Abandoned by power retailers, SMEs zapped by electricity bill shock

Singapore

SMALL and medium-size businesses have been stung by hefty bill shocks since their power retailers closed shop last year amid staggering spikes in electricity spot prices and left them high and dry. Worse, these businesses have since been stuck with SP Services's wholesale electricity price (WEP) plan - a costly option amid current elevated prices - as other retailers turn them away, citing "finite" capacity.

David Ng, owner of an engineering firm he founded in the late 1970s, was aghast when he got his December electricity bill from SP for his factory located in an industrial area near Changi Airport. The power bill for the site that makes automation equipment from packaging to processing had quadrupled to S$8,000. iSwitch was previously his provider until the largest independent and fourth largest retailer in Singapore said last October that it was bowing out, citing tough market conditions.

Chiang Loo Fern, who runs CYC Company, a sewing workshop, was no less gobsmacked. Her power charges for December issued by the national utility SP, had jumped from a monthly average of some S$1,400 to nearly S$6,000. She has since started using fans and has not turned on the air conditioners in the sewing and "cutting" rooms for her staff of 30 - and is dreading her next bill.

Many other small- and medium-size businesses are likely to have been similarly hit and for some, the latest electricity charges may be debilitating. This scenario, against the global backdrop of surging demand, skyrocketing gas prices and energy crunch, marks a setback for Singapore's liberalisation of the Open Electricity Market (OEM). The entry of, at one point, more than a dozen electricity retailers had provided households and businesses savings of up to 30 per cent on their power bills. This glow faded last year as wild swings in spot electricity prices and inability to hedge in a liquidity-sapped electricity futures market on the Singapore Exchange drove five players out of business.

Ng, who initially suspected it was a billing mistake, said: "We were already in a bad state and making loss due to Covid as no one was buying factory equipment. Now, we are talking about further losses and no one can help."

The director of Transicom Singapore lamented: "We are still stuck with the hot potato inherited from the exit of iSwitch through absolutely no fault of ours."

A sense of desperation has particularly hit businesses with an average monthly consumption (AMC) of at least 4,000 kWh (kilowatt-hour) whose retailers have ditched them or those who need to renew their electricity contracts.

Unlike households (regardless of consumption) and commercial customers (with AMC of less than 4,000 kWh) who can be transferred back to SP's regulated tariff plan, these larger consumers have to contend with SP's WEP plan.

According to the Energy Market Authority (EMA), around 1 per cent of consumers with AMC of at least 4,000 kWh buy their electricity directly from the wholesale market.

As the WEP plan is based on spot pricing in the wholesale market, which fluctuates half hourly and has surged amid gas curbs owing to piped natural gas disruptions and soaring energy demand, these users are feeling the pinch most.

"Crazy or not?" groused one businessman about his December charges on a social posting in early January. "From usual third party contract of S$0.168 (per kWh), rise to SP's S$0.7288/kWh ... Wonder how others are able to survive at this rate? SP really POWER!"

Rubbing salt into the wound, many businesses have been unable to land fixed price contracts from other retailers amid the tight market conditions.

Ng said: "I have talked to at least five authorised retailers who all told me almost the same story -- that their allotted supply is full or they do not offer plans to commercial customers." One such gentailer (a retailer with their own power generation assets) told him to contact them again only after July "for an update".

Chiang, who contacted six vendors, is in the same quandary and is clearly peeved. "I know I am not the only SME suffering this predicament. I am prepared to pay more than I used to but I am not prepared to pay 300 per cent more".

Last Friday (Jan 28), the EMA said it has worked with generation companies and retailers to offer more contracts to consumers. For consumers with an AMC of 4 to 8 MWh (4,000-8000 kWh), Sembcorp Power will offer additional one-month fixed prices plans at preferred prices. For larger consumers, Sembcorp and three other gentailers will offer contracts, also for one month, with a "significant fixed price component".

This would account for double the capacity offered in January under the Temporary Electricity Contracting Support Scheme (TRECS), which the regulator launched in December and extended to February. The latest move is aimed at helping large consumers who were previously unable to secure retail contracts, and provide them with some price certainty in volatile times.

Some business owners had no luck with the TRECS, which appear to have been snapped up shortly after launch, as demand for fixed plans outstripped supply. Against that backdrop, EMA's latest move ought to be a big relief for the worried lot.

"I am delighted that EMA is providing a way out for SMEs like us. I just submitted an enquiry to Sembcorp. Waiting anxiously to hear what rate they can offer us," said Chiang.

But there is one worry - the additional contracts last for only one month. Chiang remarked: "The downside is that the fixed price plans sound very short-term. This is not good for business as it is difficult to manage a business when a significant cost item is subject to wide fluctuations".

READ MORE:

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• Short circuit in electricity open market: Impact on consumers, retailers and the model itself