The answer from EMA.
Why electricity price hike was needed
IN HIS letter last Friday, 'Billing consumers isn't the only way', Mr Bruno
Serrien noted that the electricity tariff has increased by 48 per cent in
the past 12 months. But this must be seen in the context of the rising
fuel oil price, which has more than doubled during this period.
As Singapore imports all its fuel, we have pegged the tariff to the cost
of the fuel, so electricity is priced properly and wasteful consumption
is minimised. The increase in the tariff this quarter was necessary
because of the 38 per cent spike in the forward fuel oil price from
US$83 to US$115 per barrel between April and July this year.
Mr Serrien's claim that Singapore has the 'highest electricity price
in the region and charges... more than countries like the US or France'
is inaccurate and fails to account for differences in the availability
of indigenous fuel and pricing policies across countries. For example,
France generates 80 per cent of its electricity from nuclear energy,
which is unaffected by the high oil price. On the other hand, Japan
relies heavily on imported oil and gas, and charges a higher electricity
price than Singapore. Within the US itself, there is a wide variation
across the states and some have electricity prices which are
comparable to or higher than the rate in Singapore.
Mr Serrien also suggested that Singapore should move towards energy
independence. But as a small country, Singapore has limited alternatives
to fossil fuels. Hydro, geothermal and wind power are not available here.
Nuclear energy raises issues such as safety and disposal of nuclear
waste which have to be managed. Solar power has some potential,
but realistically this cannot replace more than a small proportion of
our energy needs. Solar is also more expensive than electricity generated
from natural gas, although the technology is still improving and costs
are gradually coming down.
We agree with Mr Serrien that regulators should create mechanisms
to protect consumers instead of simply 'passing the bill' to them. This
is why the Energy Market Authority has focused on restructuring and
liberalising the electricity market, to drive efficiency gains and ensure
competitive pricing of electricity. The Government has also set up the
Energy Efficiency Programme Office to design and implement energy
efficiency programmes across different sectors. Going forward, we will
continue to do our part to help households conserve energy and save
on their electricity bills.
Jenny Teo (Ms)
Director, Corporate Communications
Energy Market Authority