When the open electricity market (OEM) was launched in Singapore in 2018, many OEM retailers vied for market share and offered big discounts of at least 25% compared to the regulated tariff charged by SP Group. Naturally, many savvy retail consumers (like myself) eagerly made the switch to an OEM retailer to save more. However, those good times, as we are now seeing, seem to be short-lived.
The restart of global economies after an unprecedented shutdown due to the coronavirus pandemic led to a surge in demand for electricity, which was further curtailed by supply issues. This caused the price of natural gas, which is used to generate electricity, to soar to record highs. These global events had an impact on the price of electricity in Singapore, causing many of the OEM retailers to either wind up or scale down on their discounts.
Today, the difference in rates between OEM plans and the regulated tariff has narrowed to at best, around a 3% discount. In some instances, a few of the OEM plans are even higher than the regulated tariff. This defeats the purpose of sticking to an OEM plan.
If you, like me, are facing the prospect of renewing your expiring OEM plan soon, you may have wondered what your options might be. In this article, we dissect the different options that we, as consumers, have.
Historical SP Regulated Tariff Rates Since 2014
The regulated tariff for 1 July 2023 to 30 September 2023 is 29.96 cents/kWh (incl GST). This is close to the highest rate recorded since 2014. To get a sense of how high or low it is compared to the past, we have plotted a 4-period moving average (equivalent to 1-year) and a median price line.
From the 4-period moving average, we can observe that the current price has slowed down its rate of climb because the distance between the price and the moving average is narrow. Furthermore, the average tariff rate over the last nine years has been 24.98 cents/kWh, or 4.98 cents/kWh lower than the current rate.
Source: SP Group
When It Makes Sense To Switch Back To SP Group
The aim of the open electricity market was to give consumer accounts in Singapore, mainly households, the option to buy electricity from a retailer to enjoy competitive pricing. Therefore, it makes sense to stick with an OEM plan if you are either currently getting a better rate than the regulated tariff or if you hold a bias that the SP tariff rates will rise for the next two quarters or more. Locking in on a lower-rate OEM plan would save you more than being on the regulated tariff.
Likewise, it makes sense to switch back to SP when the rates offered by the OEM retailers are higher than the regulated tariff, like the plans offered by the following retailers.
Source: Open Electricity Market
It also makes sense to switch back to SP if you believe that the regulated tariffs will come down over the next consecutive quarters. Given that the shortest-term plan offered by the OEM retailers is six months, switching to SP would allow you to benefit from the drop-in rates compared to being locked-in to a long-term OEM plan at a higher rate.
My Three Choices Are To Switch To SP Group, Change OEM Plan, Or Do Nothing
As someone who is on an OEM plan, I have three options when my current plan expires.
One, I could switch back to SP Group and pay the regulated tariff. This could be considered a neutral position given that this is the base rate offered to all households in Singapore. Sticking with the regulated tariff means that I won’t have the long-term predictability in my spending that I could have with a long-term fixed rate OEM plan.
My second choice could be to switch to another OEM retailer or plan that offers better rates than my current OEM plan. This could mean choosing a long-term (1-year or 2-year) plan versus a short-term (6-month) plan. I could also look out for any promotions or referral discounts offered by OEM retailers to reduce my spending.
Finally, my third and last choice could be to do nothing. I could choose to stick with my current OEM plan and pay the prevailing market rate on the date of renewal. The plan will be extended for the same duration as the one I was previously on. This could be beneficial, especially if I get locked in at a cheaper rate than the regulated tariff.
I’m Done With OEM Plans, How Do I Switch Back To SP Group?
The main selling point of an OEM retailer is the discount they offer compared to the regulated tariff rate. Otherwise, there is little to no incentive to change your service provider from the default, SP Group. With most OEM retailers offering discounts at best in the low-single digits, there isn’t a strong incentive to remain on an OEM plan.
Therefore, if you intend to take a wait-and-see approach before committing to another long-term OEM plan, you could switch to SP Group first.
The switch back to SP Group can be made upon the expiry of your current contract. You only need to inform (call or write-in) your current OEM retailer by providing a 30 days calendar notice of your intention to terminate and switch to SP Group.
For example, if your current OEM plan is about to expire on 30 July, you need to inform the OEM retailer on 1 July of your intention to switch to SP Group. Thereafter, starting 1 August, you will be on SP billing without any interruption to your electricity supply. Do note that you will be required to place a security deposit with SP Group, with rates varying depending on the type of premises and payment method.
What Happens If I Do Nothing And Continue With My Existing OEM Plan?
As the saying goes, “a penny saved is a penny earned”. Some may find that even a 3% discount is better than nothing. At the end of the day, if we decide not to make any changes to our existing OEM plan, the contract will be renewed upon its expiry.
The contract duration will be rolled over for a similar period, but at the new rate, as of the date of renewal, which is one day after the end of the contract. For example, if the OEM plan has a contract duration of six months and ends on 30 April, then the new contract will be renewed for a fresh six-month period based on the prevailing rates charged as of 1 May.
Nevertheless, even if your contract is renewed due to an oversight, you can still terminate it within 30 calendar days of the commencement date. Similarly, if you wish to terminate or switch the plan, you would need to provide the OEM retailer with 30 days advance notice of your intention. You will not be charged an early termination fee if you cancel within this time frame.
This article was first published on 28 April 2022 and has been updated to reflect the latest tariff rates.
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