SINGAPORE – After tutor Roy Chan switched from national grid operator SP Group to an open market electricity retailer (OEM) in 2018, he is estimated to have saved more than 30% on his bill electricity.

When his plan with Senoko Energy expires this month, the 35-year-old will need to renew it at a rate of 24.9 cents per kilowatt hour (kwh), nearly 60% more than the rate of 15.89 cents per kwh. . he was paying before.

Consumers like Mr. Chan are sitting and taking note of rate hikes by OEM retailers driven by soaring electricity prices and fuel costs.

This is all the more true as Singaporeans are settling into a new standard of work, learning and recovery from home, with a sustained and significant increase in expected energy consumption.

Those who need to renew their contracts told the Straits Times they are considering their options as the gap continues to narrow between regulated and OEM prices – from 30% three years ago to around 10% today.

Observers have also warned that more OEM retailers will close their doors as their profit margins shrink and market consolidation takes hold.

Singapore’s fourth-largest electricity retailer, iSwitch, was the first to announce its exit, citing current market conditions in its Wednesday, October 13 announcement regarding its decision to cease operations in November.

Ohm Energy informed its customers on Friday that it was exiting the market the same day, due to a “volatile electricity market” making its prices unsustainable.

And others could follow.

Of the 10 retailers remaining on Friday, at least two others have suspended listing options or removed plans from their websites altogether.

Earlier this month, Trade and Industry Minister Gan Kim Yong urged households to save electricity as he warned of rising costs and soaring prices.

Noting that wholesale electricity prices have been lower than the cost of generating electricity over the past five years due to overcapacity of generation, he said: “No commercially managed company will perpetually sell electricity. ‘electricity below cost’.

Mr Gan’s call follows an earlier announcement by the SP Group that its regulated household tariff would increase 3.1% from this month to December.

At 25.8 cents per kWh, its price is now at its highest since the first quarter of last year.

For a family living in a Housing Commission four-room apartment, that means an estimated $ 2.66 increase in their average monthly electricity bill, to $ 87.83. These figures include the Goods and Services Tax.

With Singaporeans having to do more at home, the equation has changed somewhat.

Yvonne Zhang, Climate and Sustainability Risk Advisory Leader at Deloitte Southeast Asia, said this means that household electricity use has assumed the essential service role of public facilities. .

“Each household bears a fraction of the cost of our society, and reducing energy consumption now faces realistic obstacles that go beyond cost savings or environmental well-being”, a- she added.

A consensus outside of the pandemic is that remote working is here to stay, even though it’s part of a hybrid arrangement that also incorporates occasional trips to the office.

And, while home learning is seen by authorities here as a measure of last resort, it remains an option on the table, especially for older students.

Singapore’s latest move was also to announce home recovery as the default care arrangement for positive Covid-19 cases.

Global peaks

The rise in electricity prices in Singapore comes amid a global energy crisis that has unfolded in recent weeks, with reports of soaring costs of gas and coal supply chain disruptions in the world.

“This is a complex system problem, where global supplies are interconnected and where turbulence can and will affect global energy systems,” said Prof. Subodh Mhaisalkar, executive director of the Energy Research Institute. energy from Nanyang Technological University.

He said that over the past decade, the world has moved rapidly to gas-fired power plants. Gas reserves have declined due to the challenges of harsh winters as well as declining wind and hydroelectric generation due to weather conditions contrary to historical trends.

Coupled with the resurgence of post-Covid-19 economies – which have met their vaccination targets and are reopening their doors to activity – as well as global blackouts, the result has been a significant increase in gas and oil prices , which have more than doubled in the past 18 months.

“It’s hard to say how long this will last. It could take us to the end of next year,” Prof Mhaisalkar said.

Dr Kwan Kian Hoong, director of the Clean Energy Research Center at Temasek Polytechnic, said that with gas prices indexed to oil prices, electricity prices will see an upward trend.

“As economic activity picks up, barring unforeseen circumstances, the trend is likely to continue for a few quarters or more,” he added. “It would depend on vaccination rates around the world and would be fueled by the pent-up desire of consumers for pre-Covid-19 activities like travel. “

Singapore depends on natural gas for more than 95% of its electricity needs, with supplies coming from pipelines from Indonesia and Malaysia and imported liquefied natural gas.

In his written parliamentary response released earlier this month, Mr. Gan said the impact of rising fuel prices is being mitigated by power generation companies purchasing gas under contracts from multi-year supply and transmit price stability to consumers through fixed-price plans.

Nonetheless, high and sustained fuel prices will eventually affect electricity prices in Singapore.

Mr. Gan added, “(We) will have to continue to depend on energy imports in one way or another, and be subject to fluctuations in world prices.”

Free market movements

Housewife Kalsum Mohammed, 69, told ST that the price increases had little effect on her decision to stay with the “tried and tested” SP group as an electricity supplier.

She said trying to switch to an OEM retailer would be too complicated. And, in any case, the electricity bills for the four-room HDB shared with her husband and daughter are kept at around $ 50 to $ 70 – below the national average of around $ 80.

Still, one in two households in Singapore have been drawn to the prospect of cheaper bills and have switched to an OEM retailer since the electricity sector was liberalized in 2018.

A spokesperson for Geneco – one of the largest OEM players with around 20% of the market share – said that in general, slightly more residential customers have been observed turning to retailers each time a Higher rate of the SP group is announced.

Soaring fuel costs in recent times have prompted OEM retailers to raise their prices in turn – by up to 20 percent in recent months.

Geneco’s current flat rate of 25.9 cents per kwh – on its six, 12 and 24 month plans – is higher than the regulated rate of 25.8 cents per kwh.

At the start of the week, Geneco’s rate was still 22 cents per kwh.

Asked how Geneco would remain competitive, the spokesperson said: “The company’s pricing plans will be adjusted based on fuel prices. We will continue to monitor fuel costs and other energy market conditions.

Dr Kwan said the gap between regulated tariffs and OEM tariffs may continue to narrow as retailers, especially those backed by production companies, have figured out how to operate profitably in the market.

“This will encourage retailers to offer less attractive packages driven by the urgency of consumers to change,” he added.

Geneco, Keppel Electric, PacificLight Energy, Sembcorp Power, Senoko Energy and Tuas Power are retailers owned by power generation companies.

Planning is the key

A finance professional in her 30s, who only wanted to be known as Ms. Chia, will feel the pinch when her 24-month fixed-price Geneco plan expires in April.

She currently pays 16.44 cents per kwh and an average electricity bill of $ 85 for her four-room apartment. Staying with Geneco – and using their latest rate of 25.9 cents per kwh – would mean an increase of almost 58% on a bill of around $ 134.

Professor Mhaisalkar said that in the midst of price fluctuations, the OEM route still makes sense.

“The safety net to get back to SP Group is still available, but customers who do their homework and pick the right deals would still find savings through OEM retailers,” he noted.

As of Saturday, October 16, a check by ST through the OEM price comparison website showed at least 15 fixed-price packages with an estimated monthly bill of less than $ 87.83 – the average cost of an HDB apartment of four. parts consuming 340 kWh per month.

Senoko’s 24.9 cents per kwh rate for its 12 month plan was the cheapest fixed price plan offered.

According to Ms. Zhang of Deloitte, “Consumers should budget for incremental price increases on their utility bills the same way they choose a mortgage or an insurance policy, albeit on a smaller scale.

For Guardian Mr. Chan, his three-room apartment’s electric bill is already well above the national average, at around $ 120 – despite the savings from using an OEM retailer.

About 75 percent of the bill comes from air conditioners used by the family – he’s married and the father of an eight-month-old baby.

“My consumption depends on the weather, not the cost,” said Chan. “If only Singapore weren’t so hot to begin with.”

Ms Chia said if electricity prices continued to rise for the foreseeable future, it would be better to settle for a retailer with a good fixed rate and lock in the contract. “It’s a matter of shopping around for the best deal. “