We thank Mr Max Leong, Mr Goh Boon Kai and Mr Ong Soon Yam for their questions on the open electricity market (How are new retailers able to offer better prices than SP Group?; Maintaining cost savings tough in the long term; and Many concerns over changes in power market; all on Sept 25).
The open electricity market will provide consumers with more choices when buying electricity.
We recognise that not everyone may wish to switch to a retailer. Hence it is not compulsory to switch and there is no deadline.
Mr Goh and Mr Leong asked how it is that retailers are able to offer lower prices than the regulated tariff.
The regulated tariff, charged by SP Group and approved by the Energy Market Authority (EMA), is based on a fixed formula reflecting the long-term costs to produce and deliver electricity in Singapore.
SP Group has to supply electricity to all consumers while bearing the risks of an uncertain customer base as it does not impose any contract lock-in periods.
Retailers, however, can set their prices based on their business strategies to adapt to shorter-term factors such as the prevailing market conditions and level of competition.
They can also impose terms like contract lock-in periods with early termination charges for greater certainty over their customer base.
While their price plans are fixed for the contract duration, retailers may adjust their prices over time.
We wish to assure consumers that the EMA has put in place measures to protect their interests.
Any retailer who wishes to enter the open electricity market is subject to stringent review by the EMA.
Should a retailer cease operations, electricity supply to its customers will not be disrupted. They will be automatically transferred to SP Group and can subsequently decide whether they wish to switch to another retailer.
The EMA has simplified consumer choices by limiting the types of standard price plans.
Those who prefer price stability can consider a fixed price plan to pay a fixed rate throughout their contract duration. Another is the Discount Off the Regulated Tariff plan, which will be ideal for those who want to pay a rate guaranteed to be lower than the regulated tariff.
As the open electricity market is a new initiative, the EMA will also provide resources to help consumers make informed decisions. Consumers can visit www.openelectricitymarket.sg for more information and use the price comparison tool to compare the standard price plans offered by retailers.
Soh Sai Bor
Assistant Chief Executive (Economic Regulation)
Energy Market Authority