Reasons for Spike in Electricity Futures Prices Traded on Singapore Exchange in July 2021

Mr Alex Yam asked the Minister for Trade and Industry (a) what are the reasons for the spike in electricity futures prices traded on the Singapore Exchange in July 2021; (b) whether the Ministry has received any complaints from electricity retailers of potential manipulation in the market; and (c) whether the Ministry regulates the market to check on any price fixing or manipulation.

The Electricity Futures Market (EFM) is operated by the Singapore Exchange (SGX) in line with its obligations as an approved exchange under the Securities and Futures Act (SFA). Under SFA, SGX is required to ensure that the markets it operates are fair, orderly and transparent and there is no market manipulation. SGX has assessed that the increased volatility in electricity futures prices in the month of July 2021 can be attributed to price movements in the underlying spot electricity market. In particular, SGX noted that this coincided with an unplanned gas curtailment which caused prices to increase in the underlying spot market. The gas curtailment was due to a temporary drop in gas production upstream which has since been resolved. The spot electricity prices have now stabilised. In its assessment, SGX did not observe any trading irregularities during this period of increased volatility in electricity futures prices.

MTI and the Energy Market Authority (EMA) have engaged the Independent Retailers’ Association on the recent price volatility. EMA requires all Open Electricity Market (OEM) electricity retailers to hedge at least 50% of their contracted load against wholesale electricity prices. Any exposure is taken at the retailer’s own risk. We encourage all electricity retailers to review their risk management practices and ensure that they are sufficiently hedged against price movements.