Debated in Parliament on 1 Nov 2021.
Mr Liang Eng Hwa asked the Minister for Trade and Industry (a) what is the current state of the retail electricity market; (b) what are the reasons why iSwitch Energy decided to exit the energy retail business; (c) what will be the impact to consumers and businesses; and (d) how can electricity be kept affordable for households and businesses.
Ms Poh Li San asked the Minister for Trade and Industry (a) what is the impact of the energy supply crunch in China and India on electricity prices in Singapore; (b) what are the Energy Market Authority’s strategies to cushion the impact of the international energy supply crunch on the stability of energy supply and electricity prices in Singapore; and (c) whether additional assistance will be given to low-income families to cope with the rise in electricity prices from 1 October 2021, if such rates increase were to continue beyond 31 December 2021.
Mr Murali Pillai asked the Minister for Trade and Industry following the recent collapse of several electricity retailers (a) what is the Ministry’s assessment of the business viability of the remaining electricity retailers; and (b) what steps will the Ministry take to maintain a competitive electricity market in Singapore.
Mr Edward Chia Bing Hui asked the Minister for Trade and Industry given the recent pull out of iSwitch Energy from the open electricity market (a) what is the Ministry’s current risk assessment of more retailers exiting the market due to the increases in the price of gas; (b) whether the current recourse options for consumers are sufficient and satisfactory should more retailers exit; (c) whether the Ministry is considering a longer notice period for retailers when they choose to exit the market so that consumers are better safeguarded; and (d) what are the critical success factors to ensure the continued success of Singapore’s open energy market.
Mr Vikram Nair asked the Minister for Trade and Industry whether any steps will be taken to prevent or make it more difficult for electricity retailers to avoid their obligations to customers by withdrawing when the energy markets move against them.
Ms Ng Ling Ling asked the Minister for Trade and Industry (a) whether electricity retailers are required to report their financial status regularly; (b) whether the Ministry monitors their financial health to ensure operational viability; (c) whether there will be a review on the number of energy retail licences needed to sustain the open electricity market; and (d) what are the plans when Singapore’s long-term piped gas contracts with Indonesia start expiring beyond 2023.
Ms Jessica Tan Soon Neo asked the Minister for Trade and Industry with the recent rise in electricity prices and the exit of two electricity retailers (a) whether there will be support for consumers especially lower-income households given the increase in reliance on digital and work-from-home arrangements; and (b) what measures are in place to ensure that Singapore’s power supply remain stable and reliable.
Ms Sylvia Lim asked the Minister for Trade and Industry (a) what are the causes of the sharp fluctuation in the spot prices of electricity since July 2021; and (b) based on the experience since inception of the Open Electricity Market (OEM) to date, what is the Ministry's assessment of the continued viability of the OEM for households.
Ms Joan Pereira asked the Minister for Trade and Industry regarding the exit of some suppliers from the retail electricity market (a) what assistance will be provided to affected households and companies which will face unexpectedly higher tariff rates; and (b) whether the SP Group can honour the rates for which affected customers had contracted with the electricity retailers.
Ms Foo Mee Har asked the Minister for Trade and Industry (a) what is the Government’s assessment of the vulnerability of the current model of electricity retailing; and (b) what measures can the Government take to help moderate the impact of higher energy prices on residents.
Mr Gan Thiam Poh asked the Minister for Trade and Industry in view of the discontinuation of electricity retailers from the open electricity market (a) whether the Ministry will review the requirements for licensing electricity retailers, such as assessing their paid-up capital, financial means, risk management and compliance measures; (b) what is the recourse for consumers and whether retailers are legally obliged to compensate consumers for early termination; and (c) whether the Ministry will consider licensing financial institutions as electricity retailers as they have the resources and are under strong governance and supervision by the authorities.
Mr Melvin Yong Yik Chye asked the Minister for Trade and Industry (a) whether the recent exits of iSwitch Energy, SilverCloud Energy and Ohm Energy due to the volatile global electricity market are a sign that the Open Energy Market (OEM) retailers have been too aggressive in their pricing to attract customers; (b) whether the Ministry will be doing a review to determine the optimal number of retailers in the Open Energy Market; and (c) whether there are plans to include more measures to better protect consumers from sudden exits by the OEM retailers.
Miss Cheryl Chan Wei Ling asked the Minister for Trade and Industry given the recent withdrawal of electricity retailers (a) whether the future business model of electricity retailers will be reviewed to ensure that they are sustainable; (b) whether the Ministry will consider different selection criteria for new electricity retailers; and (c) whether the Ministry will assist families who may be impacted by the increase in electricity prices when helping them transit to more energy efficient appliances.
Ms Tin Pei Ling asked the Minister for Trade and Industry (a) whether the SP Group will continue to honour the prices and terms of existing contracts between the private electricity retailers who recently quit the Open Energy Market and their affected users until the contracts’ expiration; and (b) how will this series of exits affect the intended liberalisation of the energy market in Singapore.
Mr Shawn Huang Wei Zhong asked the Minister for Trade and Industry (a) with the rising cost of energy worldwide, what are the measures taken to secure the country’s access to energy; and (b) what are the measures taken to ensure that energy remains affordable to businesses and households in Singapore.
Mr Shawn Huang Wei Zhong asked the Minister for Trade and Industry (a) what is the root cause of energy retailers’ exit from the market; (b) what is the impact to businesses and households; and (c) what are the additional measures taken to ensure a stable energy market.
Mr Liang Eng Hwa asked the Minister for Trade and Industry (a) amid the current global fuel supply crunch and price volatility, what are its near- and longer-term implications on our energy security and affordability; (b) what are the measures and contingency plans in place to ensure energy supply reliability and resilience; and (c) whether current generating capacity can meet the electricity demand in the coming years.
Mr Sharael Taha asked the Minister for Trade and Industry (a) how many electricity retailers are currently left in the market; (b) what measures will the Ministry put in place to ensure that there is a viable business left for the remaining retailers and the market remains competitive; and (c) whether there will be assistance provided to affected household and companies who may now face higher tariff rates.
Mr Gerald Giam Yean Song asked the Minister for Trade and Industry regarding the recent exit of several electricity retailers from the open electricity market (a) how many households are expected to have their contracts transferred back to SP Group in the next few months; (b) what is the expected increase in electricity prices they will face with this change; and (c) how is the Ministry assisting households negatively affected by these changes.
Mr Gerald Giam Yean Song asked the Minister for Trade and Industry (a) what are the reasons for the recent curtailment of piped natural gas (PNG) from West Natuna; (b) what other disruptions to PNG supplies have been experienced in the past six months; (c) whether Singapore has had to use its reserves of liquified natural gas; (d) how long will these reserves last under current conditions; and (e) how is the Ministry exploring alternatives to natural gas for power generation.
Mr Speaker, may I have your permission to answer Question Nos 11 to 30, as well as Parliamentary Questions (PQs) by Dr Lim Wee Kiak1,2, Mr Desmond Choo, Mr Lim Biow Chuan3 and Mr Alex Yam4 that have been scheduled for a subsequent Sitting?
Please do.
Thank you. Mr Speaker, the global energy market is facing a conflation of four shocks: first, an unexpected surge in demand as economies begin to recover following the easing of COVID-19 restrictions; second, unusual weather events have impacted the generation of wind and solar power in Europe; third, lower than expected coal production, notably in China; and fourth, a series of gas production outages around the world.
The shocks have been most intensely manifested in the market for natural gas, which is a fallback fuel for electricity generation in many, many countries. As a result, spot gas prices have risen by around five times, since March 2021.
Many major economies across Europe and Asia have low inventory levels and are moving quickly to secure sufficient fuel supplies for the winter. These have compounded the impact on prices of fuel and electricity around the world.
Members of this House are understandably concerned. We have received 28 PQs on energy-related matters. Let me bucket them into three groups: (a) energy security; (b) electricity retailers; and (c) electricity prices.
First, on energy security. Singapore relies on imported natural gas for almost all our electricity production and is therefore highly exposed to global supply and demand shocks.
Over the years, we have put in place measures to secure Singapore’s access to fuel supplies.
Since 1999, we have had long-term supply contracts for Piped Natural Gas (PNG) from Malaysia and Indonesia. Negotiations to renew some of these contracts are ongoing. By and large, the supply of PNG has been relatively stable. However, due to an incident at the upstream gas production facility in July this year, West Natuna’s gas supply to Singapore has been affected resulting in a fall in overall gas supply by about 3% since September 2021. This is likely to last until the end of 2021 as the facility undergoes repair and upgrading. Gas pressure of the supply from South Sumatra has also been affected due to higher demand from gas users upstream. The Energy Market Authority (EMA) is working with the gas importers to stabilise the PNG supply.
In 2013, we supplemented PNG with Liquified Natural Gas (LNG) by building an LNG terminal. This allows us to tap gas sources further afield and is part and parcel of our diversification strategy. The LNG terminal has sufficient capacity to meet all of Singapore’s gas needs should PNG be unavailable. Earlier this year, EMA also appointed two new term LNG importers, bringing the total number of term LNG importers in Singapore to four. Gas users in Singapore now have more options to procure the gas they require.
We also require power generation companies, or gencos, to stockpile at least 60 days of fuel reserves, in the event of disruptions to our natural gas supply. The stockpile remains intact.
In addition, EMA ensures that there is sufficient generation capacity to convert the fuel to electricity. Taking into account planned and unplanned outages, we need to maintain spare generation capacity or reserve margin of at least 27% above peak electricity demand. Today, the reserve margin stands at 52% – still significantly above 27%. Over the last 10 years, the excess capacity had been higher, mainly due to over-investment by private gencos in the early 2010s. Going forward, we cannot always assume that the private sector will put in sufficient investments to build new generation capacity, even as the margin narrows over time. I will touch on how we intend to address this though the Energy (Resilience Measures and Miscellaneous Amendments) Bill tomorrow.
In short, we have sufficient fuel supplies and generation capacity today.
However, given the unprecedented scale of this energy crunch, we are leaving nothing to chance. EMA has been working closely with industry stakeholders on pre-emptive measures to further secure Singapore’s fuel and electricity supply and ensure energy resilience and reliability.
First, we have established standby fuel facilities which gencos can draw upon if needed to generate electricity. This will bolster the gencos' reserves.
Second, to complement the standby fuel facilities, EMA has informed gencos to contract sufficient fuel to at least meet their customers’ demands.
Third, in the extreme event that gencos are not willing to draw on gas reserves to generate electricity – perhaps due to risk aversion – EMA will engage the gencos directly to generate electricity using fuel from the standby facilities.
Details of these measures are in EMA’s press release on 19 October 2021.
Members of the House, these pre-emptive measures are extraordinary, but they are also necessary to secure our fuel and electricity supply during this extraordinary period. EMA will review if these measures are still needed by 31 March 2022.
Mr Speaker, over the longer term, we will continue to diversify our energy sources, where possible.
We have announced that we will quadruple our solar deployment by 2030, to generate at least two gigawatt-peak (GWp) of electricity.
We also announced last week that we will be importing up to four gigawatt (GW) of low-carbon electricity by 2035. While this was primarily a move to decarbonise the power system, it will also reduce our reliance on natural gas.
Beyond this, we will continue to explore other low-carbon alternatives like hydrogen and geothermal energy.
Collectively, these measures will make our power system more resilient and less susceptible to price and supply risks.
I will now touch on the electricity retailers. Since the 2000s, EMA had progressively liberalised the electricity retail market. Electricity retailers buy electricity through the wholesale electricity market (WEM) to sell to consumers. They were generally able to offer prices which were priced lower than the regulated tariff in the last few years, because wholesale electricity prices were depressed below the long run marginal costs due to overcapacity in generation, and oversupply of gas. The Electricity Futures Market (EFM), set up in April 2015, also enabled retailers to hedge their price risks through electricity futures. Retailers can also offlay their risk to gencos through financial hedges such as Contracts for Differences (CfDs). These have worked well in a stable market environment. With the nationwide launch of the Open Electricity Market (OEM) in 2018, household consumers were able to benefit from greater choice, competitive pricing and innovative offers with no change to the reliability of their electricity supply.
However, market conditions today are significantly more volatile than in 2018. Some market participants had not anticipated this and were not sufficiently prepared. Over the last three weeks, five electricity retailers – iSwitch, Ohm Energy, Best Electricity, UGS, SilverCloud Energy – have announced their plans to leave the market. These five retailers supply to about 9% of all electricity consumers.
Members are understandably concerned about why retailers are exiting the market. Let me explain.
First, several retailers were under-hedged when the global energy shocks and disruptions to our PNG supply caused wholesale electricity prices to spike. These retailers now find themselves having to buy the unhedged portion of electricity at the high wholesale electricity prices and sell them at much lower contracted rates to consumers.
Second, liquidity in the electricity futures market has also been affected. Given the huge volatility, market makers were not prepared to take on significant positions. This is similar to the situation in other commodity markets.
As a result, some electricity retailers are no longer able to sustain their operations in this challenging environment and thus, have chosen to exit the market.
Mr Speaker, the entry and exit of retailers are features of an open and competitive retail market. The unusually high number of exits reflects the severity of the global energy shock. We have observed the same phenomenon in other countries, such as the UK as well as Spain.
The key is to have a fair and robust system to ensure a smooth transition for customers affected by exiting retailers.
Retailers who wish to exit the retail electricity market are required to first approach other retailers to take on those consumers at the same terms and conditions. Failing which, the consumer will be transferred to SP Group. As of end October 2021, about 140,000 households and 11,000 business accounts will either be transferred to another retailer, or back to SP Group. Consumers who are transferred to the SP Group can choose to purchase electricity from another retailer.
Security deposits from household consumers are safeguarded and will be refunded after offsetting outstanding charges. Retailers are not allowed to charge customers an early termination fee.
There will be no disruption to electricity supply. EMA will direct consumers who wish to seek compensation or file claims under their supply contracts with the retailers to the available channels.
Given the current challenging circumstances, EMA is open to allowing retailers facing challenges to suspend their operations by transferring their customers to SP Group while they strengthen their business. In exchange, these retailers commit to provide an ex gratia payment to ease their customers' transition. Best Electric, Ohm Energy and UGS Energy have joined this arrangement.
EMA is working closely with the remaining nine retailers who are still operating in the Open Electricity Market (OEM).
EMA is facilitating their efforts to hedge against future price volatility. These include facilitating the sale of electricity futures contracts between retailers that are exiting the retail market to those that are staying.
EMA is also working closely with SGX to incentivise more market makers to participate in the electricity futures market.
Some Members of Parliament have asked if SP can continue to honour the prices and terms of the existing contracts that affected customers had contracted with their electricity retailers. The transferred households will need to pay the same regulated tariffs as all the other households and small businesses. This reflects the price SP pays to the gencos for the electricity. Thus, for the transferred customers to pay less, the other consumers with SP will have to pay more than the regulated tariffs to cross-subsidise them.
A few Members have asked what the recent exit of retailers portend for the OEM. Allow me to make three points.
First, the benefits of the OEM remain. Notwithstanding the recent exits, the OEM has benefited and continues to benefit many Singaporeans. Since it was launched in November 2018, consumers have been able to enjoy increased choice and flexibility when buying electricity, ranging from fixed-price plans, discount-off-tariff (DOT) plans, or even wholesale electricity price plans. More importantly, consumers who switch to retail price plans have been able to enjoy savings of up to 30% off the regulated tariff. To date, about half of all households, or about 746,000 households accounts, have switched to buying electricity from electricity retailers.
Second, the viability of OEM remains. There are currently nine remaining retailers in the OEM. Depending on the severity and the duration of this energy crunch, more retailers may either exit or they may re-enter the market. Members have asked whether EMA will be reviewing the number of electricity retail licensees needed to sustain the OEM. Mr Speaker, the answer is that there is really no magic number. There is sufficient competition in the OEM today and EMA is committed to ensuring this.
Last but not least, the foundations of the OEM will need to be strengthened. Today, OEM retailers are vetted and have to satisfy a stringent set of requirements before they are licensed to serve OEM consumers. For example, retailers have to demonstrate that their management team possesses the relevant experience in energy retailing or trading, they have to consistently hedge at least 50% of their wholesale electricity price risk and they have to submit financial statements to EMA, which allows EMA to monitor their financial health.
In hindsight, these are necessary but for a severe stress test such as this, the measures were insufficient. This is the current crisis that we are facing today. Some retailers were ill-prepared to weather the storm. Members have raised useful suggestions on how we can further strengthen these requirements and the futures market. We will consider them carefully. Thank you.
Mr Speaker, let me now turn to the third key issue, and that is on the electricity prices. I wanted to thank the Members for giving us more suggestions. But now on electricity prices.
I thought you were teasing us!
Singapore imports our energy needs and cannot be fully insulated from developments in the global energy market.
Most consumers in Singapore have been cushioned somewhat so far. Ninety-nine percent of household consumers are on standard price plans with retailers or the regulated tariff rate and about 96% of businesses are on fixed price or discount-off-tariff plans. These have risen by far less than the price of gas or wholesale electricity.
However, the sustained high fuel prices will eventually feed into our electricity bills to reflect the cost of electricity production.
Many Members of this House have asked what the Government will be doing to help affected households and businesses. The Government will provide focused and targeted assistance to eligible groups of consumers. Eligible households will continue to receive U-Save rebates to support them with their utility expenses. MTI will also work with MOF to monitor the situation and study whether further assistance is required for affected households and businesses.
At the same time, we are also conducting programmes to raise awareness of electricity conservation and facilitate efforts by households and businesses to reduce their utility bills. For example, SP Services has been progressively replacing households’ analogue electricity meters with advanced electricity meters which allow them to track their energy consumption through the SP Utilities mobile app. This will help households better understand their electricity usage patterns and encourage them to be more energy efficient.
NEA has also launched other energy saving initiatives such as the Climate Friendly Households Programme to encourage households to switch to more resource-efficient appliances. Eligible households are given vouchers to offset the costs of these appliances. We urge all consumers to use energy prudently and adopt energy conservation as a way of life.
In conclusion, Mr Speaker, Sir, our energy market has served us well for the last 20 years. Amongst major cities, our electricity supply is one of the most reliable and price competitive. Our market is now being tested by an unprecedented storm in the global energy market. While most consumers will not see an immediate increase in electricity prices, they may see an increase next year with increasing energy prices globally. Our commitment to this House is this: we will secure our energy supply. We will help vulnerable consumers weather the storm. And we will continue to make our energy sector even better.
Thank you and I look forward to your continued support.
Mr Liang Eng Hwa.
Thank you, Mr Speaker. First of all, I want to thank the Minister for his reassuring reply on how we are going to deal with the ongoing energy crunch and volatility. My question is going to be on the electricity retailers.
In the light of the current disruptions, as the Minister said, some retailers are ill-prepared for this current volatility, would the Government still recommend consumers to switch to the retail price plan? That is my first question.
The second question is, while the OEM has indeed brought significant savings to households in the last few years – having discounts over the regulated rates and so on – does the Government see the need to review this, review the regime, given the situation that we are facing now, perhaps to have fewer, but stronger and more regulated retailers? Or just having one, Singapore Power, but offering different price plans so that they can benefit from the scale efficiency.
I thank Member Mr Liang Eng Hwa for his question. The OEM provides choices to consumers, notwithstanding the recent volatility, electricity retailers continue to offer competitively-priced retail price plans to interested consumers. Affected consumers who have switched back to the regulated tariffs, actually still have the option of choosing from other retailers that are able to suit their needs. And we encourage all consumers to study carefully, deliberate over which electricity price plan would best suit their needs.
On the viability on the OEM, in my main reply, I think it still remains but we will need to continue to explore ways and means to strengthen the foundations. My Ministry will study how we can further strengthen the safeguards for the OEM, so as to better protect our consumers' interests.
Ms Poh Li San. If I can request Members to keep their questions short and no more than two supplementary questions, please.
Thank you, Speaker. I thank Dr Tan for his comprehensive reply. I have one question: if the supply crunch continues to worsen over the next few months, in the longer term, then, what is MTI's strategy to reduce the national consumption, the demand, especially from industries, the sectorial angle.
I thank Ms Poh for her question. I think we have been constantly engaging the industry. Earlier and through the past year, I have mentioned that underlying the four switches of what we have been preparing for, underlying it is energy conservation. We also want to encourage industry to consider using energy in a more efficient manner, because obviously there are peak demands and there are off-peak demands. And we hope that the industry will work closely with all of us in making sure that we can space out the peak demand versus the trough.
What is important is that as we look at securing our supply – I think it was announced in the 19 October press release by EMA – in terms of the supply, we have sufficient supply. In terms of how we procure the gas prices, we are also looking at means of exploring other longer-term measures: importing low-carbon electricity, importing from the regional grid are some of these strategies. We are also exploring, as a much longer-term strategy, to reduce our reliance on importation and that would be to look at our solar power generation capacity.
At the same time, we are also looking at working with academia, the different institutions, as well as industry leaders in how we can access low-carbon hydrogen, carbon capture utilisation and storage as well.
So, we have a combination of all these measures to reduce our reliance on any one particular supply of energy.
On top of that, we are also exploring the use of energy storage systems in the form of batteries to see how we can provide a more stable power supply to reduce the intermittence from solar energy. I hope that answers the question.
Ms Jessica Tan.
Thank you, Mr Speaker. I have a related supplementary question for the Minister in terms of energy stability as well as security. Today, 95% of Singapore's electricity still comes from natural gas. The Minister talked about the pre-emptive measures of stockpiling as well as enabling the standby fuel facilities for gencos to be able to use this capacity. But from the high prices that we have seen for natural gas, how sustainable is this measure? I know that it sounds like supply is sufficient, but how sustainable is this, given the consumption and the heavy reliance on electricity?
At the same time, my second supplementary question is on the status of the genco supply and generation capacity. Does EMA monitor this and what is the current status of this capacity as well as that supply?
I thank Ms Jessica Tan for her questions. All generation companies will need to comply with our requirements to have a fuel stockpiles that will last at least 60 days of operation. Generation companies should utilise their own fuel supply to meet electricity demand and only tap on the standby fuel facilities when needed. The standby fuel facilities are necessary to ensure we have sufficient fuel in Singapore to meet our electricity demand. Hence, we took the pre-emptive step in mid-October to secure this.
EMA will continue to review the need to maintain this facility once the global energy situation stabilises. So, to reassure Ms Jessica Tan and Members of the House, our generation capacity is sufficient.
Ms Foo Mee Har.
Thank you, Speaker. Minister has noted that the regulatory requirements for our Open Electricity Market (OEM) are probably inadequate to withstand a severe stress situation such as the current one. He identified four key things that are culminating to a perfect storm.
I would like to ask Minister two supplementary questions. First, how will the Government address the vulnerability of the current regulatory framework for the long-term sustainability of the OEM? I guess this was designed and I guess we did not expect this perfect storm. So, specifically, what is the time frame you will be rolling out a new enhanced framework; anything on the hedging strategy, anything about the financial strength of the OEM?
The second question is whether the Government will consider, in the meantime, special support to the remaining electricity retailers for their continued operations and also most importantly, their commitments to the consumers. So, how are those who are still surviving, including SP, going to manage the influx of the new customers, which it will now have to serve?
I thank the Member, Ms Foo, for her very pertinent questions. Indeed, there is a cost to regulation and this cost ultimately would be borne by consumers. If the requirements are too onerous, then fewer retailers may be willing to participate in the market. Therefore, if there are fewer retailers, there will be less choice and there will be less competitive plans for consumers.
Prior to the current energy crunch, our prudential requirements were largely adequate. We put in place safeguards to protect consumer interests, such as safeguarding the deposits of households and also the minimum hedging requirements of 50%. In addition, retailers and their shareholders know that if they should exit without regard for their customers' interests, they may not be granted retail licences henceforth.
Thus, over the last decade, up to 2020, only five other retailers have left the market and many of them cited the intense market competition as the main reason for their exit. This demonstrates that our safeguards in the past would have probably sufficed not just in our market, but in most market conditions. This episode, this unprecedented crisis, has highlighted some learning points for us.
EMA will enhance the licencing requirements for the OEM retailers and strengthen protection even more for consumers moving forward. However, we have to be also practical and realistic when instituting safeguards because it would be neither feasible nor economically prudent for us to institute safeguards that can cover every potential possible eventuality. Doing so would lead to significant costs for consumers.
On the measures that SP is taking to manage the influx of new consumers which it must now serve, the objective of shifting consumers back to SP is to ensure that there is no break in electricity provision. SP has put in place measures to make the transition for affected customers and consumers as seamless as possible. This transition back to SP is fully automated and the affected consumers do not have to take any action. SP will also follow up with consumers, post the transition, with an email or letter notification, informing them of the transfer. Affected consumers who wish to remain with SP, do not need to take any further action. Consumers are also free to switch out to other retailers thereafter.
Ms Sylvia Lim.
Thank you, Speaker. I have one supplementary question for the Minister concerning whether he has any interim data to share on the customers who have been affected by the exit of the independent retailers? What I mean is, since the exit of iSwitch and others, their customers would have to make certain decisions. From those announcements till now, can Minister share whether most customers who are displaced have decided to stay with SP for time being or have they switched to the larger retailers who are also generators called gen-tailers? Or have they actually taken the plunge to go with another independent retailer? I wonder if he has that data.
I thank Ms Sylvia Lim for her question. I think the short answer is that I do not have the data because it happened quite recently. But I think we will monitor her question as posed. In fact, we have every intention to do so. And perhaps at the subsequent Sitting, if she can file another PQ, we would be quite happy to update her.
Mr Alex Yam.
Thank you, Mr Speaker. Related question under the Code of Conduct for retail electricity licensees, retailers are required to approach other retailers to attempt to novate their customers on the same contractual terms. I hear from the previous answer to the hon Sylvia Lim that you do not have the current numbers on how many would possibly be able to novate. But a follow-up question is, how would the regulator EMA, in this case, ensure that the code is adhered to by those retailers who are exiting the market, so that these negotiations do carry on and benefit the end consumer.
The next is related to the ex gratia payment that Minister had mentioned and which was also in the EMA press release. Details are a bit scant on this. How would the retailers be getting in touch with their customers, in terms of possible ex gratia payment to ease the transition? Those are my two questions.
I thank Mr Alex Yam for his two questions. In part of my earlier reply, I said the retailers will work with EMA and they will, of course, work with other retailers. And as a last resort where SP comes in to take over that, in the form of a regulated tariff, there is a sequence and a mechanism to it.
Suffice to say, today, that what EMA will do is that they will continually work with existing retailers to ensure that the transfer is seamless and to also ensure that there is a fair code of practice being adhered to. Thus far, the novation has happened fairly seamlessly. There are existing retailers that are still in the business and I think that everyone is watching the situation quite carefully as well. So, the storm continues to evolve. I think the stability that we have provided is that very pre-emptive move to make sure that the supplies have been fortified. We have made sure that the supply of gas for the generation of electricity is actually ensured, so that our reliability and our resilience is preserved. Tomorrow, I would be also putting up a Bill, the Energy (Resilience Measures and Miscellaneous Amendments) Bill. We probably would have more points put in there to ensure that our resilience continues to be reinforced.
Mr Edward Chia.
Thank you, Speaker. I would like to ask the Minister if there are instances, where OEM retailers elected to pre-terminate contracts, despite partially hedging purchase prices – and I think Minister mentioned 50% – and by doing so, walk away with a larger windfall by selling the hedge prices in the current wholesale market at the expense of consumers? And if so, what powers does EMA have to ensure consumers are fairly treated?
I thank Mr Chia for this question. Thus far, EMA has not received any complaints from consumers about the OEM retailers pre-terminating their contracts. I would like to assure this House that in awarding a retail electricity licence, as I have alluded to earlier on, EMA would first need to be assured that the licensee has the requisite management experience and track record in electricity retailing, and they are not some fly-by-night companies out to make a quick buck and walk away when the prices of electricity or prices move against them. This applies even to the retailers that have already exited.
This round, the crisis was unprecedented and there are significant challenges to retailers because they were not sufficiently hedged. While they may have some existing hedges which can be unwound, some of the retailers have suffered significant losses this round over the last few months. Because, the hedging is, I think we require them to maintain 50% hedge, so, because they were not fully hedged, therefore, that swing, the huge volatility swing has resulted in them suffering significant losses.
We will learn from this particular episode. Ostensibly, we cannot possibly predict and pre-empt every single episode as I have shared earlier on in my answer to Ms Foo's PQ. If we covered every single instance of volatility, up to the different standard deviations, it would be very, very costly for us and not tenable. But we will make use of this opportunity to learn from it and also study how we can further strengthen and tighten it. I hope that gives the Member the reassurance.
Mr Gerald Giam.
Sir, I have two supplementary questions: one on energy security and another on electricity prices. How much leverage does EMA have over foreign gas suppliers to ensure that disruptions and low pressure do not become a regular occurrence, for example, through the imposition of liquidated damages? And have these levers being exercised so far?
Secondly, a larger proportion of customers who never switched electricity retailers are from the lower-income households. About 79% of 1-room to 2-room households versus just 40% of landed property households. This is from data from a PQ I asked in January. This means that the lower-income group has been paying elevated regulated tariff prices for several months already. Will the Government consider a special one-off additional electricity rebate to assist these lower-income households during this difficult period?
I thank Mr Giam for his questions. Let me try and answer his second question first. For the lower-income households, we have the vouchers for the U-Save rebates which effectively help them in terms of the utility bills. I have shared also in my earlier statements, either during Committee of Supply 2021 or in some of my earlier Parliamentary speeches that, the 4-room HDB flats and for the 3-room HDB flats, the rebates amount to about six months of rebates per year, and I think for some, four months per year. So, the low-income households are the ones that we are also very, very concerned about.
Notwithstanding the rebates that are already in existence, we are also exploring with MOF further means to help. I am not at liberty at this particular point in time to release further details, because obviously, we are still working out the details with MOF.
So, to summarise, the low-income households get a higher proportion of the U-Save vouchers compared to other types of households.
In terms of the global gas situation, the Member asked about what kind of leverage we have. There are contractual obligations, if they are not able to supply the agreed amount of gas, there are compensation benchmarks. In terms of other negotiations, as to how we talk to other suppliers and so on, I think because it compromises our energy security and it also compromises our negotiation powers, at this particular point in time, I am not at liberty to share them and I hope you understand.
Mr Saktiandi Supaat.
Mr Speaker, thank you. I thank the Minister for his answers earlier. I have got two supplementary questions. First, the Minister mentioned just now about trying to enhance consumers' reduction of their energy consumption to manage their costs while also allowing us to achieve our climate goals. What more can the Ministry do to enhance this even further, in terms of letting consumers manage their costs through reduced energy consumption?
The second question is related to what Member Mr Gerald Giam asked. I am very concerned about the affordability of electricity prices. Consumers can no longer enjoy the very competitive prices under OEM, compared to the regulated tariffs. So, the question is, in the worst-case scenario of retailers falling to zero – we do not want that to happen, but if it falls to zero from nine currently – do we have to go to U-Save rebates for vulnerable families going forward many times, given the volatility of the markets? And if it is triggered, what more can we do to other groups, rather than just the vulnerable groups? Are there certain segments that we can help, beyond the vulnerable segments, to weather the storm?
I thank Mr Saktiandi for his question. The regulated tariffs reflect the long-run marginal cost of generating electricity. For a period of time, the electricity retailers were generally able to offer prices lower than the regulated tariff because the wholesale electricity prices were depressed below cost due to the over capacity in generation and oversupply of gas. And I think I did intimate to Members of the House, in fact, I gave a very strong point earlier this year that that low prices are not sustainable and that it will go. What we can try to do, very, very hard, is to try to mitigate and manage the gradient of that growth.
We import all of our electricity, 95% of our electricity, more than that is through natural gas, which is imported. Even if we do go into low-carbon electricity, we will still have to import, because geographically, we are naturally disadvantaged. Even if I were to cover all the rooftops of the HDB flats, the JTC buildings with solar panels – we use vertical solar panels today and we cover our floating reservoirs, all the vast expanse of space – we probably can generate maybe at peak, well not at peak, but probably between 4% and 5% or 6% of our needs. So, we still have to import the rest of it.
So, I think the Member's point about how do we — I mean, the way I have underscored it is really about energy conservation. The Government will continue to support the low-income households through all these vouchers and rebates and so on. But I think whether we like it or not, as the demand and supply situation continues to tighten, the gap between the open electricity market and the regulated tariffs will continue to narrow.
The OEM is not just simply about offering our consumers discount off regulated tariffs. More pertinently, it offers a variety of fixed price plans and variable price plans to our consumers so that they can select the plan that best suits their needs.
In fact, the only sustainable way looking forward and one of those things that I have been preaching constantly is that we would strongly encourage all Singaporeans to adopt energy conservation as our way of life. We can start small. We can turn the lights off when we are not in the room. We can opt to use the fan more often rather than using air-conditioning. We can, in air-conditioning rooms, push the temperature up by a few degrees, we do not have to bring it down so low and wear a sweater. And switching to more energy-efficient appliances where possible. And I think that NEA has worked very well with us to put the ticks for appliances. Minister Grace Fu is here. The more ticks, the more efficient the appliances in terms of conservation of energy.
So, I hope that with every single bit, we can all come together and help. We are also committed to a low carbon footprint moving forward. I think you have read in the news today about what is happening in Glasgow and UN Climate Change Conference (COP26) and how this global warming is going to create catastrophic disastrous consequences for us if we do not lower our carbon emission. So, I hope that with that collective effort, we can all come together and make this a greener and a lower energy-requiring environment to live in.
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