Electricity Surges Ahead

Once again, inflation rears its ugly head in the form of self afflicted pain by the EMA who sanctioned another round of electrical tariff hike. Of course the exercise is timed after the election is over. All that talk about keeping the Singdollar strong to combat imported inflation, such as the cost of oil, seems to be just that, talk.

From today, cost of electricity will hit a 33-month record high of 27.28 cents per kWh, almost one-fifth  (20 percent) more than what SP services charged Singapore households one year ago. The Utilities-Save rebates will be temporary buffer, with the $20 or $90 handout, depending on type of qualifying HDB flat, providing on the average one month's offset in electrical bills. For the rest of the year and beyond, stock up on candles or charcoal.

EMA's FAQ on liberalisation of the electricity market implemented in Singapore includes this bit:
"Retail contestability will eventually be introduced to the remaining domestic and small non-domestic consumers (with average consumption less than 10,000kWh per month) under the third phase of retail liberalisation. The number of consumers in the third phase is about 1 million, but in terms of electricity sales, they represent only about 25% of total sales in Singapore. Phase 3 of the retail market liberalisation is currently under study."

Retail contestability means that consumers, no matter how big or small, can have a choice of their retailer, our subject of interest being pricey electricity. Changing a retailer means one can choose who sells you electricity, manages your bills, and provides services to you, presumably at the most competitive rate.

While Singaporeans wait (no time frame for the retail market liberalisation study is indicated), SP Services Ltd continues to set the electricity tariffs which are rubber stamped by EMA as the regulator. Electricity tariffs are reviewed quarterly and adjusted (usually upwards) to pass on the changes in fuel cost to consumers. In a 2004 paper, EMA boasted that "the competitive market has reduced prices for customers by 9.5% as it has created incentives for the largest gencos to switch from oil-fired steam generators to more efficient gas turbines."  Does the graph tell you something different?

All the major power plants have been sold and privatised, all the profits have been posted to some reserve account. But not one iota of the money making has trickled down significantly to relieve the relentless march of the tariff hikes. If there's any consolation, CIMB Research says job worries and pullback in consumption in Europe and the US will likely see oil prices come off. Salvation will have to come from external sources, not our own government bodies.