SMS S Iswaran's reply to Parliament Questions on Electricity Prices

Question No 739 of Notice Paper No 59 of 2011

Name and Constituency of Member of Parliament

Madam Halimah Yacob, Member for Jurong GRC

Question :

To ask the Minister for Trade and Industry (a) what measures are in place to assist Singaporeans cope with the higher cost of electricity; and (b) what will be the impact of rising electricity prices on companies.

Answer :

Mr. Speaker, Sir, let me first place the recent hike in electricity prices in the context of global events. Uncertainty in global energy markets due to factors such as unrest in Middle East and North Africa and the Fukushima incident, has caused fuel oil prices, and consequently our electricity prices, to rise.

Our approach has always been to price energy right. This ensures that consumers understand the true cost of energy, make efficient use of a scarce and precious resource, and avoid the wasteful consumption associated with subsidies. Nonetheless, the impact of global fuel price increases on our electricity tariffs has been mitigated in several ways. An appreciating Singapore dollar has helped to cushion the effects of rising fuel oil prices which are denominated in US dollars. Since the beginning of 2010, the Singapore dollar has appreciated by about 8 per cent against the US dollar. Without this, the electricity tariff in the second quarter of this year would have been 5 per cent higher. Also, the introduction of competition into the electricity market since 2001 has improved efficiency. Power generating companies have switched from oil-fired steam plants to more cost efficient ways of generating electricity such as gas-fired combined cycle gas turbines (CCGT).Had we continued to use steam plants, the electricity tariff today would be about 15 per cent higher, reflecting the relative efficiency of the CCGT turbines.

While these measures have helped, they cannot fully offset the effects of oil price increases on our electricity tariffs. To help households which may face difficulties coping with the rising cost of energy, the Government has provided targeted assistance for those who need it most. This year, about $250 million in utilities rebates will be given to help Singaporeans cope with higher energy prices. Three-room households will receive $340 in rebates and this is equivalent to about 5 months’ worth of electricity consumption by such households. Four-room households will receive $320, enough for about 3 and a half months of their electricity bills, assuming there is no change in their consumption behavior. Put another way, 3-room households will receive rebates this year which are worth about 5 and half times the overall increase in their electricity bills over the past 12 months. In a word, if you look back over the increase in their bills over the past 12 months and compare with the rebates in this year, the factor is more than 5 times. Households will receive the next tranche of utilities rebates this month. Since 2007, the Government has provided close to $800 million of such rebates, for the benefit of 800,000 households.

So by all measures, the assistance has been substantial. We also recognize that increases in our electricity tariff may also affect the competitiveness of businesses. As our electricity prices reflect global factors, our principal approach is to help companies manage their demand. The Government administers several programmes to promote more efficient energy use among companies. The Energy Efficiency Programme Office (E2PO), which is a multi-agency committee led by NEA and EMA, co-ordinates various programmes to raise awareness on energy management and energy efficient technologies, provide support for companies which are trying to adopt such technologies, train energy management professionals, and encourage sharing of best practices in energy efficiency among companies.

Adopting energy efficiency practices helps companies cope with the rising energy prices in the short term, but also prepares them for a future that will increasingly be energy constrained.