SINGAPORE — The Republic is poised to launch an electricity futures market in the second half of next year, said Second Minister for Trade and Industry S Iswaran yesterday.

The futures market, which will support the trading of electricity products in the future at specified prices, will help big consumers of electricity — typically malls and companies in the manufacturing and pharmaceutical sectors — better manage price volatility by allowing them to secure longer-term prices, he said.

“A futures market will also provide an alternative avenue for independent retailers to enter the market by enabling them to purchase longer-term hedges. The entry of such independent players can, in turn, further spur retail competition to the benefit of end-consumers,” Mr Iswaran added.

For instance, the futures market will provide independent retailers the option to secure fixed price contracts and offer competitive packages to the consumers.

Six power-generation companies — including Senoko Energy and Tuas Power Generation — have also expressed interest in working with the Singapore Exchange (SGX) to develop the futures market, said Mr Iswaran, who is also the Second Minister for Home Affairs.

The idea of such an electricity market was first mooted by the Energy Market Authority (EMA) in 2006, with a public consultation exercise launched last year.

Asked about possible speculative activity in the futures market, Mr Iswaran replied that rules and how various players participate in the electricity market will be “carefully structured” to ensure stability. The EMA added that safeguards, such as price limits, are in place by SGX to prevent speculative activity.

Commercial discussions for the development of the futures market are currently under way.

An industry workgroup is also helping the industry draw up electricity futures contracts, as well as ensuring sufficient liquidity for the trading of electricity futures — which means the electricity futures contract can be traded without causing significant changes in the prices.

SGX is working with the industry to launch a trial of the electricity futures market next year, to allow the power-generation companies to build up competencies and experience in trading.