Factors Affecting Electricity Prices

Currently, households and small businesses buy electricity at the regulated SP tariff. Since 1 April 2018, the Energy Market Authority commenced the soft launch of Open Electricity Market, where households and businesses in Jurong can choose to buy electricity from a retailer at a price plan that best meets their needs.

From 1 November 2018, the Open Electricity Market will be extended to all consumers across Singapore by zones. This initiative will provide about 1.4 million households and business accounts with more choice and flexibility when buying electricity, while being provided with the same electricity supply through the national power grid.

As a consumer, you may be curious about the factors affecting the cost of electricity. The regulated tariff is made up of two components: the fuel cost and non-fuel cost. Here is a summary of the Energy Market Authority's explanation:

Fuel Cost

The fuel cost, or cost of imported natural gas, is tied to oil prices, which change depending on global market conditions.

About 95 per cent of Singapore's electricity is generated from imported natural gas, where the prices of natural gas are indexed to oil prices. This is the market practice in Asia for natural gas contracts.

The fuel cost component is calculated using the average of daily natural gas prices in the first two-and-a-half month period in the previous quarter. For example, the average natural gas price between April and June is used to set the tariff for July to September.

This helps smoothen out any large swings in the oil markets. For households, this means your electricity tariffs are affected by prevailing market conditions.

Non-fuel Cost

This part of the tariff reflects the cost of generating and delivering electricity to our homes. It includes:

  • Power Generation Cost
    This covers mainly the costs of operating the power stations, such as the manpower and maintenance costs, as well as the capital costs of the stations.

  • Grid Charge
    This is the cost of transporting electricity through the Singapore power grid.

  • Market Support Services (MSS) Fee
    This comprises the costs of billing and meter reading.

  • Power System Operation and Market Administration Fees
    These comprise the costs of operating the power system and administering the wholesale electricity market.

Check out this video for a quick summary:

Singapore Electricity Tariff Key Components - Best Electricity Supply

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