EMA to cap wholesale power prices from Jul 1; but checks show fewer companies rely on wholesalers
THE Energy Market Authority (EMA) will introduce a temporary price cap on wholesale electricity prices to prevent huge swings in electricity prices.
The cap, which will take effect from Jul 1, will be calculated using a formula that includes the long-run marginal cost of generation capacity, EMA said in a paper published on its website on Friday (Jun 16).
The move from EMA comes as Singapore households and businesses face sky-high electricity costs amid the global energy crisis due to the Russia-Ukraine war.
But the soon-to-be-introduced price cap may have only a limited impact in alleviating costs pressures for businesses, as few electricity retailers here still offer long-term electricity contracts, according to local firms approached by The Business Times (BT).
Local manufacturers told BT that they have no choice now but to be at the mercy of the hefty and volatile prices offered by national grid operator SP Group, as wholesale electricity retailers have stopped offering long-term contracts.
“Every month or so, we will email the few retailers that (we know)... sometimes they would respond, sometimes they don’t,” said Knight Lim, group operations manager of frozen food distributor Eastern Harvest, whose electricity contract expired last September.
“When we approach the retailers, they would say: ‘Oh the situation is very fluid... we are running out of capacity, we cannot offer you a new contract, please go back to SP’,” he added.
“None of (the retailers) are offering (new contracts), they’re not offering any at all,” said Vincent Seo, director of operations at Seo Eng Joo Frozen Food. “We are at the mercy of whatever rates that (SP) posts up... we have no visibility until we get the bill. So that’s something that we can’t project, and it’s kind of tough for companies like ours to strategise of our expenditure every month.”
After months of approaching retailers, Eastern Harvest was fortunate in May to secure a 36-month contract with Pacific Light, which will kick in from July – but at a higher rate than its previous contract, at S$0.206 per kilowatt hour (kWh) compared to S$0.146 per kWh.
EMA said in its paper that the temporary price cap is a short-term measure aimed at mitigating the vicious circle of sustained volatility and risk aversion in the Singapore wholesale electricity market, and restoring the orderly functioning of the broader market.
The regulator noted that extreme volatility in the wholesale electricity market has made power generation companies hesitant to enter into retail contracts, and consumers have faced difficulties securing electricity contracts, especially those who buy directly from the wholesale market.
EMA decided on the move after conducting a public consultation between January and February, and engaging industry stakeholders. It added that other jurisdictions with an energy-only market, such as Australia, the Philippines and Texas, have implemented similar measures.
