Singapore's power gencos fall under scrutiny amid spike in spot electricity prices
STAGGERING swings in Singapore's spot electricity prices in July, which riled market players and drove up fixed-price plans for households, are under scrutiny by the industry's watchdog, along with possible anti-competitive practices. This latest development is happening even as electricity prices hit another multi-year high last week.
Veronica Rodriguez, senior vice-president of the industry's Market Assessment Unit (MAU) told The Business Times that a report on late July's "outlier" prices has been submitted to the Energy Market Authority (EMA) to assist the regulator, which prohibits sector-specific anti-competitive pacts and "abuse of a dominant position" in Singapore's wholesale or retail electricity market.
"When there is an unusual price event, the MAU prepares a report on the market conditions surrounding the price event," Ms Rodriguez said in response to BT queries.
The report by MAU - a unit under the Energy Market Company (EMC), an independent operator of Singapore's wholesale electricity market where the unusual price actions have played out - was prepared on behalf of the Market Surveillance and Compliance Panel (MSCP). The MSCP is an independent body established under Singapore's electricity market rules. It monitors, surveils and investigates the conduct of market players in the wholesale market. This includes looking out for rule breaches and elements that are inconsistent with the efficient and fair operation of a competitive market.
The EMC declined to provide details on the contents of the report. Elaborating on the general process, Ms Rodriguez added: "Following the MSCP's approval of the report, it is submitted to the EMA to assist the regulator in fulfilling its obligations with respect to prohibiting anti-competitive agreements and abuse of a dominant position under sections 50 and 51 of the Electricity Act."
The EMA has previously said that it was reviewing the factors that led to the uptick in prices.
Two months ago, the Uniform Singapore Energy Price (USEP), which varies half-hourly depending on demand-supply conditions in Singapore's wholesale market, shot through the roof and hit a multi-year high of S$1,514.86 per megawatt-hour (MWh). The sustained high prices over two days pushed up July's average USEP to S$167.04 per MWh - a level not seen in six years, according to an earlier report by BT. USEP, which reflects the real price of electricity, varies half-hourly depending on prevailing supply-demand conditions in Singapore's wholesale market. Retail prices move in tandem with the USEP.
While the surge coincided with a unplanned gas curtailment, its magnitude had left electricity retailers nonplussed, not least because Singapore's electricity sector, which is predominantly powered by natural gas, is well regarded for its robust gas supply infrastructure. (See Amendment note.)
As a result of the higher electricity prices and to cushion the hit on business margins, retailers have raised their fixed-price plans by 10-20 per cent for new residential consumers or households seeking to renew their contracts. If this trend persists, it could dim the lights on Singapore's praise-worthy energy sector liberalisation. Since the Open Electricity Market (OEM) was launched two years ago, one out of two households, lured by the vaunted cheaper power bills, have switched out of incumbent SP Services and opted for one of 12 OEM electricity retailers.
The extreme volatility in electricity spot prices is far from over.
Last Thursday, according to EMC data, the USEP skyrocketed to as high as S$2,036.02 per MWh - another fresh record in eight years. On that day too, the supply cushion in the wholesale electricity market reached a low of 11 per cent, said EMC's senior vice-president of markets and operations Henry Gan. Anything below 20 per cent signifies tight supply conditions.
He added: "Periodic price spikes can occur when there are tight supply conditions arising from factors like the tripping of generation units, or when several generation units are out on maintenance concurrently. What is important is that the prices normalise after the supply returns to normal, which is usually the case."
When queried, an EMA spokesperson attributed a contributing factor for the "fluctuations" to a planned gas supply curtailment for maintenance works and a forced outage of two generation units last week. BT understands that the generation units belong to Keppel Electric, the top player in Singapore's OEM.
Even so, many seem unconvinced, as in the past gas curtailment in July, that the generation unit failures had led to last week's price volatility. "There was only 300-odd MW out of the market ... nothing at all to justify these prices," Singapore-based energy broker James Whistler, the global energy head of Simpson Spence Young reckoned.
On the day of the abnormal spike in spot electricity prices last week, the Power System Operator (PSO) did not warn the market of a "high risk" or "emergency operating" states, according to a chief of an electricity retailer. The PSO is a division of the EMA that is responsible for ensuring reliable electricity supply to consumers, which includes coordinating outages and power system emergency planning. "This could mean the system was operating under 'normal' conditions then. Such high prices are not expected in the market under normal conditions," he said.
Some players suspect that there may be other forces at work. One market watcher cited dominant power generation companies or gencos that may be taking the opportunity to "extract maximum prices" in the wholesale market. That is not a solitary view.
Dallon Kay, chief executive of Diamond Electric, an electricity retailer remarked: "It appears that gencos (power generation companies) have modified their bidding strategies to maximise spot market revenue. This could be taking the form of opportunistically withholding generation capacity."
When asked to comment on the matter, the EMA spokesperson replied that it has worked with the industry, including the gencos, to ensure that there is sufficient generation capacity and gas supply in the system. He added: "The spot electricity prices have since stabilised to lower levels. EMA will continue to monitor the spot electricity prices for any unusual movements."
But the impact could nevertheless be far reaching. An executive from a leading retailer lamented: "This has been the most volatile period in the history of the electricity spot market. As a result, the retail pricing has already been reset ... to maybe even pre-OEM levels. These episodes have just made it more expensive for everybody."
Amendment note: In the previous article, it was stated that the planned gas curtailment was by the EMA. The article has been amended to reflect this change.
READ MORE
