Households on wholesale electricity plan see power bills balloon in October
SINGAPORE - Households that buy electricity at wholesale market rates have found themselves with larger-than-usual bills for the month of October .
As the wholesale electricity price fluctuates every half-hour, the higher volatility of the market that month had driven up the average cost of electricity for households on these plans.
They saw the average wholesale market rate shoot up to almost 50 cents per kilowatt-hour (kWh) in October - the month the energy crisis was felt worldwide, including in Singapore.
The rate was about 16 cents per kWh in September.
Several electricity retailers folded in October as a result of their inability to hedge against the price volatility on the spot market.
These retailers work by buying electricity on the wholesale market and selling it in "package deals" to households.
One affected consumer, Ms Catherine Chee, a 23-year-old auditor, saw her monthly electricity bill more than double to $449 from the usual $188.
She has been paying for electricity at wholesale prices for about nine months.
"My consumption remained the same," she said, adding that electricity grid operator SP Group, which allows people to pay for electricity at wholesale prices, should have informed customers about the price increase.
"This is daylight robbery during the pandemic," added Ms Chee, a Malaysian. "Life is tough when you need to send money back home (and) pay for the increase in electricity bill," she said.
Another customer, Mr Derrick Goh, 40, said the electricity bill doubled for one of his apartments and trebled for another.
Added the marketing professional: "It's a shock to have such a hike. Even though we have had some savings from the wholesale plan earlier, we do not really save much after all after factoring in the recent hike."
OCBC Bank economist Howie Lee told The Straits Times that most consumers here have been cushioned from electricity price volatility as they are on the regulated tariff rate or have standard price plans.
"Only a small minority are on the wholesale price plan, and this group may experience larger price volatility compared with those on regulated tariffs," he added.
Most households in Singapore buy their electricity from grid operator SP Group at the regulated tariff, which is currently 25.8 cents per kWh until the end of this month , or from electricity retailers that offer fixed-rate plans, or a discount off the regulated tariff.
The half-hourly energy price in the Singapore Wholesale Electricity Market is referred to as the Uniform Singapore Energy Price (Usep).
This changes based on demand and supply factors. For instance, the wholesale rate could rise if there is an increase in electricity demand, or if there is an outage at a power generating unit .
Based on SP Group's website, the half-hourly prices in February 2019 ranged between 14.32 cents and 155.83 cents per kWh.
But over the past year, the Usep has been creeping up.
In December last year, the monthly average Usep was about eight cents per kWh. It was about 10 cents in March and June, and reached 16 cents in September. In October, however, it went up to about 49 cents, before falling back to 23 cents in November.
Energy economist David Broadstock, a senior research fellow at the National University of Singapore's (NUS) Energy Studies Institute, told ST that the extreme wholesale market prices in October were not sustained for the whole month, and that the higher prices were mainly experienced in the first half.
Asked reasons for the volatility, he pointed to the global energy crunch.
From around end-September, the world entered a global gas crunch, driven by multiple factors, including higher demand from post-pandemic economic activity and the need for heating during winter months.
Yet, at the same time, severe weather events and a series of gas production outages have disrupted supplies of the fuel.
More than 95 per cent of Singapore's electricity is generated by burning natural gas. All of this is imported, either through pipes from neighbouring countries or in liquefied form from all over the world.
Dr Broadstock said: "The global energy crunch has not yet dissipated. As such, the generation side of the power market, which needs to source natural gas from the international markets, still suffers heightened cost uncertainty."
Wholesale market outcomes likely reflect this, he added, as power generators have to charge higher prices to reflect the higher input costs they currently have to or are expecting to pay.
OCBC's Mr Lee said the energy crunch has resulted in increased volatility in Usep beginning in October, with more spikes in prices .
He noted that households may be feeling the impact now as they have probably just received their October bill.