Why are SP Group's rates higher than retailers'?

File photo showing a man flipping a switch on an electrical board.
File photo showing a man flipping a switch on an electrical board.PHOTO: ST FILE

I appreciate the Energy Market Authority's (EMA) response (Open electricity market gives consumers choice; Jan 14) to Mr Hoe Lye Soon's concerns regarding the Open Electricity Market (OEM) (Keep buying of electricity simple; Jan 5).

I acknowledge that it is always good for consumers to have more choices.

However, I have a seemingly simple question that has yet to receive a satisfactory answer from the electricity retailers I have asked.

Given that electricity retailers are looking to make a profit, have spent a significant amount on marketing costs and are still able to offer consumers electricity rates that are a good 20 to 30 per cent lower than SP Group's, why doesn't SP Group just offer consumers these lower rates in the first place?

Many of the 13 or so retailers participating in the OEM do not generate their own power, instead claiming to buy in bulk from power plants to sell to consumers.

As the largest bulk buyer of electricity, SP Group should benefit the most from economies of scale, and be able to pass the savings on to consumers.

It is hard to understand the logic behind creating the OEM and getting so many retailers to compete for consumers, when SP Group is in a position to bypass this step to sell electricity directly to consumers at more competitive rates.

I doubt I am the only consumer puzzled by this, and hope that EMA can give a satisfactory explanation.

Albert Tang

A version of this article appeared in the print edition of The Straits Times on January 16, 2019, with the headline 'Why are SP Group's rates higher than retailers'?'. Subscribe