THE Energy Market Authority (EMA) will soon roll out new requirements for electricity retailers to ensure that players can withstand the volatilities of the market.

The new regulatory enhancements will raise the qualifying criteria so that only credible industry participants with “sufficient financial strength and sustainable business proportions” will be allowed to sell electricity to consumers, EMA said.

In a separate statement on Monday (Jul 31), EMA said it will also introduce a centralised process to improve coordination of the planting of new generation capacity in the private sector.

It will progressively roll out the enhancements to its regulatory framework for electricity retailers from August.

Electricity retailers will need to have a tangible net worth of at least S$1 million at the time of application for a licence or for renewal of a licence, to ensure that they are “credible and have sufficient financial standing”.

They must also hedge at least 80 per cent of their retail contract position and give a performance bond for any unhedged position. They will also need to seek EMA’s approval to appoint key office holders.

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This is to ensure the individuals leading and managing the companies are “fit and proper”, EMA said, adding that it will also protect consumers against premature termination of contracts.

The enhancements follow a public consultation exercise held from February to March. EMA said that retailers were generally supportive of the proposed enhancements at the time.

Following the announcement, retailers approached by The Business Times said they supported and welcomed the new requirements.

Sam Lim, senior vice-president for Tuas Power’s retail business, said the new measures will “strengthen the ability of retailers to stay viable in times of extreme market volatility”, and this will in turn help to protect consumers.

The retailer already has some of these measures in place, and will be implementing the rest of the requirements progressively.

“Stricter financial requirements and screening processes help to build a more stable foundation in the electricity market,” said a Flo Energy spokesperson. “This will ultimately protect the consumer, especially for essential commodities like electricity.”

Asked whether the electricity retailer expects to encounter any challenges in meeting the new requirements, the Flo Energy spokesperson replied that while there will be an adjustment period, as with any new measures, it does not foresee any significant challenges.

PacificLight Energy general manager Geraldine Tan said it already adopts “robust risk management measures” which exceed EMA’s new requirement for retailers to hedge at least 80 per cent of their retail contract position.

The genco has always been proactive in safeguarding its residential customers against volatile wholesale electricity prices by offering them a diverse range of plans to choose from and tailored to their specific needs, she added.

“Our prudent strategy enables us to manage risks effectively and provides greater stability to our customers amidst market uncertainties,” said Tan.

Under its new centralised process to develop new generation capacity, the statutory board has launched a request for proposal (RFP) for a new combined-cycle gas-turbine plant with a minimum capacity of 600 megawatts by end-2027. The plant should be operational by 2028.

EMA will continue to project electricity demand on a rolling 10-year basis and look at available generation capacity.

If its projections deem present generation capacity insufficient, EMA will conduct RFPs inviting private-sector companies to build, own and operate new generation capacity. If there is insufficient interest from the private players, EMA will intervene to provide the required capacity.

“Through (the centralised process), we can facilitate the development of the required new generation capacity, enabling us to meet Singapore’s power system demands while embracing cleaner and more sustainable energy sources,” said EMA chief executive Ngiam Shih Chun.

It launched the latest RFP after assessing that additional generation capacity will be needed in 2028. It expects companies to develop hydrogen-ready and lower-carbon intensity solutions and technologies.

Private companies can partake in the tender to build, own and operate the plant, which will use both a gas and steam turbine.

The centralised process and new requirements for electricity retailers are part of EMA’s push to better manage the risks of volatility in the energy market and ensure sufficient energy supply to meet increased demand.

The changes follow a temporary price-cap mechanism rolled out in July, for times of extreme price volatility in Singapore’s wholesale electricity market. EMA is also looking at ways to aggregate gas procurement and acquire more longer-term and secure gas contracts.

In the fourth quarter of 2021, Singapore wholesale electricity market experienced high volatility following an energy crisis resulting from the Russia-Ukraine war and ongoing energy transition.

Some electricity retailers who were inadequately hedged were exposed to high wholesale electricity prices, which eventually led to six players exiting the market. EMA noted that 10 active retailers remain, including four independent electricity retailers who supply to consumers.