Why Have Electricity Prices Become So Expensive In Singapore And What Can You Do About It

Electricity prices in Singapore have been climbing higher since July 2021, in tandem with rising global energy prices due in part to the reopening of economies that have led to a surge in demand from both Asia and Europe and a supply issue from output nations.

Closer to home, the regulated tariff rate for households by Singapore Power has increased by 8.8% or 2.06 cents per kWh over the same period. However, for consumers who had to re-contract with an open electricity market (OEM) retailer in the last couple of months, the price increase was far more significant. For example, the rates offered by OEM retailers went from a range of 17 to 19 cents before July 2021 to 27 cents currently for a 1-year fixed price plan. That translates to roughly a 50% increase for consumers.

As a city without natural resources, our electricity prices are not subsidised. Therefore, we must take other measures to better manage our energy costs.

This article explains the reasons for the recent rise in electricity prices and discusses what we can do to reduce the impact of high electricity prices.

How Is Electricity Generated And Priced In Singapore

95% of Singapore’s electricity is generated using natural gas. The power generation companies in Singapore, import these piped natural gases from Indonesia and Malaysia under long-term contracts at commercially negotiated prices indexed to oil prices.

The regulated electricity tariff rates (set by Singapore Power) comprise two key components – fuel cost and non-fuel cost. Aside from the cost of energy, the non-fuel costs include network costs, market support services fees, power system operations and market administration fees.

Why Have Electricity Prices Gone Up

The regulatory body, Energy Market Authority (EMA) explained that the electricity prices in Singapore have gone up due to both a rise in global energy prices and reduced supply conditions.

Internationally, demand for natural gas rose more than expected as global economies that had slowed from the impact of COVID-19 reopened. Moreover, an unusually cold winter season in the northern hemisphere also led to an increased demand from Europe.

At the same time, there was low a supply from countries producing liquefied natural gas, such as Russia.

Locally, demand for electricity also grew and supply was affected due to disruptions in the piped gas from West Natuna and lower gas landing pressure from South Sumatra in Indonesia.

The simultaneous occurrences of these factors created a perfect storm in the rise in natural gas prices, causing them to spike from around $100 in April 2021 to a peak of around $461 in January 2022 in the SGX USEP Quarter Base Load Electricity Futures, which are used by Singapore’s electricity retailers to hedge their positions.

What Is The Outlook For Electricity Prices Going Forward

Demand for natural gas from Europe continues to remain high, with their biggest supplier, Russia who had supplied around 40% in 2019, now reducing its gas exports over the last couple of years.

Depending on the political implications between Ukraine and Russia, gas supplies to Europe from Russia could be further limited, which might lead to sustained higher prices for natural gas.

Domestically, EMA has taken extraordinary measures to safeguard Singapore’s energy security and stabilise electricity prices. These include,

• the establishment of a Standby LNG Facility (SLF), from which gencos can draw to generate electricity when their natural gas supply is affected;
• issuance of a directive to gencos to maintain sufficient fuel for power generation based on their available generation capacity;
• and the introduction of a new framework for gencos to manage their gas demand preemptively to avoid the need for gas curtailment.

With the implementation of the above measures, EMA aims to ensure Singapore’s power supply remains secure and reliable going forward.

What Can You Do About It?

#1 Have Visible Feedback

For us to make changes to our energy consumption habits, we must first be able to track our energy usage levels.

We can be more informed about our energy consumption by using smart-phone applications that track electricity consumption in residential homes or by being observant about the information provided on our electricity bills.

The information on our bills will include the overall past monthly usage levels, which gives us feedback not only on how we are faring in terms of our usage habits but also on where we stand in terms of the baseline standards compared to our neighbours.

#2 Buy Energy Efficient Electronic Products

When buying high energy-consuming electronics such as an air-conditioner, refrigerator, television or washing machine, we should look out for the Energy Label.

The Energy Label, which indicates the energy rating of the product from a scale of 1 tick (being low energy efficient) to 5 ticks (being excellent energy efficient), is conferred by the National Environment Agency (NEA) on regulated goods.

Switching to energy-efficient electronic products with an energy-efficient rating of 3 ticks or above is an easy solution that we can undertake to improve the overall energy consumed by the household.

#3 Change Our Electricity Usage Habits

Aside from using energy-efficient products, including using LED lighting, we must adopt good energy-saving habits.

For example, we could raise our air-conditioner temperature to 25 degrees instead of keeping it at 22 degrees. Studies have shown that we can save about 6% of our electricity consumption if we raised the air-condition temperature setting by just 1 degree.

Other efforts that we can make include turning off appliances that we no longer have a need for.

By constantly practicing good energy-saving habits, we will not only reduce our excess energy consumption but also save on our electricity bills.

Read Also: 9 Practical Ways To Save Money On Your Electricity Bill In Singapore – And Save The Earth At The Same Time

#4 Choose A Suitable Electricity Plan

Since the open electricity market was launched in November 2018, there have been three types of options that are available to retail consumers.

First, the default option by Singapore Power (SP). The regulated tariff rate for the current quarter (1 Jan – 31 Mar 2022) is 27.22 ₵/kWh (incl GST). This rate is determined by SP Group and will be reviewed every quarter.

Second, you could purchase electricity directly from the Singapore Wholesale Electricity Market (SWEM). The SWEM prices are determined every half-hour depending on the prevailing demand and supply conditions. This is the most volatile option, especially during the current climate.

Third and last, you can choose any retail electricity package from any of the eight Open Electricity Market (OEM) Retailers.

The OEM retailers currently offer two types of electricity price plans. They are the fixed price plan and the discount-off the regulated tariff plan.

Which Plan Should You Choose?

Taking into consideration the current volatile electricity prices, retailers have arguably only two options. They can either choose to go with SP and the benchmark tariff rate or choose a price plan from one of the OEM retailers.

As consumers, we want to have more savings than the benchmark rate. Therefore, we shall explore the best available options provided by the OEM retailers.

Read Also: Biggest Reasons Why Singaporeans Haven’t Switched To An Open Electricity Market (OEM) Retailer – And Why They Really Should

Fixed Price Plans

Consumers who believe that prices may continue to keep rising or that it may take at least a quarter or more before prices revert downwards can choose to lock in at the current rates for a fixed period of between 6 months and 2 years.

The advantage of doing so is that it gives the consumer predictability on their electricity bills for the contractual period, and they will not be impacted by any short-term (quarterly) price shocks.

The disadvantage is that if prices were to correct downwards in the next quarter or two, the consumer could be paying more than the benchmark rate, depending on their lock-in rate.

Currently, Geneco provides the lowest 6-month price plan and Keppel Electric provides the lowest 1- and 2-year price plans. See the table below for rates.

Discount off Tariff Price plans

Consumers who believe that prices will fall in the coming quarter can take advantage of the discount off tariff price plans.

If the assumption is that prices will come down, then choosing the discount off tariff plan allows the consumer to take advantage of the lower regulated tariff rates as they would not be locked in at a higher fixed rate.

On the flipside, if the rates continue to go higher, then consumers will face a higher cost, albeit lower than the regulated tariff rate.

Currently, only two service providers are offering the discount off tariff rate plans. They are Senoko Energy Supply and Tuas Power Supply. See the table below for rates.

Summary On The Lowest Rates By OEM Retailers

*Prices are inclusive of 7% GST.

#Information accurate as of 20 February 2022.

By taking the above-mentioned four steps, we can take an active approach in mitigating the rise in our electricity cost.

Read Also: [2022 Edition] Complete Guide To Choosing The Best Open Electricity Market (OEM) Plan For Your Home

Listen to our podcast, where we have in-depth discussions on finance topics that matter to you.

How Many Money Habits Do You Practise?

Whatever financial goals you’ve set for yourself, take small, consistent steps towards them by adopting good Money Habits. Tap in and learn how to make money decisions that are right for you, at every stage of life here.