Better way is for prices of utilities to be regulated

The Energy Market Authority (EMA) of Singapore recently announced that from the second half of next year, all remaining 1.3 million accounts, mainly households, will be able to enjoy choice and flexibility in their electricity purchases.

They will be allowed to choose their electricity supplier (New online platform to help decide on electricity purchases; Oct 28).

My recent experience made me wonder if the EMA is making the right move.

Two marketeers visited me to get me to sign up with their company for my electricity supply. They offered a discount of 20 per cent on the price charged by Singapore Power.

I agreed, mainly to help the two of them even though I felt that this kind of price cutting, without any improvement in efficiency, is not sustainable in the long run.

The paperwork to make the switch was quite tedious and the two marketeers spent an hour in my office to complete it.

With the switch, I now have to pay two bills every month - one to Singapore Power, for the water; and the other to the power supplier.

The EMA may think that this improves efficiency and reduces cost for businesses and households. It may have the opposite effect of increasing cost, instead.

How so? We would eventually have to bear the cost of the many marketeers, like the two who visited me. We would also have to incur the paperwork and expenses of changing the supplier.

The consumers will have to manage two bills each month, instead of one.

A better way is to regulate the prices of utilities. They can be made market-sensitive, but the profit and expense margins can be regulated.

Alternatively, we can divide Singapore into zones and tender out the operations in each zone to an operator, similar to the bus-contracting model.

Tan Kin Lian

A version of this article appeared in the print edition of The Straits Times on November 11, 2017, with the headline 'Better way is for prices of utilities to be regulated'. Subscribe