singtel’s lease and price agreements are governed by the
Info-communications Media Development Authority as the regulator.
On that basis, a similar arrangement should exist between a regulator
and the resellers which are not power generation companies, to ensure no
first-mover price advantage.
As Singapore opens up the electricity market, we need to ensure
consumers and small-time retailers are not shortchanged because of the above
circumstances. The authorities should discourage any arrangement where dominant
players thwart competition and market forces.
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