Electricity retailers better prepared for crisis, but braced for impact as war raises costs

SINGAPORE – Electricity retailers in Singapore are better placed to ride out the current energy crisis compared with the one in 2021, even as wholesale electricity prices here have been climbing since the Middle East conflict erupted.

But analysts warn the risk of physical fuel shortages could place a strain on the sector. Electricity retailers have already begun making changes to their power plan offerings.

After the 2021 global energy crisis saw six retailers close down following wild swings in wholesale electricity prices, regulatory changes were made in 2023 so that retailers are more resilient against market volatility, and price shocks do not cascade down to households and businesses.

These changes include requirements to hedge at least 80 per cent of their contracted consumer demand on a rolling 24-month forward basis, and maintain a performance bond to cover the unhedged quantity, among other things.

There are now 10 open electricity market (OEM) retailers serving about 590,000 or 36 per cent of households, and 64,000 or 32 per cent of business consumers. At the peak, there were 14 OEM retailers.

That the current retailers are continuing to offer price plans and take on new customers signals that they can still sufficiently hedge their electricity price exposure, said economist David Broadstock, a partner at energy industry consultancy The Lantau Group.

If the retailers feel that new contracted demand cannot be hedged, they may temporarily stop accepting new customers, he said.

More inquiries for fixed-price plans

Flo Energy, the first OEM retailer to be approved under the Energy Market Authority’s (EMA) enhanced regulatory regime, told The Straits Times that it has seen more pricing inquiries from new and existing clients, as businesses seek to manage their exposure to market volatility.

“While this hasn’t yet translated into a significant increase in completed sign-ups, it reflects a growing interest in fixed-price contracts as customers evaluate their options,” said its chief executive, Mr Matthijs Guichelaar.

He added that the retailer, which serves large businesses and SMEs, is set to launch electricity plans for residential households later in 2026.

Because Flo hedges at least 80 per cent of its contracted load in advance, customers on longer-term contracts, such as two- or three-year plans, are protected from short-term market volatility, Mr Guichelaar said.

For any remaining open position, retailers are required to post a performance bond to safeguard against potential contract breaches, he added.

Senoko Energy president and chief executive Jothilingam Thiraviam said the retailer is continuing to offer fixed-rate electricity plans and has extended to its household customers early renewal windows of up to 180 days to help them secure current rates earlier and better manage their expenses.

Tuas Power said “upstream supply conditions of fuel supplies amid the ongoing Middle East crisis will exert pressure on our electricity prices”.

Retailers’ electricity costs increase when hedging costs become more expensive due to greater market uncertainty and when liquidity tightens and collateral requirements increase.

This has already resulted in fixed-price residential plans for households rising by as much as 11 per cent since the war started on Feb 28. Fixed-price plans for households ranged from 24.88 to 28.67 cents per kilowatt-hour on Feb 27. By March 27, prices had climbed to between 28.8 and 29.18 cents per kWh, according to the OEM’s price comparison website.

At the lowest end of the hikes, the rate rose 1.15 per cent – Keppel Electric’s Fixed12 plan with up to a $10 rebate climbed to 29 cents from 28.67 cents per kWh.

At the highest end, rates jumped 11.28 per cent – both Senoko Energy’s LifePower24 plan with up to $160 in rebates and PacificLight Energy’s SavvySaver24 plan with up to $258 in rebates went up to 28.8 cents from 25.88 cents per kWh.

Shorter promotional windows, reduced rebates or gifts and fewer discount-off-tariff price plans are offered when Singapore retailers are unsure where the regulated tariff may land in the next quarter.

In the first quarter of 2026, the SP electricity tariff is 29.11 cents per kWh after GST. But this is expected to increase in the second quarter as the Middle East conflict has driven up fuel prices.

Keppel Electric’s Suresave discount-off-tariff plan for new sign-ups from SP Group was stripped from its website as at mid-March. It had offered a no-contract lock-in option featuring a 15 per cent discount on the regulated tariff and no early termination fees.

Tuas Power’s 10 per cent off regulated tariff plan and six-month fixed-price plans were no longer available as at March 20, as shorter-term plans are “more sensitive to near-term cost fluctuations and therefore more challenging to price and sustain”, a company spokesperson said.

When wholesale electricity prices spiked in mid-2021 as post-Covid-19 pandemic energy demand soared and Russia’s invasion of Ukraine later worsened the energy crunch, some retailers had to buy their unhedged portion of electricity at high prices and sell at much lower contracted rates to consumers.

Many, especially those that did not sufficiently hedge their electricity price exposure, were caught on the back foot. At least two retailers prematurely terminated consumers’ contracts at that time, with about 140,000 households and 11,500 business accounts either transferred to another electricity retailer or to SP Group.

To avoid a repeat of the 2021 crisis, licensing conditions were tightened in 2023, requiring electricity retailers to hold capital, hedge risks and show governance discipline.

To ensure that retailers have sufficient financial standing, they are required to have paid-up capital or a tangible net worth of at least $1 million. To ensure that they are headed by competent and honest individuals, retailers have to seek EMA’s approval to appoint key appointment holders.

Retailers better prepared, but not immune

But on their own, “these (guard rails) are not a complete mechanism to guarantee physical liquefied natural gas (LNG) or natural gas availability under extreme geopolitical disruption”, Mr Lim Wen Bin, KPMG’s partner in infrastructure advisory, noted. LNG accounts for nearly half of Singapore’s electricity generation.

Whether these guard rails are sufficient is uncertain at this point, Dr Broadstock noted, because the current energy crisis is still evolving.

And unlike the Russia-Ukraine war, where supply disruption was caused by economic sanctions, he pointed out that the current crisis is due to war-inflicted damage to key plants providing a major share of global oil and gas and the blockade of the Strait of Hormuz, an international waterway handling a fifth of the world’s crude oil and about the same proportion of LNG supplies.

While retailers are better prepared today, Mr Lim stressed that it does not mean they are immune.

“If the shock is prolonged – for example, sustained LNG price spikes combined with shipping disruptions – retailers’ margins can still compress, and consumers may see higher contract prices as hedging costs rise,” he said.

Nevertheless, the continuity of supply mechanism remains robust even as retailers face heightened cost pressures.

“Customers’ physical electricity supply continues uninterrupted, and (customers’) transition protocol to SP Group – as previously applied – remains the industry’s backstop,” Mr Lim said.

EMA, in response to ST’s query, said Singapore’s fuel supply security has been strengthened with contingency measures, including its strategic LNG facility and substantial fuel stockpiles that can support power generation for extended periods.

“We have diversified sources of natural gas. Piped natural gas from Malaysia and Indonesia accounts for around 43 per cent of our gas supplies, and we source LNG from Australia, Africa and the US, apart from Qatar. In addition, Singapore GasCo stands ready to procure additional gas supplies as needed,” a spokesperson said.

EMA added that it is “closely monitoring the situation to ensure there is no profiteering by retailers”.