The Open Electricity Market and what it means for consumers
Since 1st November 2018, Open Electricity Market (OEM) has been extended to all consumers across Singapore by zones. But what is OEM and what it means for consumers like us?
OEM is part of the Energy Market Authority’s (EMA) effort to liberalize the electricity market, allowing residential households in Singapore to buy electricity from retailers other than SP Group. In other words, over 1.4 million households and business accounts will have the option of buying electricity from a retailer on a price plan that best meets their needs. Instead of getting power solely from SP Group at the quarterly-reviewed regulated tariff, consumers will be able to sieve through price plans — Fixed Price Plan and Discount Off the Regulated Tariff Plan — offered by as many as 13 approved retailers for either one or two years of contract duration.
Rest assured that the reliability of electricity supply will not be affected should consumers switch to buy electricity from a retailer.
The nationwide launch of OEM is being rolled out progressively in four geographical zones (see above). By the time you read this article, you will have heard of the good news if you are staying in Zone 2 as OEM will be rolled out at your area.
Electricity tariffs are regulated by the Energy Market Authority (EMA) and revised quarterly to reflect the actual cost of electricity. With the Singapore Power (SP) historical electricity tariff shown in Figure 1, we see that the electricity tariff topped at 27.53 ¢/kWh in 2014 (2nd Quarter) before steadily decreasing to its lowest rate at 18.92 ¢/kWh in 2016 (2nd Quarter).
Unfortunately, the good times didn’t last. The trend reversed and the price has been increasing ever since – until we reached the current rate of 25.82 ¢/kWh in 2018 (4Q). This could be due to the rise in oil prices and higher cost of natural gas for electricity generation.
A question arises: Given the historical movement of tariffs as shown in Figure 1, how can consumers benefit from OEM?
The answer seems to lie in a comparison between Figure 2 (Electricity Tariff Corresponding to Different Retailers) and Figure 1 (SP Historical Electricity Tariff with GST). The rates are based on the Fixed Price Plan with one year of contract duration for easy comparison.
Interestingly, despite the highest rate charged by PacificLight at 20.08 ¢/kWh, it is still below the average rate (January 2014 – October 2018) charged by SP at 23.48 ¢/kWh, which amounts to approximately 15 per cent reduction in price. If we compare this with the rate charged by SP at 25.82 ¢/kWh in 2018 (4Q) alone, that is a 22 per cent discounted price.
Given the same reliability of electricity supply with lower tariffs, more than 30 per cent of consumers in Jurong have switched to different retailers over the past seven months since the soft launch of OEM in April 2018. Overall, the OEM has been well received by residents in Singapore with the coverage of more geographical zones in future.