Global factors behind higher price volatility in wholesale electricity market; retailers exposed but most consumers ‘cushioned’ from impact

The Energy Market Authority said it was working closely with electricity retailers that are facing challenges, such as helping those that wish to continue operations hedge against future price volatility. ― TODAY pic
The Energy Market Authority said it was working closely with electricity retailers that are facing challenges, such as helping those that wish to continue operations hedge against future price volatility. ― TODAY pic

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SINGAPORE, Oct 16 — Most customers in Singapore are cushioned from the higher price volatility in the wholesale electricity market, which has been hit in the past fortnight by several factors such as an increased demand for natural gas and falls in coal and natural-gas production, said the Energy Market Authority (EMA).

The power-industry regulator said today (Oct 16) that electricity retailers that have under-hedged their positions might be exposed to the volatility and, hence, find it challenging to sustain their operations and choose to exit the market.

This is to be expected in an open and liberalised market where players may enter and exit, and consolidation may happen, it added. 

The government agency’s latest comments came after two electricity retailers, iSwitch and Ohm Energy, announced their exits from the Singapore market this week, citing volatile market conditions.

In a statement, EMA said that wholesale electricity prices were determined every half-hour depending on prevailing demand-and-supply conditions.

In the past two weeks, the wholesale electricity market here has experienced higher price volatility for sustained periods, which can be attributed to several factors. 

Around the world, prices for spot liquefied natural gas have risen significantly, driven by increased global demand as well as a drop in the production of natural gas and coal, said EMA. 

Domestically, Singapore has also seen higher-than-usual electricity demand, with a new peak of 7,667 megawatts recorded on Tuesday.

“There is also a curtailment of piped natural gas from West Natuna and low landing pressure of gas supplied from South Sumatra,” EMA said. 

Right now, about half of household consumers here get their electricity from the Open Electricity Market, which was launched in 2018 to give consumers more options and flexibility. 

These consumers can select from a range of plans, including those offering fixed prices or discounts on the regulated tariff. 

The remaining half of household consumers buy electricity from utilities company SP Group at the regulated tariff, and only a small group of consumers get their power directly from the wholesale market. 

“Most consumers have been cushioned from the volatility in Singapore Wholesale Electricity Market prices, as they are either on fixed-price plans, discount-off-regulated-tariff (plans) or the regulated tariff.” 

EMA said that it was working closely with retailers that are facing challenges given the “exceptional circumstances”.

For instance, it is helping retailers that wish to continue operations hedge against future volatility. 

It is also open to allowing retailers to suspend their operations by transferring their customers to SP Group while they strengthen their business and ease their customers’ transition with ex-gratia payments. Ex-gratia payments are made where there is no legal liability to pay. 

Setting out the safeguards for consumers, EMA said that electricity retailers wishing to exit the market must first approach other retailers to take on their customers under the same contractual terms and conditions.

“If the exiting retailer is not able to novate their contracts to another retailer, its customers will be transferred to SP Group,” it said.

Customers would then have the option of accepting the transfer or switching to another retailer of their choice.

EMA stated again that there would be no disruption to the electricity supply of affected customers, and retailers exiting the market must not charge customers an early-termination fee.

The retailers are also required to refund any remaining security deposits after offsetting outstanding charges. ― TODAY

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