ST Forum writer: Why didn’t SP offer consumers heavily discounted retailers’ rates in the first place?

A member of the public, Albert Tang, wrote to ST Forum and his letter was published on ST today (“Why are SP Group’s rates higher than retailers’?“, 16 Jan).

Mr Tang wanted to know why SP Group didn’t offer the heavily discounted electricity rates, which many of the electricity retailers are currently offering to the public, in the first place.

“I have a seemingly simple question that has yet to receive a satisfactory answer from the electricity retailers I have asked,” he said.

“Given that electricity retailers are looking to make a profit, have spent a significant amount on marketing costs and are still able to offer consumers electricity rates that are a good 20 to 30 per cent lower than SP Group’s, why doesn’t SP Group just offer consumers these lower rates in the first place?”

Indeed, according to moneysmart.sg, one can get a fixed discount of as much as 25% off the regulated tariff from SP Group for floating rates.

For fixed price plans, it can be even higher at 30% discount.

Mr Tang continued, “Many of the 13 or so retailers participating in the OEM do not generate their own power, instead claiming to buy in bulk from power plants to sell to consumers. As the largest bulk buyer of electricity, SP Group should benefit the most from economies of scale, and be able to pass the savings on to consumers.”

“It is hard to understand the logic behind creating the OEM and getting so many retailers to compete for consumers, when SP Group is in a position to bypass this step to sell electricity directly to consumers at more competitive rates,” he added.

“I doubt I am the only consumer puzzled by this, and hope that EMA can give a satisfactory explanation.”

In any case, with the heavily discounted pricing currently being offered by so many electricity retailers, following Mr Tang’s reasoning, one would wonder if SP Group has been overly charging the public all this while.