Reason for Electricity Tariff Hike

11 Jan 2020

We thank Mr Alan Chiu Chen Hong for his feedback (Puzzled by electricity tariff hike as natural gas price has dropped, Jan 1).

The power generation companies in Singapore import natural gas under long-term contracts at commercially negotiated prices indexed to oil prices.

The price of natural gas delivered to Singapore will therefore differ from the general price of natural gas. The electricity tariff also includes non-fuel cost, such as the costs of operating the generating plants, manpower costs, capital costs and an adjustment component to account for any variation between forecasted and actual electricity consumption.

As the average price of natural gas delivered to Singapore under long-term gas contracts was relatively flat in the fourth quarter of last year, over the preceding quarter, the increase in the electricity tariff for the first quarter of this year was mainly due to an increase in the non-fuel cost of the power generation companies.

Lee Lie Yen
Director
Economic Regulation and Licensing
Energy Market Authority

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Puzzled by electricity tariff hike as natural gas price has dropped, 1 January 2020 (The Straits Times)

 

By Alan Chiu Chen Hong

It was reported that electricity tariffs will rise on average about 3.5 per cent in the first quarter of this year and that gas prices will fall (Electricity bills to go up, and gas prices to fall, Dec 30, 2019).

SP Group said in the article that the increase is mainly due to "higher energy cost compared with the previous quarter".

According to the Energy Market Authority Singapore, about 95 per cent of Singapore's electricity is currently generated using natural gas, up from just 26 per cent in 2001, when oil was the preferred fuel.

Therefore, I am surprised by the tariff increase because the natural gas price has been very weak, and has dropped significantly in the past year. The article also said the tariff is the highest it has been since the period from October to December 2014, when it was 25.28 cents before GST.

Last year, the natural gas price was about 16 to 20 per cent lower than in end-2014.

Can SP Group help consumers understand the reason for the increase?