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