SINGAPORE — A temporary scheme was launched on Monday (Dec 13) to allow large electricity consumers, mostly businesses, to secure electricity contracts that provide greater price stability in the midst of a major global energy crunch and record gas prices.

The move by the Energy Market Authority (EMA), which regulates the country’s electricity and gas industries, follows feedback it received that some of these large consumers face difficulty in renewing or obtaining new contracts.

These consumers buy electricity on the wholesale market unlike households, which buy their electricity from retailers on set contracts, though they have also been affected by the market volatility with several retail providers pulling out of Singapore in October.

Singapore relies on imported natural gas for almost all its electricity production, but the record global gas prices have led to higher wholesale electricity prices.

This, along with the risk of disruptions to piped natural gas that Singapore received from gas wells in Indonesia, have limited retailers’ ability to offer fixed price contracts.

This has made the power generation business riskier. For instance, generation companies (gencos) may not be able to renew contracts with existing customers as they have to quote a high price. They also expose themselves to the risk of buying expensive energy.  

In a press release on Monday, EMA said that the Temporary Electricity Contracting Scheme will allow gencos and electricity retailers to offer one-month fixed price plans for January 2022 to large consumers.

Large consumers include malls and manufacturing companies that have an average monthly consumption of at least 4,000 kilo-watt hour (kWh).

The three retailers taking part in the scheme are: Geneco, Sembcorp Power and Senoko Energy Supply, which have collectively offered around 300 MW of power capacity for the scheme.

Gencos will be able to draw on EMA’s standby fuel facility to generate electricity for these contracts, reducing the risk due to disruptions to piped natural gas, the authority said.

It added that the scheme provides a “viable option” for companies that want to reduce their exposure to volatile electricity prices but face difficulty in security electricity contracts.

HIGHER PRICES DUE TO ENERGY CRISIS

The energy crunch, which has seen global gas prices tripling since the first quarter of this year, resulted in five electricity retailers here announcing their exit from the open electricity market in a span of three weeks in October.

The retailers were: iSwitch, Ohm Energy, Best Electricity, UGS Energy and SilverCloud Energy.

At that time, Dr Tan See Leng, the Second Trade and Industry Minister, had explained in Parliament that the energy crisis was due to several reasons.

These included an unexpected surge in demand for electricity as Covid-19 curbs eased, unusual weather events in Europe that affected power generation, lower-than-expected coal production and a series of gas-production outages worldwide.

Singapore also faces the risk of disruption to its piped natural gas supply due to production issues in Indonesia’s West Natuna gas fields and low gas landing pressure from South Sumatra, EMA said on Monday.

“As a result, the Singapore Wholesale Electricity Market has experienced unprecedented volatility,” the statutory board said. 

However, it said that most consumers here are not affected by the price volatility in the Singapore Wholesale Electricity Market because they are on standard price plans with retailers or are on the regulated tariff rate.

Tariffs are regulated by EMA and revised quarterly to reflect the actual cost of electricity.

Only about 1.1 per cent of consumers buy electricity directly from the wholesale electricity market and are exposed to volatile prices. Of these, the majority, or about 9,500 consumers, are businesses. 

EMA stressed that it is not mandatory for consumers to take part in this scheme and they should continue to engage retailers on pricing arrangements that best fit their needs.

The sign-up period for these plans is from Wednesday to Dec 27, 3pm. 

The authority said that it will consider extending the scheme if there is demand.

TAKING STEPS TO SECURE ELECTRICITY SUPPLY

Besides the new scheme, EMA also disclosed other measures that it has in place to secure Singapore’s electricity supply.

These include directing gencos to maintain enough fuel for power generation based on their available generation capacity for power generation from Jan 1 to March 31 next year.

It will also be directing gencos to generate electricity using gas from a standby fuel facility pre-emptively if there are potential shortages in the energy supply in the Singapore Wholesale Electricity Market. It has consulted gencos on the framework and will issue a finalised plan soon.