Energy Market Authority to work closely with electricity retailers exposed to price volatility; no disruption to consumers

SINGAPORE: The Energy Market Authority (EMA) said that it is working closely with electricity retailers facing challenges given the “exceptional” circumstances in the energy market.

Electricity retailers who have under-hedged their positions may be exposed to price volatility, the government agency said in a media release on Saturday (Oct 16).

Some retailers may find it "challenging" to sustain their operations, said EMA, and may choose to exit the market.

"This is a consequence of their business decisions and can be expected in open and liberalised electricity markets, where participants may enter and exit the market, and market consolidation may occur," EMA said. 

The comments come days after two electricity retailers, iSwitch and Ohm Energy ceased their operations in Singapore, citing the volatile electricity market. 

Customer accounts under Ohm Energy and iSwitch will be transferred to SP Group from Oct 20 and Nov 12 respectively.

SAFEGUARDS FOR CONSUMERS

For retailers ceasing their operations entirely, EMA said it will ensure a smooth transition for affected customers.

"Retailers who wish to exit the retail electricity market are required to first approach other retailers to take on their customers under the same contractual terms and conditions," the authority said.

If the exiting retailer is not able to novate, or transfer, their contracts to another retailer, its customers will be transferred to SP Group, said EMA.

Affected customers will have the option to accept the transfer, or switch to another retailer of their choice, it added. 

"There will be no disruption to their customers’ electricity supply."

The authority added that retailers will also not be allowed to charge customers an early termination fee. 

Retailers are also required to refund any remaining security deposits after offsetting outstanding charges for household consumers, it said.

EMA said it is also “open” to allowing retailers to suspend their operations by transferring their customers to SP Group while they "strengthen their businesses and ease their customers’ transition with ex-gratia payments". An ex-gratia payment is one that is made voluntarily and not out of any legal obligation.

For retailers intending to continue operations, the authority said that it is facilitating efforts to hedge against future price volatility.

MOST CONSUMERS ‘CUSHIONED’ FROM PRICE VOLATILITY

The wholesale electricity market has experienced higher price volatility for sustained periods in the past two weeks, EMA said in its media release, attributing this to several factors.

Globally, the prices for spot liquefied natural gas have risen significantly, the authority said.

This is driven by increased global demand for natural gas and a drop in natural gas and coal production.

In Singapore, there has been higher than usual electricity demand, with a new system peak demand of 7,667 megawatt recorded on Oct 12.

“There is also a curtailment of piped natural gas from West Natuna and low landing pressure of gas supplied from South Sumatra,” said EMA.

Most Open Electricity Market (OEM) consumers have been "cushioned" from the price volatility in the wholesale electricity market due to the fixed price plans, discount-off-regulated tariff or regulated tariff.

“OEM consumers may see an increase in electricity prices at the point of contract renewal, which reflects the increased costs of electricity production,” EMA said.

The nationwide OEM was launched in November 2018 to provide consumers with increased choice and flexibility when buying electricity.

About half of household consumers in Singapore have switched to buying electricity from OEM retailers, the government agency said.

The remaining half of household consumers purchase electricity from SP Group at the regulated tariff, it added.

Only a small group of consumers purchase electricity directly from the Singapore Wholesale Electricity Market, said EMA.