Singapore: Tan See Leng, the second minister of Singapore’s Ministry of Trade and Industry, stated in Parliament on Monday (November 1) that despite the recent withdrawal of at least five electricity retailers, Singapore’s open electricity market (OEM) is still beneficial and beneficial to consumers. feasible.
However, the basis for this initiative to allow Singaporean consumers to choose their preferred power supplier needs to be strengthened, because it turns out that these initiatives are “not enough” to conduct “serious stress tests”, such as the ongoing global energy crisis. Dr. Tan said in answering questions about The issue is a series of parliamentary questions when said.
In October, a series of power retailers-iSwitch, Ohm Energy, Best Electricity, UGS Energy and SilverCloud Energy-announced their withdrawal on the grounds of turbulent market conditions. Dr. Tan stated that these five retailers provide power to approximately 9% of electricity consumers, including residential and commercial users.
Such continuous evacuations have caused shocks across the country and have raised questions about opening up Singapore’s electricity market to as many as a dozen retailers.
Dr. Tan acknowledged these concerns, but he stated that since the launch of OEMs at the end of 2018, consumers have been able to “enjoy more choice and flexibility” when purchasing electricity and save up to 30% of regulated electricity prices. The retailer’s person.
So far, about 746,000 households in Singapore (about 50% of all households) have switched to purchasing electricity from retailers instead of obtaining electricity from SP Group at the regulated electricity price reviewed on a quarterly basis.
“Despite the recent exit, OEM has benefited and will continue to benefit many Singaporeans,” he told the House of Representatives.
Dr. Tan, who is also the Minister of Manpower, said that the full opening of Singapore’s electricity retail market is still feasible.
He added that there are still nine retailers. Depending on the severity and duration of the energy crunch, more retailers may choose to withdraw or re-enter the market.
Regarding the question of whether the Energy Market Authority (EMA) will review the number of electricity retailers, the minister said: “The answer is that there are really no magic numbers. Nowadays OEM competition is fierce and EMA is committed to ensuring this.”
Nevertheless, the market foundation still needs to be strengthened.
Currently, electricity retailers have undergone “examination” and must meet “a series of strict requirements” to obtain a license. These requirements include submitting financial statements to EMA and always hedging at least 50% of wholesale electricity price risk.
“In hindsight, these are necessary, but for severe stress tests like this, these measures are not enough…Some retailers are not ready to weather the storm,” Dr. Tan said, adding The authorities will consider various suggestions made by members. Parliaments (MPs) on how to strengthen these requirements and the electricity futures market.
The Energy Market Administration works closely with electricity retailers facing price fluctuations; does not disturb consumers
He pointed out that EMA will strengthen licensing requirements for electricity retailers and strengthen consumer protection in the future, although such protection measures need to be implemented in a “practical” manner.
“Because for us, it is neither feasible nor economically prudent to formulate safeguards that can cover all potential possibilities. I think this will bring huge costs to consumers,” he was responding to members of Congress. Said when supplementing the question.
Dr. Tan also emphasized that the electricity retailers here are not “companies that make money quickly and walk away when electricity prices or price trends are not favorable to them.”
“This even applies to retailers that have exited. This round of crisis is unprecedented, and retailers are facing major challenges,” he added.
EXITS ARE FEATURES OF OPEN MARKET
There are two types of retailers in OEMs-“generator retailers” that generate electricity and sell electricity; and independent retailers that purchase electricity from the wholesale market instead of generating their own electricity. Prices in the wholesale market change every 30 minutes according to supply and demand.
Dr. Tan said that due to oversupply of power generation capacity and oversupply of natural gas, wholesale electricity prices are sluggish, and independent retailers are usually able to provide retail prices that are lower than the regulated electricity prices in the past few years.
The electricity futures market established in 2015 also allows retailers to hedge price risks through electricity futures. The minister added that retailers can also transfer risks to power generation companies or “gencos” through financial hedging such as CFDs.
Dr. Tan said that these work well in a stable market environment. However, considering the recent turbulence in the wholesale electricity market due to the superposition of shock factors in the global energy market, some retailers have found themselves unprepared and “insufficient hedging.”
“These retailers now find themselves having to buy the unhedged portion of electricity at a high wholesale electricity price and sell it to consumers at a much lower contract price.”
Liquidity in the electricity futures market has also been affected.
“Given the huge volatility, market makers are not prepared to take major positions. This is similar to the situation in other commodity markets,” the minister added.
“As a result, some electricity retailers are no longer able to maintain operations in this challenging environment and have opted out of the market.”
Dr. Tan stated that the entry and exit of retailers is “a characteristic of an open and highly competitive retail market.” The recent unusually high number of exits reflects the severity of the global energy shock. Similar phenomena have been observed in other countries such as the United Kingdom and Spain.
“The key is to have a fair and robust system to ensure a smooth transition for customers affected by exiting retailers,” he said, while reiterating existing safeguards, such as not allowing exiting retailers to charge early termination fees. Any remaining deposit will be refunded after offsetting the unpaid expenses.
The authorities also guarantee that the power supply to affected customers will not be interrupted.
As of the end of October, about 140,000 households and 11,000 business accounts will be transferred to another retailer or return to SP Group. Dr. Chen said that consumers who transfer to SP Group can choose to purchase electricity from another retailer.
In response to a question about whether SP Group can continue to fulfill the prices and contract terms of existing electricity retailers for the affected people, Dr. Tan stated that the regulated electricity price reflects the electricity price paid by SP to the power generation company.
“In order to make the transferred customers pay less, other consumers with SPs will have to pay more than the prescribed tariffs before they can be cross-subsidized.”
At the same time, EMA is working closely with other electricity retailers to promote their efforts to hedge against future price fluctuations. At the same time, it is also cooperating with the Singapore Exchange to “incentivize more market makers to participate in the electricity futures market.”
ASSITANCE ON ELECTRICITY PRICES
Dr. Tan told the House of Representatives that his department is monitoring Singapore’s electricity prices together with the Ministry of Finance and studying whether it is necessary to provide further assistance to affected households and businesses.
The government has always provided targeted assistance to eligible people, such as U-save rebates to help low- and middle-income families pay utility bills. He added that there are also plans to increase awareness of energy saving in households and businesses.
Dr. Tan said that given Singapore’s dependence on energy imports, the country cannot be completely immune to the development of the global energy market.
So far, most consumers in Singapore have been buffered because 99% of households are using standard price plans offered by retailers or paying regulated tariffs. At the same time, approximately 96% of companies use fixed-price or discounted tariff plans.
“These price increases are much lower than the prices of natural gas or wholesale electricity,” Dr. Tan said. “However, continued high fuel prices will eventually be included in our electricity bills to reflect the cost of electricity production.”
ENERGY SECURITY
Speaking of energy security issues, Dr. Tan said that measures have been taken over the years to ensure Singapore’s fuel supply.
On the one hand, the country has signed long-term pipeline natural gas supply contracts with Malaysia and Indonesia since 1999, and is negotiating to renew some of these contracts.
This supply has been “relatively stable”, even though an accident at an upstream natural gas production facility in July affected the natural gas supply in Sinatuna, Indonesia, resulting in a 3% drop in Singapore’s total natural gas supply since September.
Dr. Tan said that this situation may continue until the end of this year as the facility undergoes maintenance and upgrades.
In addition, the supply of natural gas in South Sumatra has also been affected due to increased demand from upstream natural gas users. He added that EMA is working with natural gas importers to stabilize the supply of pipeline natural gas.
Among other measures, if the supply of natural gas is interrupted, “gencos” must also store fuel reserves for at least 60 days. According to the minister, these stocks are “intact.”
EMA also ensures that there is sufficient power generation capacity to convert fuel into electricity.
“Considering planned and unplanned power outages, we need to keep the standby generation capacity or reserve margin at least 27% above the peak power demand. Today, the reserve margin is 52%. It is still much higher than 27%,” He said.
