SINGAPORE – After tutor Roy Chan made the switch from national grid operator SP Group to an Open Electricity Market (OEM) retailer in 2018, he saved, by his estimate, more than 30 per cent on his electricity bill.
When his fixed-price plan with Senoko Energy expires this month, the 35-year-old will have to renew it at a rate of 24.9 cents per kilowatt hour (kwh) – nearly 60 per cent more than the rate of 15.89 cents per kwh he was previously paying.
Consumers like Mr Chan are sitting up and taking notice of rate hikes by OEM retailers driven by soaring electricity prices and fuel costs.
This is especially as Singaporeans settle into a new normal of working, learning and recovering from home, with a sustained, significant increase in power consumption expected.
Those needing to recontract told The Straits Times that they are mulling over their options as the gap continues to narrow between regulated tariff rates and OEM rates – from as high as 30 per cent three years ago to around 10 per cent today.
Observers also warned that more OEM retailers would shut down as their profit margins shrink and market consolidation takes hold.
Singapore’s fourth-largest electricity retailer iSwitch was the first to announce its exit, citing current market conditions in its Wednesday (Oct 13) announcement over its decision to cease operations in November.
On Friday, Ohm Energy informed customers it was exiting the market effective the same day, due to “a volatile electricity market” rendering its prices unsustainable.
And more could follow. Of the 10 retailers left as at Friday, at least two others have suspended sign-up options or removed plans altogether from their websites.
Earlier this month, Minister for Trade and Industry Gan Kim Yong urged households to conserve electricity as he warned of rising costs and surging prices.
Noting that wholesale electricity prices have been depressed below the cost of producing electricity in the last five years due to overcapacity in generation, he said: “No company that is commercially run will sell electricity below cost perpetually.”
Mr Gan’s call follows an earlier announcement by SP Group that its regulated tariff for households would increase by 3.1 per cent from this month to December.
At 25.8 cents per kwh, it is now priced at its highest since the first quarter of last year.
For a family living in a four-room Housing Board flat, this means an estimated $2.66 increase in their average monthly electricity bill, to $87.83. These figures include the goods and services tax.
With Singaporeans needing to do more things from home, the equation has changed somewhat.
Deloitte South-east Asia’s risk advisory climate and sustainability leader Yvonne Zhang said it means that electricity usage in households has taken on the essential service role of public facilities.
“Every household is shouldering a fraction of the cost of our society, and reducing power usage now faces realistic barriers that are beyond cost saving or doing good for the environment,” she added.
A consensus out of the pandemic is that remote work is here to stay, even if as part of a hybrid arrangement that also incorporates occasional trips to the office. And, although home-based learning is viewed by the authorities here as a last-resort measure, it remains an option on the table, especially for older students. Singapore’s latest move has also been to announce home recovery as the default care arrangement for positive Covid-19 cases.
Climbing electricity prices in Singapore come amid an unfolding global energy crisis in recent weeks, with reports on the soaring costs of gas and coal supply chain disruptions worldwide.
“This is a complex systems problem where the world’s supplies are interconnected and turbulence can and will affect global energy systems,” said Professor Subodh Mhaisalkar, executive director of the Energy Research Institute at Nanyang Technological University.
He said that over the past decade, the world has switched rapidly to gas-fired power plants. Gas reserves have been shrinking due to challenges posed by harsh winters as well as lower output from wind and hydropower due to weather conditions that went against historic trends.
Coupled with resurgent post-Covid-19 economies – which have reached their vaccination targets and are reopening up to activity – as well as global outages, the result has been significant increases in gas and petroleum prices, more than doubling over the past 18 months.
“It’s difficult to say how long this will last. It could take us into late next year,” said Prof Mhaisalkar.
Dr Kwan Kian Hoong, head of the Clean Energy Research Centre at Temasek Polytechnic, said that with gas prices pegged to oil ones, electricity prices will be on an upward trend.
“As economic activities pick up, barring unforeseeable circumstances, the trend will probably continue for a few quarters or even longer,” he added. “This would depend on the vaccination rates globally and be fuelled by consumers’ pent-up desire for pre-Covid-19 activities like travelling.”
Singapore relies on natural gas for more than 95 per cent of its electricity needs, with supplies coming through pipelines from Indonesia and Malaysia and imported liquefied natural gas.
In his written parliamentary response issued earlier this month, Mr Gan said the impact of fuel price hikes is mitigated by power generation companies here buying gas under multi-year supply contracts, and passing on the price stability to consumers through fixed-price plans.
Nonetheless, sustained high fuel prices will eventually feed into Singapore’s electricity prices. Mr Gan added: “(We) will need to continue to rely on energy imports one way or another, and be subject to global price movements.”
Open market moves
Housewife Kalsum Mohammed, 69, told ST that price increases have little effect on her decision to stick with the “tried and tested” SP Group as her electricity supplier.
She said trying to switch to an OEM retailer would be too complicated, and in any case, electricity bills for the four-room HDB shared with her husband and daughter are kept at around $50 to $70 – below the national average of about $80.
Still, one in two households in Singapore has been enticed by the prospect of cheaper bills and switched to an OEM retailer since the power sector was liberalised in 2018.
A spokesman for Geneco – one of the largest OEM players with around 20 per cent share – said that in general, slightly more residential customers have been observed to switch to retailers whenever a higher SP Group tariff is announced.
The surging fuel costs of late have prompted OEM retailers to up their prices in turn – by as much as 20 per cent over the past few months.
Geneco’s current fixed-price rate of 25.9 cents per kwh – across its six, 12 and 24-month plans – is higher than the regulated tariff of 25.8 cents per kwh.
At the start of the week, Geneco’s rate was still 22 cents per kwh.
Asked how Geneco would remain competitive, the spokesman said: “The company’s price plans will be adjusted according to fuel prices. We will continue to observe the fuel costs and other energy market conditions.”
Dr Kwan said the gap between regulated and OEM rates may continue to narrow as retailers, especially those backed by generation companies, have understood how to operate in a cost-effective way in the market.
“This will prompt the retailers to offer less attractive packages buoyed by the urgency of consumers to switch,” he added.
Geneco, Keppel Electric, PacificLight Energy, Sembcorp Power, Senoko Energy and Tuas Power are retailers under power generation companies.
Planning is key
A finance professional in her 30s, who only wanted to be known as Ms Chia, will feel the pinch when her 24-month fixed-price Geneco plan runs out in April.
She currently pays 16.44 cents per kwh and averages an $85 electricity bill for her four-room flat. Staying with Geneco – and using their latest rate of 25.9 cents per kwh – would mean an almost 58 per cent hike to a bill of around $134.
Prof Mhaisalkar said that amid price fluctuations, the OEM route still makes sense.
“The safety net to switch back to SP Group is always available, but customers who do their homework and choose the right plans would still find cost savings through the OEM retailers,” he noted.
As at Saturday (Oct 16), a check by ST using the OEM price comparison website showed at least 15 fixed-price plans with an estimated monthly bill of below $87.83 – the average cost for a four-room HDB flat consuming 340 kwh per month.
Senoko’s rate of 24.9 cents per kwh for its 12-month plan was the cheapest fixed-price plan on offer.
Said Deloitte’s Ms Zhang: “Consumers should budget for their utility bill’s incremental price rises in the same way they choose a mortgage or insurance policy, albeit on a lower scale.”
For Mr Chan the tutor, the electricity bill for his three-room flat already comes in way above the national average, at around $120 – despite the savings from using an OEM retailer.
About 75 per cent of the bill comes from air-conditioners used by the family – he is married, with an eight-month-old baby.
“My consumption is dependent on the weather, not cost,” said Mr Chan. “If only Singapore wasn’t so hot to begin with.”
Ms Chia said that should electricity prices keep rising in the foreseeable future, it would be best to just settle for a retailer with a good fixed rate, and lock in the contract. “It’s a matter of shopping for the best deal.”