Some SMEs struggling with sharp spikes in electricity prices, anxiety over expiring contracts

Hefty electricity bills are taking a toll that could see some SMEs fold or pass on costs to customers. ST PHOTO: DESMOND WEE

SINGAPORE - 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 (ST) 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 the Singapore market last year.

Executive director of Singapore Precision Engineering and Technology Association (Speta) Steven Koh expects all SMEs in the electricity-intensive industry - about 80 per cent of some 2,700 businesses - to be affected as many operate with lean resources and capacity.

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

Large electricity users are commercial consumers with an average monthly consumption of at least 4,000 kilowatts per hour (kwh) - 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 such as malls may soon be slapped with higher electricity bills or asked to find their own retailers as more fixed plans expire this year.

Some businesses paying for electricity to landlords who purchase from the wholesale market, such as 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 over the past two months but has been turned away by suppliers that cited full capacity.

For the month of December last year, The Projector paid almost triple of its bill compared with before prices started spiking in October.

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

She noted that the cinema's seating capacity has been halved because of Covid-19 restrictions, and the ban on selling liquor past 10.30pm has also affected revenue.

Hawker Benjamin Tong, whose landlord also purchases electricity from the volatile wholesale market, has raised prices for consumers and cut salaries for himself and two staff after being unable to further absorb costs.

The founder of Rice and Roll in Ang Mo Kio, which sells traditional stone-milled chee cheong fun, said: "We were caught off guard in December when the electricity rate jumped from 26 cents to 68 cents, so the bill rose from about $100 to around $450."

To save on electricity, he prepares his food in near darkness and switches on the induction cooker and steamer only when he opens the shop for business.

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

Managing director of tailor CYC Chiang Loo Fern was horrified when her company's bill for December jumped from about $1,400 to nearly $6,000 after her former supplier i-Switch went belly up last October.

While CYC managed to sign a one-month fixed rate with Sembcorp Power this month and has switched from using-air conditioners to fans in its factory, Ms Chiang said the short contract is unsustainable due to uncertainty over future rates.

ASME's Mr Ang recommended that fixed price plans last at least six months, adding that SMEs usually need a minimum of six months to plan ahead.

Of the nine electricity retailers contacted by ST, only two said they are helping businesses tide through the volatility in the energy market.

A Sembcorp Power spokesman said close to 110 businesses have obtained one-month-long contracts after EMA announced more temporary contracts for large electricity users in January to meet overwhelming demand.

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, while others did so because they could not get their contracts renewed by power generation companies scaling down their electricity retail operations.

To date, Flo Energy has not offloaded any customers on fixed price plans and continues to offer them because it has hedged the risk associated with offering these contracts, he said, declining to give specific figures.

But prices are unlikely to drop to original rates, he said, adding that there is uncertainty about the impact of the Ukraine crisis on Singapore, which depends on imported natural gas for almost all of its electricity production.

Speta executive director Steven Koh encouraged SMEs to optimise their energy usage, move to high margin activities, and expedite the adoption of renewable energy to manage the sharpest increase in energy cost he has seen after more than 40 years in precision engineering and banking.

Chief executive of Singapore Productivity Centre Michael Tan said almost all of about 10 SMEs that consult the centre each week have expressed concern about electricity prices, and at least half plan to eventually pass these on to consumers.

Ahead of Parliament on Monday (Feb 14), five MPs have also filed questions asking for support for SMEs to manage their business costs against the steep increase in electricity prices.

As at Sunday, EMA has not responded to ST queries.

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