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Oral reply to PQs on Energy-related matters

Oral reply to PQs on Energy-related matters

Questions

Mr Liang Eng Hwa: To ask the Minister for Trade and Industry (a) what is the current state of the retail electricity market; (b) what are the reasons why iSwitch Energy decided to exit the energy retail business; (c) what will be the impact to consumers and businesses; and (d) how can electricity be kept affordable for households and businesses.

Ms Poh Li San: To ask the Minister for Trade and Industry (a) what is the impact of the energy supply crunch in China and India on electricity prices in Singapore; (b) what are the Energy Market Authority’s strategies to cushion the impact of the international energy supply crunch on the stability of energy supply and electricity prices in Singapore; and (c) whether additional assistance will be given to low-income families to cope with the rise in electricity prices from 1 October 2021, if such rates increase were to continue beyond 31 December 2021.

Mr Murali Pillai: To ask the Minister for Trade and Industry following the recent collapse of several electricity retailers (a) what is the Ministry’s assessment of the business viability of the remaining electricity retailers; and (b) what steps will the Ministry take to maintain a competitive electricity market in Singapore.

Mr Edward Chia Bing Hui: To ask the Minister for Trade and Industry given the recent pull out of iSwitch Energy from the open electricity market (a) what is the Ministry’s current risk assessment of more retailers exiting the market due to the increases in the price of gas; (b) whether the current recourse options for consumers are sufficient and satisfactory should more retailers exit; (c) whether the Ministry is considering a longer notice period for retailers when they choose to exit the market so that consumers are better safeguarded; and (d) what are the critical success factors to ensure the continued success of Singapore’s open energy market.

Mr Vikram Nair: To ask the Minister for Trade and Industry whether any steps will be taken to prevent or make it more difficult for electricity retailers to avoid their obligations to customers by withdrawing when the energy markets move against them.

Ms Ng Ling Ling: To ask the Minister for Trade and Industry (a) whether electricity retailers are required to report their financial status regularly; (b) whether the Ministry monitors their financial health to ensure operational viability; (c) whether there will be a review on the number of energy retail licences needed to sustain the open electricity market; and (d) what are the plans when Singapore’s long-term piped gas contracts with Indonesia start expiring beyond 2023.

Ms Jessica Tan Soon Neo: To ask the Minister for Trade and Industry with the recent rise in electricity prices and the exit of two electricity retailers (a) whether there will be support for consumers especially lower income households given the increase in reliance on digital and work-from-home arrangements; and (b) what measures are in place to ensure that Singapore’s power supply remain stable and reliable.

Ms Sylvia Lim: To ask the Minister for Trade and Industry (a) what are the causes of the sharp fluctuation in the spot prices of electricity since July 2021; and (b) based on the experience since inception of the Open Electricity Market (OEM) to date, what is the Ministry's assessment of the continued viability of the OEM for households.

Ms Joan Pereira: To ask the Minister for Trade and Industry regarding the exit of some suppliers from the retail electricity market (a) what assistance will be provided to affected households and companies which will face unexpectedly higher tariff rates; and (b) whether the SP Group can honour the rates for which affected customers had contracted with the electricity retailers.

Ms Foo Mee Har: To ask the Minister for Trade and Industry (a) what is the Government’s assessment of the vulnerability of the current model of electricity retailing; and (b) what measures can the Government take to help moderate the impact of higher energy prices on residents.

Mr Gan Thiam Poh: To ask the Minister for Trade and Industry in view of the discontinuation of electricity retailers from the open electricity market (a) whether the Ministry will review the requirements for licensing electricity retailers, such as assessing their paid-up capital, financial means, risk management and compliance measures; (b) what is the recourse for consumers and whether retailers are legally obliged to compensate consumers for early termination; and (c) whether the Ministry will consider licensing financial institutions as electricity retailers as they have the resources and are under strong governance and supervision by the authorities.

Mr Melvin Yong Yik Chye: To ask the Minister for Trade and Industry (a) whether the recent exits of iSwitch Energy, SilverCloud Energy, and Ohm Energy due to the volatile global electricity market are a sign that the Open Energy Market (OEM) retailers have been too aggressive in their pricing to attract customers; (b) whether the Ministry will be doing a review to determine the optimal number of retailers in the Open Energy Market; and (c) whether there are plans to include more measures to better protect consumers from sudden exits by the OEM retailers.

Ms Cheryl Chan Wei Ling: To ask the Minister for Trade and Industry given the recent withdrawal of electricity retailers (a) whether the future business model of electricity retailers will be reviewed to ensure that they are sustainable; (b) whether the Ministry will consider different selection criteria for new electricity retailers; and (c) whether the Ministry will assist families who may be impacted by the increase in electricity prices when helping them transit to more energy efficient appliances.

Ms Tin Pei Ling: To ask the Minister for Trade and Industry (a) whether the SP Group will continue to honour the prices and terms of existing contracts between the private electricity retailers who recently quit the Open Energy Market and their affected users until the contracts’ expiration; and (b) how will this series of exits affect the intended liberalisation of the energy market in Singapore.

Mr Shawn Huang Wei Zhong: To ask the Minister for Trade and Industry (a) with the rising cost of energy worldwide, what are the measures taken to secure the country’s access to energy; and (b) what are the measures taken to ensure that energy remains affordable to businesses and households in Singapore.

Mr Shawn Huang Wei Zhong: To ask the Minister for Trade and Industry (a) what is the root cause of energy retailers’ exit from the market; (b) what is the impact to businesses and households; and (c) what are the additional measures taken to ensure a stable energy market.

Mr Liang Eng Hwa: To ask the Minister for Trade and Industry (a) amid the current global fuel supply crunch and price volatility, what are its near- and longer-term implications on our energy security and affordability; (b) what are the measures and contingency plans in place to ensure energy supply reliability and resilience; and (c) whether current generating capacity can meet the electricity demand in the coming years.

Mr Sharael Taha: To ask the Minister for Trade and Industry (a) how many electricity retailers are currently left in the market; (b) what measures will the Ministry put in place to ensure that there is a viable business left for the remaining retailers and the market remains competitive; and (c) whether there will be assistance provided to affected household and companies who may now face higher tariff rates.

Mr Gerald Giam Yean Song: To ask the Minister for Trade and Industry regarding the recent exit of several electricity retailers from the open electricity market (a) how many households are expected to have their contracts transferred back to SP Group in the next few months; (b) what is the expected increase in electricity prices they will face with this change; and (c) how is the Ministry assisting households negatively affected by these changes.

Mr Gerald Giam Yean Song: To ask the Minister for Trade and Industry (a) what are the reasons for the recent curtailment of piped natural gas (PNG) from West Natuna; (b) what other disruptions to PNG supplies have been experienced in the past six months; (c) whether Singapore has had to use its reserves of liquified natural gas; (d) how long will these reserves last under current conditions; and (e) how is the Ministry exploring alternatives to natural gas for power generation.

Oral Answer (to be attributed to Second Minister for Trade and Industry Dr Tan See Leng)

1. Mr Speaker, may I have your permission to answer PQs 11 to 30, as well as PQs by Dr Lim Wee Kiak, Mr Desmond Choo, Mr Lim Biow Chuan, and Mr Alex Yam that have been scheduled for a subsequent sitting?

2. Mr Speaker, the global energy market is facing a conflation of four shocks:

  a. First, an unexpected surge in demand as economies begin to recover following the easing of COVID-19 restrictions;

  b. Second, unusual weather events have impacted the generation of wind and solar power in Europe;

  c. Third, lower than expected coal production, notably in China; and

  d. Fourth, a series of gas production outages around the world.

3. The shocks have been most intensely manifested in the market for natural gas, which is a fallback fuel for electricity generation in many countries. As a result, spot gas prices have risen by around five times, since March 2021.

4. Many major economies across Europe and Asia have low inventory levels and are moving quickly to secure sufficient fuel supplies for the winter. These have compounded the impact on prices of fuel and electricity around the world.

5. Members of this House are understandably concerned. We have received 28 PQs on energy-related matters.  Let me bucket them into 3 groups:

  a. Energy Security;

  b. Electricity Retailers; and

  c. Electricity Prices.

Energy Security

6. First, on energy security. Singapore relies on imported natural gas for almost all our electricity production and is therefore highly exposed to global supply and demand shocks.

7. Over the years, we have put in place measures to secure Singapore’s access to fuel supplies:

  a. Since 1999, we have had long-term supply contracts for Piped Natural Gas (PNG) from Malaysia and Indonesia. Negotiations to renew some of these contracts are ongoing. By and large, the supply of PNG has been relatively stable. However, due to an incident at the upstream gas production facility in July this year, West Natuna’s gas supply to Singapore has been affected resulting in a fall in overall gas supply by about 3% since September 2021. This is likely to last until end-2021 as the facility undergoes repair and upgrading. Gas pressure of the supply from South Sumatra has also been affected due to higher demand from gas users upstream. EMA is working with the gas importers to stabilise the PNG supply.

  b. In 2013, we supplemented PNG with Liquified Natural Gas (LNG) by building an LNG terminal. This allows us to tap gas sources further afield. The LNG terminal has sufficient capacity to meet all of Singapore’s gas needs should PNG be unavailable. Earlier this year, EMA also appointed two new term LNG importers, bringing the total number of term LNG importers in Singapore to four. Gas users in Singapore now have more options to procure the gas they require.

  c. We also require power generation companies (‘gencos’) to stockpile at least 60 days of fuel reserves, in the event of disruptions to our natural gas supply. The stockpile remains intact.

8. In addition, EMA ensures that there is sufficient generation capacity to convert the fuel to electricity. Taking into account planned and unplanned outages, we need to maintain spare generation capacity or reserve margin of at least 27% above peak electricity demand. Today, the reserve margin stands at 52% – still significantly above 27%. Over the last 10 years, the excess capacity had been higher, mainly due to over-investment by private gencos in the early 2010’s. Going forward, we cannot always assume that the private sector will put in sufficient investments to build new generation capacity, even as the margin narrows over time. I’ll touch on how we intend to address this though the Energy (Resilience Measures and Miscellaneous Amendments) Bill tomorrow.

9. In short, we have sufficient fuel supplies and generation capacity today.

10. However, given the unprecedented scale of this energy crunch, we are leaving nothing to chance. EMA has been working closely with industry stakeholders on pre-emptive measures to further secure Singapore’s fuel and electricity supply and ensure energy resilience and reliability.

  a. First, we have established standby fuel facilities which gencos can draw upon if needed to generate electricity. This will bolster the gencos’ reserves.

  b. Second, to complement the standby fuel facilities, EMA has informed gencos to contract sufficient fuel to at least meet their customers’ demands.

  c. Third, in the extreme event that gencos are not willing to draw on gas reserves to generate electricity – perhaps due to risk aversion – EMA will engage gencos directly to generate electricity using fuel from the standby facilities.

11. Details of these measures are in EMA’s press release on 19 Oct 2021. These pre-emptive measures are extraordinary, but they are also necessary to secure our fuel and electricity supply during this extraordinary period. EMA will review if these measures are still needed, by 31 March 2022.

12. Mr Speaker, over the longer term, we will continue to diversify our energy sources, where possible.

  a. We have announced that we will quadruple our solar deployment by 2030, to generate at least 2 gigawatt-peak (GWp) of electricity.

  b. We also announced last week that we will be importing up to 4 gigawatt (GW) of low-carbon electricity by 2035. While this was primarily a move to decarbonise the power system, it will also reduce our reliance on natural gas.

  c. Beyond this, we will continue to explore other low-carbon alternatives like hydrogen and geothermal energy.

13. Collectively, these measures will make our power system more resilient and less susceptible to price and supply risks.

Electricity Retailers

14. I’ll now touch on the electricity retailers. Since the 2000s, EMA had progressively liberalised the electricity retail market. Electricity retailers buy electricity through the wholesale electricity market to sell to consumers. They were generally able to offer prices which were priced lower than the regulated tariff in the last few years, because wholesale electricity prices were depressed below the long run marginal costs due to overcapacity in generation, and oversupply of gas. The Electricity Futures Market, set up in April 2015, also enabled retailers to hedge their price risks through electricity futures. Retailers can also offlay their risk to gencos through financial hedges such as Contracts for Differences (CfDs). These have worked well in a stable market environment. With the nation-wide launch of the Open Electricity Market in 2018, household consumers were able to benefit from greater choice, competitive pricing and innovative offers with no change to the reliability of their electricity supply.

15. However, market conditions today are more volatile than in 2018. Some market participants had not anticipated this and were not sufficiently prepared. Over the last three weeks, five electricity retailers – iSwitch, Ohm Energy, Best Electricity, UGS, SilverCloud Energy – have announced their plans to leave the market. These five retailers supply to about 9% of all electricity consumers. Members are understandably concerned about why retailers are exiting the market. Let me explain:

  a. First, several retailers were under- hedged when the global energy shocks and disruptions to our PNG supply caused wholesale electricity prices to spike. These retailers now find themselves having to buy the unhedged portion of electricity at the high wholesale electricity prices and sell them at much lower contracted rates to consumers.

  b. Second, liquidity in the electricity futures market has also been affected.  Given the huge volatility, market makers were not prepared to take on significant positions. This is similar to the situation in other commodity markets.

  c. As a result, some electricity retailers are no longer able to sustain their operations in this challenging environment and have chosen to exit the market.

16. Mr Speaker, the entry and exit of retailers are features of an open and competitive retail market. The unusually high number of exits reflects the severity of the global energy shock. We have observed the same phenomenon in other countries, such as the UK and Spain.

17. The key is to have a fair and robust system to ensure a smooth transition for customers affected by exiting retailers:

  a. Retailers who wish to exit the retail electricity market are required to first approach other retailers to take on those consumers at the same terms and conditions. Failing which, the consumer will be transferred to SP Group. As of end Oct 2021, about 140,000 households and 11,000 business accounts will either be transferred to another retailer, or back to SP Group. Consumers who are transferred to the SP Group can choose to purchase electricity from another retailer.

  b. Security deposits from household consumers are safeguarded and will be refunded after offsetting outstanding charges. Retailers are not allowed to charge customers an early termination fee.

  c. There will be no disruption to electricity supply. EMA will direct consumers who wish to seek compensation or file claims under their supply contracts with the retailers to the available channels.

18. Given the current challenging circumstances, EMA is open to allowing retailers facing challenges to suspend their operations by transferring their customers to SP Group while they strengthen their business. In exchange, these retailers commit to provide ex gratia payment to ease their customers’ transition. Best Electric, Ohm Energy and UGS Energy have joined this arrangement.

19. EMA is working closely with the remaining nine retailers which are still operating in the Open Electricity Market (OEM).

  a. EMA is facilitating their efforts to hedge against future price volatility. These include facilitating the sale of electricity futures contracts between retailers that are exiting the retail market to those that are staying.

  b. EMA is also working closely with SGX to incentivise more market makers to participate in the electricity futures market.

20. Some MPs have asked if SP can continue to honour the prices and terms of the existing contracts that affected customers had contracted with their electricity retailers. The transferred households will need to pay the same regulated tariffs as all the other households and small businesses. This reflects the price SP pays to the generating companies for the electricity. Thus, for the transferred customers to pay less, the other consumers with SP will have to pay more than the regulated tariffs to cross-subsidise them.

21. A few members have asked what the recent exit of retailers portend for the OEM?  Allow me to make three points:

  a. First, the benefits of OEM remain. Notwithstanding the recent exits, the OEM has benefited and continues to benefit many Singaporeans. Since it was launched in November 2018, consumers have been able to enjoy increased choice and flexibility when buying electricity, ranging from fixed-price plans, discount-off-tariff (DOT) plans, or even wholesale electricity price plans. More importantly, consumers who switch to retail price plans have been able to enjoy savings of up to 30% off the regulated tariff. To date, about half of all households, or ~746,000 households accounts, have switched to buying electricity from electricity retailers.

  b. Second, the viability of OEM remains. There are currently nine remaining retailers in the OEM. Depending on the severity and duration of the energy crunch, more retailers may either exit or re-enter the market.  Members have asked whether EMA will be reviewing the number of electricity retail licensees needed to sustain the OEM. The simple answer is that there is no magic number. There is sufficient competition in OEM today and EMA is committed to ensuring this.

  c. Last but not least, the foundations of OEM will need to be strengthened.  Today, OEM retailers are vetted and have to satisfy a stringent set of requirements before they are licensed to serve OEM consumers. For example, retailers have to (i) demonstrate that their management team possess relevant experience in energy retailing/trading, (ii) consistently hedge at least 50% of their wholesale electricity price risk, and (iii) submit financial statements to EMA, which allows EMA to monitor their financial health. On hindsight, these are necessary but insufficient to withstand a severe stress test, such as the one we are currently facing. Some retailers were ill-prepared to weather the storm. Members have raised useful suggestions on how we can further strengthen these requirements and the futures market. We will consider them carefully.

Electricity Prices

22. Mr Speaker, let me now turn to the third key issue, on electricity prices. Singapore imports our energy needs and cannot be fully insulated from developments in the global energy market.

  a. Most consumers in Singapore have been somewhat cushioned so far. 99% of household consumers are on standard price plans with retailers or the regulated tariff rate, and about 96% of businesses are on fixed price or discount-of-tariff plans. These have risen by far less than the price of gas or wholesale electricity.

  b. However, sustained high fuel prices will eventually feed into our electricity bills to reflect the cost of electricity production.

23. Many Members of this House have asked what the Government will be doing to help affected households and businesses. The Government will provide focused and targeted assistance to eligible groups of consumers. Eligible households will continue to receive U Save rebates to support them with their utility expenses. MTI will also work with MOF to monitor the situation and study whether further assistance is required for affected households and businesses.

24. At the same time, we are also conducting programmes to raise awareness of electricity conservation and facilitate efforts by households and businesses to reduce their utility bills. For example:

  a. SP Services has been progressively replacing households’ analogue electricity meters with advanced electricity meters which allow them to track their electricity consumption through the SP Utilities Mobile App. This will help households better understand their electricity usage patterns and encourage them to be more energy efficient.

  b. NEA has also launched other energy saving initiatives such as the Climate Friendly Households Programme to encourage households to switch to more resource-efficient appliances. Eligible households are given vouchers to offset the costs of these appliances. We urge all consumers to use energy prudently and adopt energy conservation as a way of life.

25. Mr. Speaker, our energy market has served us well for the last twenty years.  Amongst major cities, our electricity supply is one of the most reliable and price competitive. Our market is now being tested by an unprecedented storm in the global energy market. While most consumers will not see an immediate increase in electricity prices, they may see an increase next year with increasing energy prices globally. Our commitment to this House is this: We will secure our energy supply. We will help vulnerable consumers weather the storm. And we will continue to make our energy sector even better.

26. Thank you and I look forward to your continued support. 

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