Scheme to support large electricity users will be extended for three months till May

SINGAPORE - A scheme that enables commercial energy users to purchase electricity at fixed prices will be extended for three more months till May, said Second Minister for Trade and Industry Tan See Leng on Monday (Feb 14).

"We are extending (the scheme) for March, April and May. We encourage consumers without a retail plan to consider these contracts for greater certainty," he told the House, in response to questions raised by five MPs on the impact of the global energy crisis on small and medium-sized enterprises (SMEs) in Singapore.

The scheme, called the Temporary Electricity Contracting Support Scheme (Trecs), was launched by the Energy Market Authority (EMA) in January to cushion SMEs from the recent volatility in wholesale electricity prices.

Under the scheme, commercial users can 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 six retailers involved in the scheme. These are: Geneco, Keppel Electric, PacificLight Energy, Sembcorp Power, Senoko Energy Supply, and Tuas Power Supply.

The contracting window for March will open on Tuesday (Feb 15), said EMA in a separate statement, adding that it will continue to work with generation companies and retailers to offer monthly contracts to large consumers who are unable to secure longer-term retail contracts.

Users eligible for the scheme are commercial consumers with an average monthly consumption of at least 4,000kWh or 4MWh - about 10 times the average monthly consumption of a four-room Housing Board flat.

Such commercial consumers can buy electricity only from the wholesale market or from retailers, and cannot pay for electricity at the regulated tariff offered by SP Group, which is currently at 25.44 cents per kWh before the goods and services tax. 

But the wholesale electricity market has been volatile in recent months due to the global energy crisis. For example, according to data from November last year, wholesale electricity prices fluctuated between 6.87 cents/kWh and $4.42/kWh.

Noting that the Trecs plans were fully subscribed for January and February, Dr Tan said the EMA - an agency under his ministry - has worked with generation companies and electricity retailers to offer around 645MW of Trecs and other plans "with significant fixed price components".

At least 200MW of the contracts are still available for February, he added.

Dr Tan said around 11,000 business consumer accounts - accounting for about 1 per cent of consumers - have to buy directly from the wholesale market, and are thus more exposed to volatile electricity prices.

This is where the Trecs plan will come into play to support these consumers, he added.

The global gas crisis was sparked due to increased economic activity following a recovery from the Covid-19 pandemic, along with cold winter months that depleted natural gas reserves. 

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

The global gas crunch saw the price of spot liquefied natural gas rising significantly, remaining elevated at more than three times the level at the start of 2021, said Dr Tan.

“While our piped natural gas supply typically helps to moderate the impact from higher liquefied natural gas prices, there has been a series of disruptions and planned depletions to our piped natural gas supply since the second half of 2021. This confluence of factors has caused increased volatility in wholesale electricity prices,” he added. 

This has led to six electricity retailers exiting the market and another two prematurely terminating some of their customers’ contracts, thereby affecting around 9 per cent of all electricity consumer accounts, noted Dr Tan. 

In a supplementary question, Mr Gerald Giam (Aljunied GRC) asked if the Government will consider extending the scheme further. 

Dr Tan said in response that global market consultants have been studying energy prices and are hopeful that tensions over Ukraine do not worsen. “Once winter is over, we are cautiously optimistic that the natural gas prices will ease somewhat,” he added.