Why and How Electricity Prices Change in Singapore?

Every time the electricity bill arrives at my door, I wonder what did I do to make the them charge me so differently every few months! I faced this dilemma for quite some time as an adult until I found valid reasons to explain these bill fluctuations.

In Singapore, the SP Group was the sole electricity provider. However, now with the introduction of the Open Electricity Market (OEM) in 2018, customers can choose an electricity plan for themselves that best fulfils all their requirements from a retailer of their choice. These plans are usually priced lower than the prevailing electricity tariff at the current quarter.

Electricity prices or more formally known as electricity tariffs are charges to electricity that changes every three months, regulated by the Energy Market Authority (EMA).

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The following are factors that influences the quarterly-set tariff, affecting the final price you see on your monthly electricity bill.

Fuel cost

95% of Singapore’s electricity is generated using imported natural gas. Hence, the global supply of natural gas will affect the fuel cost as it is a volatile resource. Additionally, it is tied to the conditions of the oil markets. So changes in the oil market affects fuel cost.

To calculate the fuel cost for the next quarter, the mean daily price of natural gas is calculating from the first two-and-a-half month of the current quarter.

Non -Fuel cost
Factors like equipment used, production process, and extraneous labour charges also influence the prevailing tariff.

  • Generation cost:

This includes the charges to operate power plants, labour charges and other production details.

  • Market support service cost:

This charge includes the fee of billing as well as the meter reading carried out by SP Group.

  • Power system and market administration charge:

This is a cost that is administered to recover the money used to operate power systems and keeping the wholesale electricity market running.

  • Grid charges:

This includes the cost of transporting electricity from the Singapore national power grid operated by SP Group.

What has been done in the OEM that makes the price plans of each retailer different?

There are 13 different electricity retailers in the OEM and they are allowed to set their own rates. This flexibility impacts each retailer differently as they have different competition levels and costs to cover. For example, Sembcorp Power is an electricity generation company on top of being a retailer. Therefore they have the advantage of supply control on their side –and in extension pricing – as compared to independent retailers such as iSwitch.

Moreover, these electricity providers have unique offerings, therefore they can customise price plans. To add, they usually provide additional services and bonuses (e.g. discounts, rebates) that might reduce the cost for consumers.

Targeting different consumer segments (e.g. big companies, small households) as a form of business strategy helps these retailers adapt to the market and in turn provide specific solutions to specific target audience. By providing both general plans and niche services, they are able to provide more services to more people.

Now, you know everything there is to know about electricity pricing in Singapore and the OEM. Why not make the switch from SP Group and start saving more?

Take the next step forward and compare a diverse range of electricity rates and prices  offered by a retailer in the Open Electricity Market.