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Until the recent Open Electricity Market (OEM) initiative in Singapore, electricity supply was never something anyone had to give much thought to. Singapore Powers (SP Group) was the only electricity retailer around, supplying juice to all households in Singapore.
But that’s old news now: ever since the official launch of the OEM on 1 Nov 2018, there are as many as 12 electricity retailers fighting for a slice of the power pie.
All households already have the option to switch from SP to another electricity retailer. If you’re too lazy to care, don’t worry – you’ll just continue getting your supply from SP.
But what about the rest of us penny-pinching Singaporeans? Will this affect the cost of electricity in Singapore? How do I make the switch?
Let’s address all these questions and more below.
Singapore Electricity Guide (2020) – about the OEM, new electricity retailers & more
First of all, what is the Energy Market Authority (EMA)?
According to their website, the EMA is a statutory board under the Ministry of Trade and Industry that aims to “ensure a reliable and secure energy supply, promote effective competition in the energy market and develop a dynamic energy sector in Singapore”.
They regulate the local electricity industry, helping to ensure that the power supply to your homes are reliable and running. They also set the regulated tariff, which is the long-term cost of producing and delivering electricity in Singapore (because that’s the price SP Group sells it for). They’re basically the ones behind the current OEM initiative to liberalise the electricity market.
Okay, so what is the Open Electricity Market (OEM)?
In 2017, the Electricity Market Authority (EMA) announced the Open Electricity Market (OEM) initiative in effort to encourage competition and innovation in the power industry.
Starting 1 November 2018 and by May 2019, all households in Singapore should be eligible to choose their preferred electricity provider. That means you’ll be given the choice to switch away from SP Group, but it is not mandatory (it’s completely up to you!) and there is no deadline for it.
Here’s a timeline of the OEM initiative:
- Oct 2017 – Official OEM announcement
- Apr 2018 – Soft launch for 108,000 households (and 9,500 businesses) in Jurong
- Nov 2018 – Official launch of OEM, starting with zone 1 (postal codes 58 to 78)
- Jan 2019 – Launch for zone 2 (postal codes 53 – 57, 79 – 80, 82 – 83)
- Mar 2019 – Launch for zone 3 (postal codes 34 – 52, 81)
- May 2019 – Final launch, for zone 4 (postal codes 01 – 33)
For a bit of background on the electricity market, there are three main players in the industry – power generation companies, electricity retailers and you, the consumer.
Power generation companies are power plants that generate electricity. In the wholesale electricity market (National Electricity Market of Singapore), they bid to sell their power to electricity retailers in bulk. Then, electricity retailers compete to sell it to consumers like you and me.
So who are the new electricity retailers?
As of 2 Jan 2019, the 12 electricity retailers have joined the fray:
- Best Electricity Supply Pte Ltd
- Diamond Energy Merchants Pte Ltd
- Geneco (by Seraya Energy Pte Ltd)
- iSwitch Pte Ltd
- Keppel Electric Pte Ltd
- Ohm Energy Pte Ltd
- PacificLight Energy Pte Ltd
- Sembcorp Power Pte Ltd
- Senoko Energy Supply Pte Ltd
- Sunseap Energy Pte Ltd
- Tuas Power Supply Pte Ltd
- Union Power Pte Ltd
For the latest update on new retailers, please check the OEM’s official list of electricity retailers.
What types of new electricity price plans are there?
There are 2 standard ways the 12 electricity retailers price their power:
Fixed price plans are like SP Group’s. For a contractual period, you pay a fixed rate for whatever amount of power you use. At the moment, because of the power price war, all the new retailers’ prices are lower than the regulated tariff (that SP is offering).
Discounted off the regulated tariff plans are prices that are pegged to the regulated tariff. For example, the retailer may offer you 20% off the regulated tariff. That means that you’ll always be paying less than SP. Right now, the tariff is $0.2594 per kWh, so you will pay $0.20752 per kWh. But if the tariff drops to $0.24 in the next quarter, you pay $0.192 per kWh.
During the soft launch of the OEM, some retailers also tried a “peak & off-peak” type of package where retailers offered lower prices during off-peak hours and higher prices during peak hours. Whether or not it averages out and/or results in cost savings depends entirely on your usage patterns.
However, many retailers have done away with this because it was not as popular as the first 2 pricing mechanics. Other non-standard price plans include flat fee pricing, which charges you a monthly flat fee for a fixed amount of electricity – kind of like a cellphone data plan.
Will the cost of electricity be affected? Will my bill be cheaper or more expensive?
Are these new electricity retailers cheaper than SP Group? The short answer is yes.
There is no law or regulation on electricity prices, so retailers can literally sell it to you at any price, but thanks to stiff competition in the market, prices are the lowest it’s been in a long time.
This is the current regulated tariff (i.e. SP Group’s price if you don’t do anything) = $0.2594
The EMA changes the electricity tariff every quarter (Jan, Apr, Jul and Oct of every year). For the current quarter of 2020 (1 Jan to 31 Mar), the tariff is $0.2594 per kWh, which is a 3.5% hike from the last quarter ($0.2507 per kWh).
This is a 5-year high, but it doesn’t mean that the tariff always goes up. In fact, it is quite volatile and fluctuates quite a bit. This price hike comes after a dramatic drop in the tariff from Q3 2019 to Q4 2019.
Now, let’s look at the price of electricity if you switch to another electricity retailer.
Lowest price of electricity for fixed price plans = $0.1760 per kWh
At the moment, the more competitive fixed price plans are all under $0.18 per kWh. The cheapest one at the time of writing is Union Power’s Fixed Saver 12 plan that’s $0.1760 per kWh, which is 32% cheaper than the tariff.
Assuming you stay in a 4-room flat and use 360 kWh per month, your bill will go from $93.38 down to $63.36, meaning you save $30.01.
The downside of fixed price plans is that you benefit less when the electricity tariff drops, but some would say the stability is well worth it. In fact, those who picked fixed plans before 2020 would be happy that their rates maintained despite the recent tariff increase.
Best discount for “discount off regulated tariff” plans = 25% off
Most retailers offer only 22% to 23% off, and the best package right now is 25% off (Diamond Electric’s Sure Save Plus Rebates plan).
Compared to the fixed rate’s 32% off, these “lower discounts” may seem less attractive. However, that’s only because it’s pegged to the tariff, which means that you will benefit from any drop in the price, just like the dip from Q3 ($0.2592 kWh) to Q4 ($0.2507 kWh).
However, if you had picked a discount off regulated tariff plan before this year, your electricity price would have gone up along with the Q1 2020 tariff.
What are some benefits of the Open Electricity Market (OEM)?
Although all the hassle to do research, compare promo codes and compare prices may not make it seem so… the OEM is generally a good thing!
1. More choices and lower prices
Previously, we literally had no choice but to choose SP Group and pay the electricity tariff, which fluctuates every quarter. Even if you found it expensive, you had no choice but to pay it.
But with the OEM, the EMA has opened up the electricity market to competition, pushing local electricity retailers to lower their prices. All the retailers offer packages below the tariff, which means cheaper prices and greater savings for us all.
2. More innovative products
Because the competition is so stiff, electricity retailers are also coming up with more innovative products and bundles to attract customers.
For instance, aside from the standard fixed price & discount off tariff plans, some retailers even offer peak & off-peak plans, as well as monthly flat rate packages.
Some also bundle their electricity with other products like insurance and give away freebies at roadshows.
3. More awareness on electricity costs in Singapore
For the most part, most Singaporeans didn’t know much about electricity before the OEM. It was just another utility bill we paid for.
Thankfully, a lot of the OEM’s efforts is also focused on educating the public and helping consumers make informed decisions, which is great. You don’t want to kena conned into paying higher prices, right?
Can I switch from SP Group already?
Yes, every household in Singapore is eligible to pick their own electricity retailer. The OEM initiative rolled out in April 2018 and was completed in May 2019:
|1 April 2018||60 to 64||Jurong East, Jurong West, Tuas, Pioneer and Boon Lay|
|1 Nov 2018||58 to 78||Upper Bukit Timah, Clementi Park, Ulu Pandan, Jurong, Hillview, Dairy Farm, Bukit Panjang, Choa Chu Kang, Lim Chu Kang, Tengah, Kranji, Woodgrove, Upper Thomson, Springleaf|
|1 Jan 2019||53 to 57, 79 to 80 and 82 to 83||Serangoon Garden, Hougang, Punggol, Bishan, Ang Mo Kio, Seletar|
|1 Mar 2019||34 to 52, 81||Macpherson, Braddell, Geylang, Eunos, Katong, Joo Chiat, Amber Road, Bedok, Upper East Coast, Eastwood, Kew Drive, Loyang, Changi, Tampines, Pasir Ris|
|1 May 2019||01 to 33||Raffles Place, Cecil, Marina, People’s Park, Anson, Tanjong Pagar, Queenstown, Tiong Bahru, Telok Blangah, Harbourfront, Pasir Panjang, Hong Leong Garden, Clementi New Town, High Street, Beach Road (part), Middle Road, Golden Mile, Little India, Orchard, Cairnhill, River Valley, Ardmore, Bukit Timah, Holland Road, Watten Estate, Novena, Thomson, Balestier, Toa Payoh, Serangoon|
If I switch electricity retailers, will my electricity supply be affected or disrupted?
Don’t worry, it won’t.
Not that your power supply will never get disrupted, but if it does, it won’t be because of the electricity retailer you choose.
This is because SP Group still owns and maintains the infrastructure, and is responsible for delivering power islandwide – no change.
What if I buy electricity wholesale? Will it be cheaper?
Technically, you don’t need to be a retailer to buy electricity from the wholesale market. Individuals like you can too. But most people don’t because you’ll be paying the fluctuating half-hourly prices, which means how much you pay depends on when you use (and thus, buy) the power.
This is tricky, because even if you’re super idle and want to go study the trends like the stock market, you can’t. When you opt for wholesale prices with SP, there is a 10-day lag when it comes to your report. It sounds ridiculous, but if you think about it, it’s reasonable – 48 different prices per day is a lot of data to collate and deliver to thousands of households.
So as an average Joe just looking to get your new home powered up, you don’t really need to be too fussed with the wholesale electricity market. Choose the path of least resistance… Which is through a licensed electricity retailer participating in the OEM.
So all in all, is the Open Electricity Market (OEM) a good thing?
Competition is always good, so yes – at least for now.
Initially, industry members expected Singaporeans to be on the conservative side, forecasting a mere 5% of switches during the soft launch. According to this ST report in February 2019, the take-up rate is as high as 40% (in Jurong, the pioneer batch).
The published prices of the new retailers are already markedly lower than the regulated tariffs. And as more zones become eligible to make the switch, the electricity retailers are likely to remain aggressive, pushing out more promotions and rebates to attract new customers.
That means more discounts for us, which is always welcome news!
But the big question is… For how long?
Discounts are great, but as we learnt from Uber… Sometimes, it’s not sustainable.
In my opinion, it’s only a matter of time before the bubble bursts. Take Red Dot Power as an example – the company was part of the OEM’s soft launch, but exited the market shortly after due to “financial challenges”.
Red Dot may be the first to fold, but I don’t expect it to be the last.
It’s hard to say what SP and the retailers’ next move will be because we’re obviously not privy to their board meetings, but my guess that the only way to come out tops in this power play is to find a way to genuinely value-add the service instead of undercutting for the sake of it. (… That, or have super deep coffers.)
Some retailers (like Geneco) get their power from their parent companies that are power generators; others are purely retailers, and have to purchase electricity from the wholesale electricity market. But whichever they are, they still need to go through SP, who runs the power grid (basically delivers the power to consumers).
And since all retailers need to pay SP to use the infrastructure, SP Group remains the biggest player in the industry.
This post appeared first on the MoneySmart blog. MoneySmart.sg is Singapore's leading personal finance portal that helps you to maximize your money. Like us onFacebook to keep up to date with our latest news and articles. Compare and shop for the best deals on Loans, Insurance and Credit Cards on our site now! Text: Eugenia Liu.