Singapore Number 2 in Raising Electricity Tariffs

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Once again, we are ranked near the top of the table. But this time, it’s for raising electrical tariffs!

HK electricity producer CLP Power released a media statement last month that included a table of 21 major cities ranked by how much electricity tariffs they have raised since 2005.

Thanks to our formidable Singapore Power SP Services, we are ranked No. 2 in hiking the price of electricity.

Comparison of electricity tariff increase since 2005 across major cities

Singaporeans see an increase in electricity rates that’s higher than our friends in 19 other major cities that include New York City, Amsterdam, Sydney, Tokyo, Seoul and Paris.

Ok, let’s be fair. It’s the price increase that puts us up there.

The article also compares the actual residential tariffs in absolute terms (in HK currency).

Our electricity is the 12th priciest – not too bad – but the following cities charge cheaper rates: HK, Sydney, Seoul, Wellington, Shenzhen, Shanghai, Vancouver, Taipei, Jarkata and KL.

Let’s also not forget that CLP Power has just reduced its rates while our friendly Singapore Power SP Services hiked ours by a whopping 21% due to some fancy formula.

We win again!

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40 Comments

  1. the statistics may be true, but circumstances are that costs for producing energy are much more expensive in sg.
    other countries may make use of hydroelectric, nuclear, solar, wind, tidal power, or their reserves of oil, coal and gas, but sg relies only on imports of oil and natural gas.
    higher electrical charges do not necessarily mean greater profit for power companies. maybe a comparison of profits by power companies would be more enlightening.

  2. Sing Power made S$1B profit after tax for FY07/08 (see their website). ONE BILLION.
    No need to compare with others…

  3. hm.. if i’m not wrong this $1b figure was arrived at after the sale of fixed assets, and not taking into account the extra requirements for infrastructure changes in the next few years, considering that sg is shifting from oil to natural gas.
    the figure is therefore a poor indicator. how much of it is really taken out as dividends? if not much, then most of it is going back to the company for infrastructure purposes.
    i’m not happy abt price increases as well, but let’s not be myopic.

  4. Just looking at the news article, CLP Power is able to give a guaranteed 10% price reduction due to reduced capital expenditure. However, their costs went up by 7%, so they could only give 3% discount.

    I didn’t try to find out why their cost went up by 7%.

    SP Power increased its tariff by “only” 21% even though its cost went up by 38% ($155 vs $112).

    If you want to argue, then argue that SP Power should peg its tariff to something else. (Since they weren’t very dependent on oil anyway.)

  5. the bottom line is: how come HK can do it and not SG?
    in my view, they also handle the mini bond saga much better than our world class civil servants and ruling politicians who are the best paid in the world.

  6. If not for Tan Kin Lian, the aunties and uncles who invested in Lehman mini bonds would be crying quietly to themselves at home.

  7. yes, $1b profits, but are they taken out as dividends for the shareholders or are they pumped back into the company for building infrastructure?

    power infrastructure costs, as i see it, are astronomical, and such profits accumulation is needed for the long term.

    sidetrack: but why do sgporeans involve the govt in everything? minibonds.. aren’t they purely a commercial transaction? if there is misrepresentation, sue. the courts will help you. what can the govt do? slap the dbs managers?

  8. Hey Jack, Please do your research first before arguing on “considering that sg is shifting from oil to natural gas.
    the figure is therefore a poor indicator.”

    This is from the Energy Market Authority. “Today, about 80% of Singapore’s electricity demand is generated from natural gas” http://www.ema.gov.sg/gas/history.php

    Care to respond to that? Your argument on that they “need” to spend their $1B profits on infrastructure so as to shift from oil to gas is FUNDAMENTALLY Flawed when 80% of our electricity is ALREADY generated by natural gas. Please don’t tell me that price of natural gas is same as oil. Just because they are both from underground doesn’t mean they both costs the same. Don’t argue just for the sake of arguing and trying to appear smart to the people who are ignorant on such facts. You just appear to be an empty barrel to me. Arguing on the “Need” to spend on infrastructure when the money was ALREADY SPENT years ago. I’m having my exams now, no time to go thru their financial reports. Will respond to your argument on the sale of fixed assets contributing to the bulk of the after sale profits after 10th nov.

    Btw, I’m accounting trained. I wondered whether are you trained in that area too? Do you know the accounting policies regarding sale of fixed assets and how to profits are treated? If not too sure, then please don’t sprout your nonsense here after reading from some other website and give a disclaimer like “IF I’m not wrong”. I know you’re not writing your thesis here but please at least back it up with some evidence or materials.

    And lastly, don’t get me started on the dividends issue. If I have the money, I would definitely buy lots of Singapore Power shares. I strongly believe that the energies market should be nationalized by the government and not be left to the abuse of the free markets. Didn’t Alan Greenspan, the previous FED Reserve chief testify in the US congress on why he was shocked that the free market principle isn’t working? Now, let us not forget the lessons learned by the Americans on the ENRON debacle. Seriously Jack, have you even heard of Enron and the whole issue surrounding it? I can recommend you a good film so that you can gain more knowledge before sprouting nonsense here. You’re the one who is myopic in view and yet had the cheek to tell others not too. Anyway, enuf of the negative response to your posts. Here’s the name of the film. “Enron: The Smartest Guys in the Room”. Just watch the trailers on Youtube and you’ll get a rough picture of it.

    Please feel free to counter my views and points. I look forward to it.

  9. cannot reduce tarrif because profit will drop.
    Raise price then GDP can increase.
    Each ministry must maintain high prices so that GDP can be maintained.
    Why? Variable bonus of top civil servants tied to GDP mah – you didn’t know meh?
    That is why HDB prices are market based, not cost based.
    Someone should work out – with a person earning $1200, buying our public housing for the first time in Jurong, after paying all the HDB loans and interest, how much in the CPF would he have for retirement?
    Or should he jump into MRT first?
    Oh, no wonder Minister of Health is now promoting Euthanasia.
    Lesser govt expenditure on heath care – his bonus higher mah.

  10. Alan Greenspan speaks on

    In the straits times today – he indicated that Capitalism and the way he run the USA economy failed. Fantastic, this after the failure of communism.

    I hope the pegging of pay to GDP will also be discontinued as it leads to untold consequences and misery on the people. High bills, poor transport system, high cost of flat etc etc

  11. wow.. chill edmund. i admit that i did not do much research on the matter and that i’m not accountancy trained, but let’s not get too worked up.
    firstly, the price of natural gas is inextricably linked to the price of oil, both being energy resources. as oil prices rise, so does the price of natural gas.
    secondly, my point on infrastructure costs being high. i’ve just read that we’ve had to spend billions on an lng terminal. i’m not sure where the money is coming from, but it just emphasizes my point that infrastructure costs are atronomical in this industry. do we already possess all the infrastructure needs? i’m not so sure.
    thirdly, it seems that you’ve merely sidestepped the dividends issue. if money is not taken out, then it is still in the company, probably for infrastructure costs.
    lastly, the power industry is not completely privatised. on the contrary, like many industries in sg, it is highly regulated. the enron debacle resulted from poor corporate regulation in the us. it is highly unlikely a similar thing could occur in sg. it’s merely my opinion, but i am legally trained.

  12. wow, this is “good news” to our gov, they like statistics of this nature. It showed the world that Singapore has what it takes to be like the top cities, like New York & London.

    First world, indeed!

    More good years…

  13. the billions used was not for research into solar power or anything –

    it was used to pun on power gen in other countries. Thus do not be misled to think that the money is still in the company to serve the Singapore people

  14. Dear Jack,

    perhaps you are legally trained, but you might want to pay attention to what’s happening in the futures market and brush up on your economics. Natural prices are “inextricably” linked to oil prices, but it’s still a substitute for oil. The price for natural gas is significantly cheaper than oil, and if you’ve been paying attention, oil prices have dropped significantly for the past week or so, based on the assumption that oil consumption will drop drastically in the future.

    Why in the world are you aruging about shareholder profits and infrastructural costs as the same time? If Sing Power is concerned mainly about profits and shareholder value, then it should be treated as a corporate entity separate from the government. If it is to be treated like a corporate entity, why should anyone be concerned about infrastructural costs and why should its customers pay for such things? The company should pay for such developments from its own coffers. If you want to argue that Sing Power has strong government links and should be considered a government linked entity, then should not its top concern be providing a service to the populace, rather than care for its profit line?

    Might want to rethink your argument, Jack the legally trained person.

  15. the people in here aren’t rather polite…
    mercia:
    sarcasm aside. the tariffs were raised even before the current fall in prices in commodities. moreover, the price of natural gas moves in tandem with the price of oil, substitute or otherwise. in any case, price of oil is largely affected by the decisions of the opec cartel, and we could well see prices rising again.
    secondly, there isn’t a simplistic model between a purely corporate entity and a government one. even if sing power were to be understood as a simple corporate entity, which it is not, clearly it has to weigh in infrastructure costs in its corporate decisions. and even if it were a wholly government entity, which clearly it isn’t, it would have to consider future costs in deciding what to charge consumers now.
    my question is, are the shareholders really gaining by the increase in electricity prices? (which we would think unreasonable) or are they merely to offset increase in costs of energy and for costs of infrastructure? (which would be reasonable) the answer to these questions are the important ones.

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  17. Anyone interested in the expected tariff just need to read SP Power’s press release.

    2008 q1: oil price US$66.28
    2008 q2: oil price US$74.40
    2008 q3: oil price US$82.61
    2008 q4: oil price S$155.14 (from S$112.35)

    SP Power switched to S$, didn’t explain why. It should be around US$114.

  18. when times are good, you can do hike prices and attribute it to anything in the world and people will still be happy to pay albeit some grumblings.

    when times are bad, you can still hike prices and attribute it to anything in the world BUT people will not be happy to pay anything more.

    private or public, does it really matters now?

    just pay lah…

  19. Hi Jack,

    It’s not that I want to be rude or anything. In fact, I’m a friendly person. However, your comments does makes me angry with some of the points that you’ve raised. There you are going on and on about shareholder’s interests, dividends etc. My point is that WHY ARE WE PAYING 3 MONTHS FORWARD OIL PRICES when 80% of our electricity are generated from Natural Gas. Don’t tell me they record 3 month forward oil price (which actually is an estimate, and under accounting expense definition and accounting rules, it’s not allowed.) into their accounting books? Surely they must have passed entries on their expenses on NATURAL GAS. Is it so hard to based the price of electricity on the cost of Natural Gas. Our “esteemed” minister argues that there isn’t a good index to peg the price of natural gas to and therefore they peg it to oil. What the hell man……it’s like you are ordering plain water and they are charging you for a cup of coffee for the costs of coffee beans, water, sugar and electricity used for boiling the water. Is it really that hard to set the prices of electricity based on fluctuating prices? They do have to pass entries into their accounting books isn’t it? Can’t they rely on that information since it will be audited anyway. It should therefore be more reliable to the forward prices formula. At the end of the day, I still don’t see why privatizing our Energy markets can bring about more efficiency. Maybe I’m ignorant on such matters and if so, can some one teach / enlighten me on the subject matter? Why privatization will bring about more efficiency and therefore consumers will be better off at the end of the day? I simply cannot wrap my head around that idea.

  20. Edmund,

    go look at the definition of forward contracts in the context of financial markets or in this case natural gas. dont blabber. it doesnt makes u look any better.

    privatisation is good if you are talking textbook, econs 101. since u mentioned that you have learnt econs you should noe the answer.

    however, we live in a real world and thats when the academic theories and ideals of a laissez faire/free market sort of malfunction in the real world. esp when we are talking about infrastructure sectors, high capital industries, with natural high barriers to entry.

    so privatisation is supposd to bring in more competition as a result deadweight losses which occur in theoretical monopolistic/oligopolistic markets gets utilised and the industry as a whole becomes more efficient.

    however, if you are talking about the price levels per se, there is certainly something lacking in the pricing mechanisms here.

    either the corporates themselves are exposing themselves to high levels of costs, in this case gas/oil/watever, and not hedging them well enough or they have been passing off these costs substantially over to the end consumers.

    in a pure perfect competitive world, goods producers will find it hard to sell their products when they hiked their price levels. however, apparently in this case, the costs are easily transferred from the producers to us, therefore we are not living in a pure p.c world.

    so the questions to be asked should be so,
    are these producers/firms/corporates operating in an efficient manner? if not, what should we as end users do about it? is there a recourse for end users like us?
    Or are these producers/firms/corporates behaving like a monopolistic entity? if so, is there anything the regulators can do about it?

  21. Hi adiemuso,

    My point that I want to make is why are we paying for Oil prices when we are not using 100% of the oil to produce our electricity. It has nothing to do with forward contracts definition or the hedging of risks. I don’t plan to look good here anyway, since I’m ignorant on a lot of stuffs that you are talking about but you’re missing my point by at least a mile. As for your comments on efficiency, does it mean that government managing it will be less efficient than being managed by free market itself? Are you subscribing to the Rational Economic Person theory whereby everyone is out for his / her own interests and the spill off / trickle down effect is that it will benefit the society as a whole?

  22. Btw adiemuso,

    I never once mentioned that I learnt econs…..are you confusing me for another person? Anyway, I did studied econs and how weird is it that most of the things i studied are not applicable in ahem….my country. Milton Friedman did mentioned on GST as an oppressive tax and it might do the society more harm than good if there were more middle class / low income groups.

  23. Edmund,

    You did study Econs, so I am not mistaking you for another.

    And government managed versus private being efficient or not was not on my agenda.

    Economic theories are largely based on Rationality. Of course there are examples that Rationality has failed like in what Mr Greenspan had recently admitted in his oversight.

    Your point about prices being affected by Oil prices is exactly what i meant by pricing mechanisms.

  24. for what I know Hong Kong’s power supply and nature gas supply are from mainland China that able to supply hong kong for 50 years and cheaper than market price, hong kong have already sign the contract with China in May / June this year.

    So I feel that is difficult to compare Singapore with hong kong in this area.

    Singapore Govt. just don’t do enough in alternative energy in the previous time that causes today high electricity tariffs. Singapore Govt. doesn’t want to subsidy the cost of electricity unlike those countries in the graph.

    in actual market there is a lot of countries Govt. subsidy the cost of electricity tariffs.

    beside that I don’t know that SP will it charge it higher cost a not.

  25. All in the name of GREED, those people who are involved in all these profiteering business at the expense of the already so suffering citizens will have no offspring to carry their genes in singapore, this is just outright extortions.

  26. No matter government take over power supply or SP services continue managing power supply or inviting 5 other power vendors to create “competition”… each and every one of them would like to make the $1b profit…
    Think of it this way; put yourself into this big pair of shoes… If you were in the position to manage the power company, don’t you think you want to earn significantly more money from the work you do and earn more and more each year (aka yearly increment and variable bonus)? Or would you be willing to work for free + forgo the increment and variable bonuses for the benefit of fellow citizens? Who can be so selfless? Not the people in SP services, not the people in government, not you and definitely not me.

  27. well..it cant be changed…we operate on capitalism…

    hopefully, the profit being generated are being pumped back into the economy vis a vis green projects, cleaner energy, subsidies for needies.

    in my point of view, we are seriously lacking in the clean and green aspects. we can definitely do much more.

  28. The way I see it, its counter-intuitive that electricity tariffs have to be hiked substantially (+21%) when HK reduced its tariff and the price of commodities in general continued its downtrend.

    I don’t subscribe to the argument that it is for maximising profits. What I would hazard a guess is that they could have entered into a financial hedge at the height of the rally in commodities prices earlier and now that commodities prices have dropped, they found themselves in an unfortunate situation where they have locked in at higher prices hence the pass through to consumers.

    We will never know unless the full details of SP Services’ financial statements are published, I guess.

  29. whatever it is, many people cannot afford to pay the increase. im guessing many affluent SINs drop by this website but i worry for lower income families or single old aged folk. the subsidies given to them arent that great either. AND my GRC just lost over $2m in mini bonds.jus wana say dats $$ dat can be better spent!

  30. for those who are still unclear, SP services does not set the price. the energy mkt authority (EMA) does so. SP services only collects the money, pay back the generation companies (gencos) and pay SP powergrid (who runs the transmission and distribution network).
    i think some many Singaporeans are pointing their fingers at the wrong person =)

  31. goes to show how vulnerable we all are. since both ema and sp are players at the top of the food chain, i’m sure they can do something to pre-empt the problem and not just sit there. now that the problem has happened, instead of fixing it, they are still sitting there, at best giving lame excuses eg it’s ‘standard practice’ to use oil prices. or maybe they’re so incompetent to think that there’s no problem at all? then why pay them world-class salaries to just sit there?

  32. i will reiterate…SP services is not at the top of the food chain (nor anywhere near the top), it just charges consumers whatever EMA states. even the proportion of the charges that SP keeps to maintain the grid, etc is regulated by EMA. this whole thing is EMA’s doing and i think they should sort themselves out cos they’re doing a bad job.

  33. May be a bit late to weigh in, but…

    Price of gas in Singapore is contractually linked to the price of HSFO. It is by formula and it cannot be changed until the contracts expire. The linkage is reasonably common and is neither good nor bad. It looks bad when oil goes up. It looks good when it goes down. For a long time, oil was pretty low….

    CLP has a completely different energy mix, with older nuclear and coal plants (highly depreciated) as well as gas (which is also linked to oil). CLP and HKE have different energy mixes (note that CLP and HKE have different situations.) CLP and HKE and Singapore’s electricity sector have completely different investment profiles and energy security priorities and options, including project timing, reserve margin and so forth, as well.

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