Expect to pay higher electricity bills

No relief soon as high oil prices push up costs for power companies
Yang Huiwen, Straits Times 9 May 08;

IF YOUR latest power bill gave you a jolt, you had better get used to it because there is more to come.

Soaring crude oil prices drove the benchmark market price of electricity to a record last month, and there is not much relief in sight.

In fact, the pain for consumers will likely go on for the next two quarters. That is because oil prices will continue to be high, and the six months from April to September tend to see higher power use nationwide.

The wholesale price is what power companies pay for electricity, plus a small amount of regulation and administrative costs and adjustments. It affects how much consumers end up paying.

Yesterday, the Energy Market Co, which runs the wholesale electricity market here, said that this price - known as the Uniform Singapore Energy Price - jumped 17.7 per cent from March to hit $173 per megawatt hour (MWh) last month.

That is the highest monthly average since 2003, when wholesale market trading began, and well up on the last high of $168.34 per MWh in August 2006. Last year, the average price was $124.57 per MWh.

The result is a corresponding spike in electricity prices consumers pay, though it is not a direct correlation.

In response to rising wholesale prices, Singapore Power Services (SPS), which supplies electricity to about 1.2 million households, has been steadily increasing electricity tariffs.

The so-called Low Tension Tariff, which is what the man-in-the-street pays, was 18.88 cents per kilowatt hour (kwh) from April to June last year.

The rate jumped to 22.62 cents per kwh by the first quarter of this year. And a month ago, the rate - which is set by SPS every quarter - rose 5.7 per cent to 23.88 cents per kwh.

For people such retiree Loh T.E., this means higher electricity bills.

Mr Loh, who lives in a five-room flat without air-conditioning, said electricity costs now make up 12 per cent of his household expenses, compared with 8 per cent last year.

EMC chief executive David Carlson said yesterday that the main reason behind the higher bills is the rising price of crude oil, which hit close to US$124 (S$170) per barrel yesterday.

And fuel oil, which is priced in tandem with crude oil, forms the largest cost component for power generating companies.

'Fuel oil prices continued to rise coming into this year, so during the first quarter, fuel costs have had to be paid by (power) generators. That had an impact on what they can offer into the market,' said Mr Carlson.

'We expect to see higher demand (for power) in the second and third quarter.'

But he declined to predict if that would translate to higher electricity prices, saying that there were other factors at play.

First, demand is heavily influenced by economic growth. If the economy slows down, then prices should ease a little.

Second, Singapore's power market has been liberalised, and new power generation companies are free to enter the market and compete, bringing down prices.

Mr Carlson said greater competition has cushioned the impact of oil prices on electricity prices in the past three years and will continue doing so.

Oil industry trips on spiralling power rates
With tariffs likely to rise further, cogeneration plants could be the answer
Ronnie Lim, Business Times 9 May 08;

(SINGAPORE) What goes around, comes around. On the back of the hike in oil prices which almost touched US$124 yesterday, electricity tariffs in Singapore have climbed to uncomfortable heights. And ironically, the oil industry here - which uses a lot of electricity - is feeling the most pain.

BT has learnt that the worst may not be over as electricity rates are likely to face more upward pressure in the coming months.

This was disclosed by Energy Market Company (EMC) CEO Dave Carlson yesterday in response to queries from BT. He said that the rising crude prices had pushed up the price of high-sulphur fuel oil, which is used by some power stations here. But the bigger impact came through the hike in the price of natural gas - the main feedstock - which is pegged to the price of high-sulphur fuel oil.

The impact has been obvious. The average monthly electricity tariffs stood at just over $140 a megawatt hour last December, he said. They shot to $158 in January, before cooling to $149 in February and $147 in March. In April, the spike was the steepest as this rate climbed to $173.

'With electricity demand in the second and third quarters traditionally higher, more upward pressure on tariffs is expected,' Mr Carlson added. Last year's surprise 6 per cent dip in tariffs is now just a distant memory.

Separately, an oil industry source later said 'we are feeling the pain - it's a significant increase', when asked if the latest run-up in electricity tariffs was starting to hurt.

Oil refineries and petrochemical complexes are big power users, with electricity costs accounting for as much as 25-30 per cent of total operating costs, the source said. 'So the 25 per cent jump in tariffs in the last few months is significant,' he added.

'But we have no control over electricity prices and have to manage our costs. One option, however, will be to build our own cogeneration plant, and this is something we are looking at,' he added.

BT had earlier reported that oil companies here like ExxonMobil are already building additional cogen plants to supply power to their big expansion projects, including its US$5 billion-plus new petrochemical cracker. And this is clearly the industry's answer to ever-rising electricity and other utility costs.

EMC's Mr Carlson, who was giving a media briefing on the electricity market here, earlier indicated that average electricity prices dipped in 2007 to $124.57/MW hour - after climbing from $82.35 in 2004 to $109.90 in 2005 and $132.42 in 2006.

The 2007 dip was attributed to efficiency gains and increased competition among the generation companies, spurred by the entry of new player Keppel Merlimau Cogen with its 500 MW station.

He, however, declined to project how much electricity tariffs could go up by this year, as this depends on various factors, including whether oil prices will rise further.

Another factor is electricity demand growth, which tends to follow Singapore's gross domestic product growth. Latest official indications are that Singapore's GDP is expected to moderate this year to 4-6 per cent - lower than last year's 7.5 per cent.

But this doesn't mean that electricity demand growth is also going to slow down this year, Mr Carlson said. He added that a decision by a big investor - say, another oil refinery coming into Singapore - would affect demand as well.

Hopefully, increased competition in electricity generation, 'with new investment entering the market', will help temper electricity tariff increases, he said.

This includes the entry of new players - like China Huaneng Group, China's largest power producer, which recently took over Tuas Power - as Temasek Holdings continues with the divestment of the two remaining big gencos, Senoko Power and PowerSeraya.

More players here, like Senoko Power, are also converting more of their older plants to more efficient cogeneration plants, while others like Sembcorp Cogen are also looking into cheaper alternatives like waste-derived fuels to stay competitive amid a high oil price environment.

As electricity prices go up, up and away
Demand for more power, as factories increase output, could result in higher bills
Esther Fung, Today Online 9 May 08;

Consumers be warned. Household electricity prices have shot up 11.7 per cent in the first four months of this year — and Singapore's electricity market operator said that consumers should expect more upward pressure in coming months.

Oil prices shot up 18 per cent over the same period, yesterday touching a new fresh record of US$124 per barrel in international trading.

As Singapore manufacturers ramp up activity in the second and third quarters of the year, there is likely to be additional demand for power, which could lead to higher prices.

"Traditionally, this is the time of the year when companies use up more electricity," said Mr Dave Carlson, chief executive of the Energy Market Company (EMC).

Recent higher temperatures have also resulted in more energy usage from air conditioners.

EMC operates Singapore's wholesale electricity market, from which service providers such as Singapore Power Services and Senoko Energy buy their electricity to sell to end-users such as households and firms. The service providers paid an average $151 per megawatt-hour for electricity in the first quarter this year. This was 21 per cent higher than last year's $125 average.

Oil prices may have risen consistently over the past year, but some cost savings have been made in Singapore thanks to increased efficiencies brought about by escalating competition.

Over the last five years, power generation companies (gencos) have been increasingly using gas piped in from Indonesia and Malaysia, which results in more efficient electricity generation as compared to steam turbine plants.

Last year, demand for electricity rose 4 per cent, while average wholesale prices service providers paid for electricity actually fell 6 per cent.

An additional gas source is also slated to come on board. Singapore's first liquefied natural gas terminal will start operations in 2012.

Some gencos are also planning to combine electricity production with others. "You will see electricity and steam coming together; you will see electricity, steam and water also coming together," said Mr Carlson.

"Putting those together, you can get more efficient use of the fuel and environmental savings as well."

Singapore can look forward to further competition with Keppel Merlimau Cogen being the most recent genco to start operations.

"With Keppel, we saw prices come down. And that was partly due to more efficient generation," said Mr Carlson.

Island Power will soon open a new gas plant as well.

However, Mr Carlson said it remains unclear if increasing competition can continue to cushion electricity prices.

"It's a hard one to predict," he said.