With the full launch of the open electricity market (OEM) throughout Singapore, households are beginning to switch to retailers while comparing the best electricity prices for the best deals.
In this article, we will demystify what goes into Singapore’s electricity prices that you are paying for in your monthly electricity bill.
The Current Electricity Tariff in Singapore
The regulated tariff from 1st October to 31st December 2019:
The tariff is the amount charged by the electricity supplier (in Singapore, it is the SP Group) for using electric power. It is set by SP Services and is the price that every residential consumer was paying before the OEM and now, if they have not switched to an electricity retailer.
The electricity tariff in Singapore is regulated by the Energy Market Authority (EMA), and is also updated every quarter based on changes in the cost of power generation.
Electricity Tariff History and Trends
Most Singaporeans think that the electricity tariff is always increasing year to year. Looking at the historical tariff for the last 5 years, we can see that the trend is not always a rising one.
The following table shows the domestic consumption prices (exclusive of GST) of Singapore tariffs on a quarterly basis, from 2014 onwards:
For the full electricity tariff history from 2014 till date, please head to SP Group’s website to download the file.
So, what factors go into determining the prices that SP Group charges?
Components of the Electricity Tariff in Singapore
The regulated tariff in Singapore comprises of four main components that make up the price:
1. Energy Fuel Costs
Electricity in Singapore is generated mainly by burning natural gas and fuel oil. Since the cost of natural gas in Asia is pegged to the cost of oil, this means the fuel cost is largely dependent on oil prices.
If the price of oil climbs in the market, you can expect the tariff to increase as well. This is a reason to consider switching to an electricity retailer, in order to lock in favourable long term prices. Conversely, if the price of oil drops, you can expect the regulated tariff to decrease to reflect this change in the market.
In addition, the fuel cost is derived using the average daily natural gas prices in the preceding quarter. In other words, the average daily natural gas prices for January to March is used to set the tariff for April to June. This helps to negate major fluctuations in price due to varying market conditions. As mentioned, this cost is reviewed every quarter.
2. Grid Network Charge
This charge covers the cost of transporting electricity from the power generation companies to the power grid and then to consumers. This fee is reviewed every year.
3. Market Support Services (MSS) Fee
This pertains to the cost of billing and meter reading. This fee is also reviewed every year.
4. Market Administration & Power System Operation (PSO) Fee
This fee is charged to consumers as part of the cost of operating the power system as well as the wholesale electricity market. This fee is also reviewed every year.
Now that we know what the regulated tariff is and how it is derived, how does it relate to the actual price we are paying in our monthly electricity bill?
Source: SP Group
The 3 Types of Electricity Price Plans
The electricity retailers in Singapore provide mainly two types of electricity price plans, as listed below. Read on to find out how the regulated tariff is tied to the actual cost of electricity in Singapore.
1. Fixed Price Plan
The fixed price plan allows consumers to lock in a fixed rate for their electricity consumption that will not change no matter how high the regulated tariff gets (e.g. when the oil price shoots up). However, if the oil price drops, the fixed price that you pay could be higher than the regulated tariff.
Hence, fixed price plans are ideal for consumers that prefer to have electricity bills that stay relatively constant over the months.
2. Discount Off Tariff (DOT) Plan
The discount off tariff plan guarantees consumers a lower rate compared to the regulated tariff. This means whether the price of oil rises or falls, the consumer will always enjoy a discount off the tariff.
Discount off tariff plans are ideal for consumers who do not want to regularly monitor the oil market and prefer to simply enjoy discounts that the open electricity market has to offer.
Electricity price plans by iSwitch (as of 12th September 2019) as an illustration:
3. Non-Standard Plan (Peak & Off-Peak)
These plans allow their customers to enjoy different rates at the time of your usage. This means at the peak hours defined by the retailers, if you turn on the switch, you will be paying higher prices than if your usage happened during off-peak hours. For example, if you regularly use more electricity during peak hours, you might be paying 25 cents/kWh whereas if you limit most of your usage during off-peak hours, you could be paying only 15 cents/kWh. When it comes to peak & off-peak plans, it is important to take note of what is considered peak and off-peak timings for the different retailers. Some might consider 7am-7pm a peak timing but might be charging a slightly higher rate while other retailers might fix 7am-11pm as their peak timing but have a cheaper peak rate.
*Currently, iSwitch offers Non-Standard Plan for Commercial customers only.
Understanding your household usage and patterns is key in selecting the right plan for your electricity supply. There is no “better” type of plan out there, just the right type of plan that suits each consumer’s energy usage.
Now, you may be wondering – how do the electricity retailers manage to offer consumers lower rates than the regulated tariff? All licensed electricity retailers in Singapore buy electricity in bulk from the power generation companies and through their trading and retailing strategy, they can provide competitive rates to consumers both residential and commercial.
You may refer to the diagram below to understand more about how the electricity market works.
Besides selecting an electricity price plan that suits your needs, you should also be aware that there could be other costs to pay for as well.
7 Hidden Costs of Electricity in Singapore
While switching to an electricity retailer can allow you to enjoy savings off your electricity bill, you should take note of possible additional charges that could turn up in your electricity bill.
1. Transmission Loss Factor (TLF) Charge
In Singapore, electric power is delivered at 230V to consumers and during the transportation of electricity through the power grid to our homes and offices, a small percentage of the energy is lost. This percentage loss is known as the Transmission Loss Factor (TLF).
The TLF effective 01 April 2019 for a load of 230V is 1.031651. You can view the latest TLF on the OEM’s website.
Some electricity retailers, such as iSwitch, absorb the TLF charge for their customers. Hence, depending on the electricity retailer, consumers are billed either on metered readings or loss adjusted readings. If the retailer bills based on metered readings, consumers will just pay for the power usage that is recorded by their meter and the TLF will be borne by the retailer.
However, if the retailer bills based on loss adjusted readings, the TLF will be factored in and the electricity bill will be calculated as such:
Electricity Usage = Metered Reading x TLF x Electricity Rate
2. Carbon Tax
Singapore signed the Paris Agreement on climate change and as such, since January 2019, every electricity consumer in Singapore is subject to a carbon tax for their energy use. As power generation companies are liable for a $5 tax for every tonne of emissions and since they primarily burn natural gas for power generation, this tax is passed down to everyday consumers.
As a reference, the carbon tax charge takes effect for every unit of electricity (in kWh) consumed from 1st January 2019 onwards.
Carbon Tax Charge = Electricity Consumed* x GEF-OM** x Carbon Tax Rate
Some electricity retailers, such as iSwitch, absorb the carbon tax for their residential customers.
**To learn more about the carbon tax, you can read this article.
3. Early Termination Fee
While signing a contract with an electricity retailer brings with it sign-up perks and bonuses, retailers may enact a penalty if you break the contract – mostly in the form of an early termination fee.
For example, at iSwitch, a cancellation within 3 days from the date of application will incur a $100 cancellation fee. If the contract is cancelled after the initial 3 days, an early termination charge will apply, and this varies depending on the number of months left in the contract.
4. Security Deposit
Before the OEM, all consumers paid SP Group a security deposit in order to power up their homes back then. The same applies to the electricity retailers too.
The security deposit is refundable when an account is terminated and is primarily imposed to ensure any outstanding amount on a final bill will be settled. Any remaining amount will be refunded upon settling the final bill.
The security deposit could vary based on your dwelling type. In addition, electricity retailers are not allowed to collect a security deposit that is beyond twice of your average monthly electricity bill. This means if your average monthly electricity bill is $50, the maximum amount that can be collected as security deposit is $100.
5. Advanced Meter Installation Fee
A meter reading is essential for the estimation of electricity usage and there are two types of meters available.
The first type is the cumulative meter, which is what the majority of households in Singapore use. Meter readings are read manually by inspectors that head down to the premises once every two months.
The second type is the advanced meter that measures electricity consumption every 30 minutes, allowing consumers to be regularly updated with their electricity consumption. The advanced meter will require an installation fee of $40 (excluding GST).
Consumers should check with their electricity retailer on the type of meter required.
6. Relocation Fee
Whether you are looking to move abroad or relocating to another premise, there might be a relocation charge depending on the electricity retailer.
7. Paper Billing Fee
Even though billing is now mostly performed online through digital statements that can be accessed from a retailer’s online portal or sent via email, consumers can still opt for paper bills. However, depending on the electricity retailer, there may be a nominal fee charged.
With these fees and charges in mind, consumers should read through and fully understand the price plans and what they entail before signing up.
Lastly, your electricity bill may be reduced depending on the U-Save rebate given by the Singapore Government.
The U-Save Rebate & Your Electricity Bill
Since 2018, every Singaporean household is eligible to receive a U-Save rebate (as part of the overall GST Voucher) that helps to subsidise their utility bill, which includes the electricity bill.
Depending on the home type (HDB, Condominium, Bungalow, etc.), each household will receive a U-Save rebate that ranges between $240 to $400.
Points to note about the U-Save rebate:
- The U-Save rebate will be automatically credited to the utilities account of the household (no sign-up or action is needed on your part).
- The U-Save rebate will not lapse. It will continue to be rolled over month after month to help offset the utility bill.
- For some retailers like iSwitch, the U-Save rebate will be used first to offset the SP Group bill for non-electricity charges (such as water and gas) before being utilised to offset the electricity bill.
Learn more about the U-Save rebate and how it can help to offset your electricity bills.
As you can see, determining the electricity prices consumers pay in Singapore is not as direct and simple as it seems. With this breakdown, we hope you will have a better understanding of the factors that affect your monthly electricity bill.