SMEs count the cost of spikes in electricity bills

The global energy crunch has increased electricity bills for some local small and medium-sized enterprises (SMEs) by three to five times, with more expected to be hit this year as contracts under old rates expire.

Despite countermeasures by the Energy Market Authority (EMA), associations and businesses told The Straits Times that hefty electricity bills are taking a toll that could see some SMEs fold or pass on costs to customers.

Five SMEs said they are grappling with the sharpest spikes in electricity rates that they have ever encountered - an issue compounded by struggles to secure fixed price plans that last beyond a month. Surging prices in the wholesale market had seen five electricity retailers exit last year.

Singapore Precision Engineering and Technology Association's executive director Steven Koh expects all SMEs in the electricity-intensive sector - about 80 per cent of some 2,700 businesses - to be hit as many operate with lean resources and capacity.

The rise in energy costs is the highest he has seen in his more than 40 years in precision engineering banking, he added.

Association of Small and Medium Enterprises (Asme) vice-president Ang Yuit said the price hike has mainly hit large electricity users among SMEs - typically from the food and beverage, retail and manufacturing sectors.

Large electricity users have an average monthly consumption of at least 4,000 kilowatts per hour - about 10 times the average monthly consumption of a four-room Housing Board flat.

They can buy electricity only from retailers through fixed rate contracts or from the wholesale market, where electricity prices fluctuate every half-hour.

To help large electricity users reduce their exposure to volatile electricity prices, the EMA rolled out the Temporary Electricity Contracting Support Scheme last December to allow these users to pay a capped rate for one month.

While most of about 270,000 SMEs here do not consume that much electricity, Mr Ang said those operating in rented properties like malls may see higher electricity bills or be asked to find their own retailers as more fixed plans expire this year.

Some businesses paying for electricity to landlords which purchase from the wholesale market, like indie cinema The Projector, are already feeling the pinch.

Ms Karen Tan, founder of the independent cinema based in Golden Mile Tower, said her landlord has tried to switch to a cheaper fixed price plan but was turned away by suppliers that cited full capacity.

The Projector's December bill was nearly three times higher, compared with before prices started spiking last October.

"It's a difficult environment to pass costs on to consumers, especially since demand has been depressed due to the pandemic," Ms Tan said.

Despite EMA introducing more one-month contracts under its scheme in end-January to meet demand, businesses said stability beyond a month is sorely needed.

EMA has not responded to queries on the number of large electricity users that need support and further plans to support them beyond March.

Mr Ang proposed that fixed price plans last at least six months to allow SMEs to plan ahead.

A Sembcorp Power spokesman said close to 110 businesses have obtained one-month contracts after EMA announced more contracts for this month.

Mr Ernst Westendorp, chief commercial officer of Flo Energy Singapore, said the renewable energy retailer has helped all interested businesses secure fixed price plans, after some signed up due to the closure of their electricity retailers. Others did so because they could not get their contracts renewed by power generation companies scaling down their electricity retail operations.

Singapore Productivity Centre chief executive Michael Tan said at least half of some 10 SMEs that consult the centre each week have no choice but to pass electricity prices on to consumers.

Ahead of Parliament today, five MPs have filed questions asking for support for SMEs amid the steep rise in electricity prices.