Large users of electricity to get fixed-rate price option

Large electricity users in Singapore, such as shopping malls and manufacturing facilities, will be cushioned from the recent volatility in the electricity market under a new scheme that will enable them to buy electricity at fixed rates.

The new Temporary Electricity Contracting Support Scheme, announced by the Energy Market Authority (EMA) yesterday, will allow such users to pay for electricity at a rate capped at 39.7 cents per kilowatt hour (kWh).

The actual rate they pay will depend on their negotiations with the three retailers involved in the scheme: Geneco, Sembcorp Power and Senoko Energy Supply.

This fixed-price contract will be valid for the month of January next year, EMA said, although it could be extended if there is demand in the months ahead. It is not mandatory for large consumers to participate in this scheme.

"(The scheme) provides a viable option for companies which want to reduce their exposure to volatile electricity prices but face difficulty in securing electricity contracts," said EMA.

Large electricity users refer to commercial consumers with an average monthly consumption of at least 4,000kWh - about 10 times the average monthly consumption of a four-room Housing Board flat. Currently, such users can buy electricity only from retailers or the wholesale market - where electricity prices fluctuate every half hour.

In October - the month the energy crisis was felt worldwide, the average wholesale market rate shot up to almost 50 cents per kWh. The rate was about 16 cents per kWh in September.

EMA said it has received feedback that some large businesses are facing difficulties renewing their contracts or obtaining new ones, especially for the next three months.

The volatile gas and electricity prices, and risk of piped natural gas disruptions, have limited the retailers' ability to offer fixed-price contracts, EMA said.

About 95 per cent of Singapore's energy mix comes from natural gas, all of which is imported into the country via pipes from its neighbours or in liquefied form from all over the world.

Globally, pandemic-recovery economic activity and countries entering the cooler seasons are nudging up demand for the gas.

Piped natural gas supply into Singapore has also been affected due to upstream production issues in Indonesia's West Natuna gas fields and low gas landing pressure from South Sumatra.

In October, EMA announced new measures to boost the country's energy security amid the global fuel crunch, including establishing standby fuel facilities which generation companies here can draw upon to generate electricity.

In an update yesterday, EMA said it has also directed generation companies to maintain sufficient fuel for power generation, based on their available generation capacity for power generation, from January to March next year.

Second Minister for Trade and Industry Tan See Leng said Singapore cannot be completely insulated from higher energy prices due to the ongoing global energy crunch.

"But we can and will continue to ensure that consumers have access to the electricity supply and plans they need. (The new scheme) is another step in this direction."

He added: "We will also help vulnerable consumers cope with the higher costs. We hope that consumers can also help us in conserving electricity use where they can."

OCBC Bank economist Howie Lee said the new scheme would bring about greater price stability for the affected companies, although it may not necessarily translate to cost savings as this depends on each firm's consumption pattern.

"(The new scheme) would result in less volatility in the consumer's electricity costs, for the month of January at least."