Open Electricity Market in Singapore
During November 2018, the Energy Market Authority (EMA) launched the Open Electricity Market. To this end, consumers are able to choose who they want to work with for their electricity supply. Before we make our decision, we should first understand the electricity market in Singapore.
- Part 1: About the Open Electricity Market
- Part 2: Understanding the Standard Price Plan
- Part 3: Understanding the Non-Standard Price Plan
- Part 4: My Evaluation on the Open Electricity Market Retailers
Part 1: About the Open Electricity Market
Same Electricity Supply
According to a statement from SP Group,
SP will continue to operate the national electricity grid. Hence consumers will enjoy the same reliable and efficient electricity supply, regardless of their choice of electricity retailer.
In other words, our electricity supply will remain the same even after we change to another electricity retailer.
According to another statement from SP Group,
Energy Market Authority (EMA) regulates the electricity tariff. As a result, there will be quarterly revision to the electricity rate. This is for the purpose to reflect the actual cost of electricity.
To put it another way, our monthly bill reflects an average cost of electricity. As a result, this is not an accurate reflection on our actual usage. With this intention, SP Group will make adjustments (up or down) every quarter to reflect the actual cost of electricity.
Part 2: Understanding the Standard Price Plan
For this purpose, there are two standard price plans:
- Fixed Price Plan
- Discount Off the Regulated Tariff Plan
Part 2.1 Fixed Price Plan
How it Works: Firstly, the electricity retailer will fix the electricity rate. Thereupon, we will pay the same rate throughout the contract duration.
Example (with reference to Infographic 1):
As an illustration, a retailer charges a rate of 24 cents/kWh for a 12 months contract. During this period, we consume 300 kWh of electricity every each month. To this end, we will pay $0.24 x 300 kWh = $72 monthly for the next 12 months.
(Point A) What if the electricity tariff decreases below the fixed rate (e.g. 20 cents/kWh)…
In this case, we will pay a higher cost for the quarter. Accordingly, the extra cost is subtraction between the fixed rate and the prevailing electricity tariff. In detail, that is ($0.24 – $0.20) x 300 kWh x 3 months = $36. Consequently, we will pay $12 more every month.
(Point B) What if the electricity tariff increases above the fixed rate (e.g. 30 cents/kWh)…
In this case, we will save more money for the quarter. Evidently, the savings is the difference between the prevailing electricity tariff and the fixed rate. Explicitly, that is ($0.30 – $0.24) x 300 kWh x 3 months = $54. In effect, we will save $18 more each month.
To sum up…
Advantage: On the positive side, the (up or down) fluctuation in the electricity tariff does not affect us. Consequently, our electricity bill will be more or less the same every month. By the same token, this is based on the assumption that we uses the same amount of electricity every month.
Disadvantage: If the electricity tariff falls below the fixed rate, then we will pay a higher rate for that quarter. In the long run, we will be worse off by changing to a fixed price plan.
Part 2.2 Discount Off the Regulated Tariff Plan
How it Works: Basically, the electricity rate is a fixed discount off the prevailing regulated tariff. In effect, we will pay this discounted rate throughout the contract duration.
Example (with reference to Infographic 2):
Firstly, let’s assume that the electricity tariff over the next 12 months will fluctuate according to Infographic 2. Next, a retailer provides a 20% discount off the regulated tariff for a 12 months contract. During this period, we consume 300kWh of electricity every month. As a result, we will pay $704.88 for the year. In effect, we will save $176.22, or $14.69 every month.
(Point C) What if the electricity tariff continues to be low…
In this scenario, we save from both the fall in electricity tariff and the fixed discount from the contract.
(Point D) What if the electricity tariff continues to be high…
In this scenario, we will only have savings from the fixed discount in the contract.
To sum up…
Advantage: In any case, it is likely that we will always be paying lesser than the prevailing regulated tariff. In the long run, we will be better off changing to an electricity retailer that provides such a plan.
Disadvantage: If the electricity tariff continues to rise, then we will end up with a more expensive electricity bill. This is despite the fixed discount rate.
Part 3: Understanding the Non-Standard Price Plan
How It Works: Generally, these plans do not follow the usual way of charging their customers. Instead, the formula depends on how creative the electricity retailers are. (Well, maybe that’s why they are termed “non-standard”. 🤷🏻♂️)
For instance, a retailer may charge a rate for electricity based on time. For instance, the rate will be 20 cents/kWh from 7am to 7pm, and 15 cents/kWh on other timing. Moreover, some plans have fancy initial contract terms and terrible terms on renewal.
Advantage: In order to maximise the benefit from the plan, we will need to control our household’s electricity consumption perfectly.
Disadvantage: Some of the plans require you to install a Smart Meter (aka AMI) and this costs an additional $42.80. Besides, we won’t know if it is really possible to control our electricity consumption perfectly.
For example, some of the electrical items like the fridge is on power 24/7. In the long run, I don’t think I can live in such a controlled environment. 🤖
My Evaluation on the Open Electricity Market Retailers
All things considered, the non-standard plan confuses me tremendously. This is partly due to its complex wordings. Furthermore, I ain’t really confident about the dollar that I may save.
In the long run,
If the electricity tariff continues to fall…
Then I will be better off with a Discount Off the Regulated Tariff Plan.
If the electricity tariff continues to rise…
Then I will be better off with a Fixed Price Plan.
Interested to know how I made my choice? Check out: How to choose an Open Electricity Market Retailer in Singapore
Find out why I signed a two years contract with Ohm Energy: Ohm Energy Review: I am Impressed!
Looking for the most comprehensive comparison table on open electricity market?
Thoughts of the Day 💭
- Will you choose a Fixed Price Plan or a Discount Off the Regulated Tariff Plan?
- What are your considerations before making a switch?
- Will the electricity rise or fall in the long run?
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