SGX electricity futures an enabling factor for new competition

Independent retailers welcome the futures, the first in Asia outside Australia, as it helps them hedge risks

Published Wed, Jan 4, 2017 · 09:50 PM

Singapore

THE emergence of new competition in the electricity market has been heralded by a single factor: the new electricity futures on the Singapore Exchange, which have enabled independent retailers to hedge their risks.

Yet, with liquidity still lacking in the futures market, incumbents warn that a lack of effective hedging could result in new entrants going bust, posing risks to consumers and denting confidence in the overall market.

The electricity futures market started on the Singapore Exchange in 2015, though the move was mooted by the Energy Market Authority as early as 2006. Such a market would benefit various stakeholders in the electricity market, it said.

According to a factsheet by the electricity market regulator, futures provide an additional hedging option for generation companies to manage commercial and operational risks such as power plant outages; for contestable consumers, the market provides an additional avenue to lock in long-term prices or to compare the prices against those offered by electricity retailers; for independent retailers, it can be used to secure fixed price contr…