The prospect of surging energy prices for the next few years and a severely diminished ability to effectively hedge against volatile conditions are what spurred the departure of two retailers from Singapore's open electricity market (OEM), experts said.

Of the 10 remaining retailers, at least two others are set for the exit door.

But the experts also said the ones still standing will likely be able to continue to offer savings on the regulatory rate set by the national grid operator SP Group, and that consumers would still stand to gain from competition in the sector.

"While there have been signals for some weeks now regarding the global energy price crisis, and recognition that this will spill over into Singapore's domestic electricity markets, the recent events have still emerged as something of a surprise," said Dr David Broadstock, a senior research fellow at the National University of Singapore's Energy Studies Institute.

"Such extreme and sudden choices are rare in most market contexts - it is essentially an overnight reorganisation of an industry."

Singapore's fourth-largest retailer iSwitch, as well as Ohm Energy, announced their departures from the market just days apart.

iSwitch said last Wednesday that it would cease operations on Nov 11 due to "current electricity market conditions".

On Friday, Ohm Energy informed customers it was exiting the market effective the same day due to "a volatile electricity market" rendering its prices unsustainable.

Best Electricity Supply's website no longer contains information on any plans, and on Diamond Electric's website, the only plan on offer is a zero per cent discount off the prevailing regulated tariff of 25.8 cents per kilowatt-hour.

An e-mail to an existing Diamond Electric customer seen by The Sunday Times cited "increasing costs of electricity" for the discontinuation of a similar plan. The retailer advised the customer to switch to another retailer by Nov 6 or be switched back to SP Group on Nov 7.

iSwitch, Ohm Energy, Best Electricity and Diamond Electric did not respond to queries.

The OEM's official price comparison tool now lists only plans offered by the eight other retailers.

Of these, six - Geneco, Keppel Electric, PacificLight Energy, Sembcorp Power, Senoko Energy and Tuas Power - are backed by power-generation companies.

The other two, Union Power and Sunseap Energy, are now offering plans with only marginal price differences compared with the regulated tariff.

Earlier this month, Trade and Industry Minister Gan Kim Yong cautioned in a written parliamentary response that fuel prices have more than doubled over the past 18 months, and that global movements would affect Singapore - which imports nearly 100 per cent of its energy needs.

Dr Broadstock, an energy economist, noted that Singapore's electricity futures are generally trading at a higher price today than at any point in their history, with a curve suggesting that high energy prices will be locked in until December 2023.

Retailers in the OEM - which first opened up to residential households in 2018 - thus have to choose between future unknown but increasingly volatile spot, or real-time, market outcomes and locking in high costs on the basis of currently tradable futures.

"The ability to hedge effectively is greatly diminished," said Dr Broadstock.

Hedging is a financial instrument protecting against price volatility, by locking in profits on market movements.

Business lecturer Tan Tsiat Siong from the Singapore University of Social Sciences said: "In other words, retailers offering fixed price plans are promising to sell electricity at a cheap price - and sometimes in large volume - without sufficiently ensuring that they would be able to purchase this electricity at low prices."

Observers said independent retailers also had to compete in a saturated Singapore market - with 12 retailers for 1.4 million residential households - and for some of them, at the disadvantage of not having their own power generation assets.

"The OEM retailer route still brings savings to the consumers and this would override any concerns of some retailers exiting the business," said Professor Subodh Mhaisalkar, executive director of the Energy Research Institute at Nanyang Technological University.

Mr Sharad Somani, KPMG Singapore partner and the head of infrastructure advisory, called on industry regulator Energy Market Authority to review the appropriate number of retailers. "Singapore's market size can likely accommodate around five to seven retailers, for them to co-exist with healthy competition," he said.

The energy authority could also set up financial parameters of monitoring to detect retailers showing early warning signs and to encourage consolidations where apt, suggested Mr Somani.

"Retailers will need to reinvent their business model and offer more value-added and diverse services to stay relevant, competitive and profitable in the long term," he added.