The opening of the electricity market via soft launch in April raises a few questions of public interest, about whether it is indeed in the name of market competition.

First, the electricity produced by the power generation companies requires utility provider SP Group to transmit and distribute it to consumers through the national power grid.

That means, SP group will charge these power generation companies for the facilities and infrastructure use to transmit and distribute electricity via, for example, switchgears, transformers, transmission/power and distribution cables and, in future, the underground tunnels that SP Group will use for cables and other equipment.

Because there is the one and only power grid on this island, it is a “natural monopoly”, meaning it is economically not viable to have more than one grid to compete. Hence, these power generation companies would have to accept whatever fees set by SP group without much or any bargaining power. The costs would be passed on to consumers or retailers authorised to resell electricity.

For such a situation, it should then be regulated, just like how the Energy Market Authority regulates electricity tariffs. The authority should do more, perhaps audit and approve how much SP Group will charge the power generation companies for the transmission and distribution of electricity?

Apart from this, there are now more players in the mix: The power generation companies can sell electricity, and there are also retailers which are not power generation companies but buy electricity from these companies to resell to consumers.

Because these power generation companies also sell directly to consumers, they are the first movers, unlike resellers which act as “middlemen” buying and selling electricity. These power generation companies will therefore have a competitive advantage in terms of pricing and plans.

Presently, some telecommunication service providers lease broadband from Singtel. Singtel’s lease and price agreements are governed by the Info-communications Media Development Authority as the regulator.

On that basis, a similar arrangement should exist between a regulator and the resellers which are not power generation companies, to ensure no first-mover price advantage.

As Singapore opens up the electricity market, we need to ensure consumers and small-time retailers are not shortchanged because of the above circumstances. The authorities should discourage any arrangement where dominant players thwart competition and market forces.