Electricity price fixing by the Generation Companies?

by Jasmine Cheng

The electricity and water prices are major concerns for Singaporeans. Did anyone notice it kept going up?

We need to understand how electricity is priced to know why it goes up. The Government has liberalized the Singapore Electricity Market with intention of letting the market forces to determine the proper pricing for electricity. In theory, it makes sense.

But does it make sense in practice? The Singapore Electricity Market has two major players. The Generation Companies (GenCo) are on the supply side while we have the buyers or electricity consumers like ourselves on the demand side. The GenCo will have to bid for the right to sell on the Energy Market Company platform on a half-hourly basis (48 periods in 24 hours) based on the expected demand. This will ensure that the prices will reflect proper market demand. It should work – at least for most of the times. But it is not perfect.

What if some GenCo band together and decided to shut down their generation sets (forced outages) on an unplanned basis? In this case, the sudden lack of supply will drive the half-hourly electricity prices up. And this is where the problem starts! But there is neutral regulator, Energy Market Authority (EMA) that is supposed to monitor this kind of activities and take corrective actions. With and active and efficient EMA, the GenCo would think twice before taking any action to fix the market. And we the electricity consumers at the bottom of the food chain will benefit.

But sadly, this is not the case. The facts do not lie. Our GenCo have been struck by a streak of bad luck and their set keep shutting down unexpectedly from March 2018 and as recent as 27th August 2018. From March 2018 onward, there are more than 20 unexpected shutdown downs! Is our GenCo so inefficient? As a result, the half-hourly electricity price shot through the roof. How does the GenCo benefit? Well, if the half-hourly price is $100/MWh and there is a sudden loss of supply, what will happen? The price will spike! And in such case, the GenCo may bid and sell at $200/MWh. What a Windfall!

The EMA may fine the GenCo for the unplanned shut downs. But how much will the GenCo make as a result of their unplanned shutdowns? EMA should release the number of additional windfall and fine. Example, the fine is $20,000.00 and the Windfall is $5,000,000.00. If the fine is paltry, it is a mere slap on the wrist. And how will the consumers be compensated? Should the unexpected windfall be distributed to the consumers who suffered?

If I am a consumer buying from a retailer at a tariff that is based on the half-hourly prices + a margin, I am screwed big time! Why is it that the GenCo can keep doing such unexpected shut downs with such boldness? And the blood will keep flowing. And will EMA every explain to the public what happened? Why don’t EMA tell the public the real statistics of the forced outages? Why kept so silent?

Singapore is a Country that is built on fairness. Are we going to have the usual reply? Sorry, forced outages due to unexpected situations? And allow the GenCo to pocket the gains from the forced outages? When is the government ever going to have the courage to deal with this elephant in the room while consumers like us bleed?

Do they have the courage to take actions against the Genco?