Electricity price hike: Make it fairer, more transparent

Letter from Wong Weng Fai, Straits Times Forum 7 Oct 08;

I REFER to last Saturday's letter, 'EMA explains spike'.

To the question on why, even though 80 per cent of our electricity is powered by natural gas, electricity prices are pegged to oil prices, the Energy Market Authority (EMA) replied that, because there is no Asian benchmark for gas prices, oil prices are used instead. In other words, it is not the actual cost of raw material (gas) that is used in computing electricity prices.

Surely the power generation companies know exactly how much they pay for natural gas. Is it not possible to determine electricity prices more accurately, rather than stick to 'this is what we have been doing all along since 2004, so we will continue to do it'?

Another issue this price increase has brought up is transparency. I was unable to find anywhere the formula to determine these prices. Perhaps the power companies should be required to publish their raw material prices, overheads and margins on their websites, so the public are kept up to date.

With privatisation of electricity, is there still a need for a 'one price for all' approach? Let the power companies figure out how best to obtain the lowest-priced raw material (using spot, one-month or three-month futures, or private agreements with gas producers) and reflect it immediately in monthly bills. This will allow competition to increase efficiency. EMA should play the role of moderator to ensure there is no cheating or collusion.

Like most Singaporeans, I am not asking for subsidies for utilities. I am just asking for fair and transparent pricing.

Power shock: Bring retail competition sooner
Straits Times 7 Oct 08;

ANY way one looks at it, the increase of 21 per cent in electricity charges that took effect last week was a shocker. The size of the quarterly jump, the biggest in eight years, will burden the majority of middle-income home users although the poorest households in HDB housing are insulated with adequate government rebates.

The beef is with the timing - despite consumer acceptance that state fuel subsidies are not a habit with this Government and the fact that electricity price adjustments work to a formula that tracks the world oil price.

In the face of financial failures in the West, inflation tendencies seem almost like yesterday's news to many people, though prices have demonstrably not stopped biting. Singaporeans are even more apprehensive now about income and job uncertainties associated with the fallout from the banking crash in America and Europe and the consequent liquidity crisis that is working its way through the global economy.

In the circumstances, might the Energy Market Authority (EMA) have made an exception of this instance and held prices at the current level? (Price adjustments are made quarterly.) The gesture would have been appreciated. As it is, EMA thinks the next quarterly adjustment in January could see a tariff reduction as crude oil prices, which determine the cost of the fuel oil used in power generation, have lately been dipping again in tandem with the financial disruptions.

A question arises as to whether the adjustment formula based on the forward fuel oil price, as opposed to the spot price, could be refined so as to bring the cost charged to consumers closer to the world oil price, with minimal time lag.

Home consumers are still subjected to the rigidities of an imperfect market as the supply of power to the 1.2 million households, which account surprisingly for only 25 per cent of the electricity market, has not been liberalised as quickly as the industrial-use sector which is far bigger.

Price relief will come only in three or four years when the home-use sector is opened to competition, which will give consumers a choice of retailers to buy their power from. EMA calculates that industrial users which enjoy full competition have seen their prices fall by 3 per cent to 8 per cent. Comparable reductions cannot come soon enough for households.

If an experiment next month, with electricity vending meters in 1,000 volunteer households in Marine Parade and West Coast, demonstrates that the technology and conservation monitoring methods are feasible, EMA should bring full implementation sooner than the planned schedule of around 2012.