Electricity prices to drop

[zcf]

Just wondering, why Singapore can't have gas/oil reserve as other countries stock up during the low oil price time, and as a buffer the high price and some leverage when negotiating price. Sorry really don't know about the oil industry, that's why asking?

http://www.straitstimes.com/Breaking+News/Singapore/Story/STIStory_341865.html

Electricity prices to drop
By Clarissa Oon

ELECTRICITY prices will drop again in the second quarter, most likely in the region of the 25 per cent fall in the first quarter.

The hint was given by both Prime Minister Lee Hsien Loong and Trade and Industry Minister Lim Hng Kiang yesterday as they addressed a tripartite forum with employers and workers.
Mr Mohd Rashed Badarudin, a human resources manager at Teijin Polycarbonate Singapore, had highlighted high utilities prices as a major component of the business costs incurred by manufacturing companies that run plants with huge machinery. He asked whether these prices could be moderated.
Electricity rates peaked in the fourth quarter of last year but dropped 25 per cent in this year's first quarter in the wake of falling oil prices.
Tariffs are revised quarterly based on the oil price during the first month of the preceding quarter, resulting in a time lag between oil prices and tariff changes.
To reduce the time lag, a new tariff formula will take effect from the third quarter of this year. Instead of just referring to the prices in the first month of the previous quarter, the Energy Market Authority will take the average of the oil prices over all three months of the previous quarter.
With world oil prices down last month, next quarter's electricity tariffs will likely fall again, Mr Lim indicated.
He added that the Government is equally concerned about keeping costs down for businesses.
For example, when JTC Corporation sets the rental for petrochemical companies on Jurong Island, it uses competitors such as China, Malaysia and countries in the Middle East as a benchmark, to 'make sure we're not priced out'. For utilities prices however, Singapore is a 'price taker' that must buy its oil and gas from the world market. This reduces its ability to control prices.

 

[contaxable]

finally they realised the former ridiculuous hike in energy would caused all factories and businesses to suffer. but the remedy is a little too late as many are going bust by now.

even with free electricity, these factories jobs cant be saved now! The uncles and aunties are jobless as there are not enough orders to justify the operation here.

i am not implying ema was the culprit behind the bad economy, but they should have made immediate change of policy there and then to help the commercial parties to pull through a tough time. Even before the crisis hit, 2008 had not been a good year for factories honestly. It took them 6mths to realise this.

 

[SNAG]

I think there was a previous discussion on this (when the pricing hike was prevalent), so I think that'll be a good read before this new discussion begins.

Some interesting points raised:

Just wondering, why Singapore can't have gas/oil reserve as other countries stock up during the low oil price time, and as a buffer the high price and some leverage when negotiating price. Sorry really don't know about the oil industry, that's why asking?

http://www.straitstimes.com/Breaking+News/Singapore/Story/STIStory_341865.html

Well, EMA can definitely do that, but if they do pile up buffer stocks of natural gases, then they're taking a position on the oil/gas market, which definitely entails risks. What if they locked in contracts at US$40/barrel, and then 3/6 months down, the cost of fuel drops to $30? For instance, a huge chunk of SIA's losses in the recent quarters were due to bad fuel hedges that they made on 44% of their fuel requirements, at ard US$131/barrel.

Whether that strategy is something they want/should pursue is one thing, but I guess a more important thing on whether the Singaporean public is able/willing to accept the possibility of such "losses" down the road? If we are ready, then let's do it.

So far, EMA's stand (from what I conjecture) with regards to pricing is to pursue a position neutral strategy where they peg the electricity tariffs to forward fuel contracts of fuel.

finally they realised the former ridiculuous hike in energy would caused all factories and businesses to suffer. but the remedy is a little too late as many are going bust by now.

even with free electricity, these factories jobs cant be saved now! The uncles and aunties are jobless as there are not enough orders to justify the operation here.

i am not implying ema was the culprit behind the bad economy, but they should have made immediate change of policy there and then to help the commercial parties to pull through a tough time. Even before the crisis hit, 2008 had not been a good year for factories honestly. It took them 6mths to realise this.

I stand corrected here, but I guess the pegging of natural gas contracts to the oil is a market convention, and this is something that is out of EMA's control. But having said that, they could have tried to alleviate the high costs by providing subsidies (of some form) to businesses (think U Save for businesses?)

But anyway, I'm still happy that tariffs are coming down - it'll be a help to everyone in such tough times.