Grid operator SP Group does not benefit directly from tariff hikes: Tan See Leng
SINGAPORE — The impending electricity and gas tariff hikes are driven by the volatility of global fuel prices, and grid operator SP Group does not benefit directly from tariff increases, said Second Minister of Trade and Industry Dr Tan See Leng on Wednesday (14 October).
“The electricity and gas tariffs in the third and fourth quarters of 2020 remain lower than in Q1 2020, and are amongst the lowest since January 2018,” said Dr Tan, who added that around 47 per cent of all households will not be affected by the new tariff prices, as they have already switched to the Open Electricity Market.
Since dipping to their lowest levels in the past 20 years in April 2020, fuel prices rose by 46.6 per cent in the third quarter of 2020, as global economic activity gradually resumed. The electricity and gas tariffs therefore rose to 22.93 cents/kWh and 18.39 cents/kWh in the fourth quarter of 2020, as fuel prices rebounded.
The tariff hike is therefore not “opportunistic”, given that SP Group, as the distributor, charges consumers the same energy costs that it pays to buy power from the gencos, or power-generation companies. “And I have said it, many a time, that the generation companies, too, need to have some form of returns, because they have also invested significantly in the infrastructure here,” said Dr Tan.
He also urged households to consider switching to fixed-price plans offered by electricity retailers under the Open Electricity Market, as fuel price fluctuations are likely to continue in the months ahead.
‘Why can't they just wait a little bit longer?’
Dr Tan, a first-term Member of Parliament, was responding to Holland-Bukit Timah MP Liang Eng Hwa’s parliamentary question on the basis for the latest increase in electricity tariffs and gas prices.
Last month, SP Group announced that around 700,000 Singapore households will see electricity tariffs increasing by an average of about 9 per cent from then till New Year’s Eve, compared with the three months before. City Gas also said that gas tariffs will rise in the fourth quarter by about 5 per cent for households.
Dr Tan revealed that households’ average monthly electricity and town gas consumption from April to July 2020 was 16 per cent and 34 per cent higher compared to the same period last year respectively, as Singaporeans spent more time at home during the partial lockdown and early stages of the country’s phased reopening.
Non-Constituency MP Leong Mun Wai had also questioned why SP Group did not absorb the higher prices from gencos, given its past profits. Leong, who is from the opposition Progress Singapore Party, charged that the grid operator instead chose to pass them on to Singaporeans who are already suffering in the economic downturn.
“When the electricity wholesale market collapsed, from 2012 to 2018, and they didn’t actually pass on the benefits to the consumers at the time, because the retail market was still in the process of being liberalised. So they have made some profits, in fact, a lot of profits during those years, so why can’t they just wait a little bit longer?” said Leong.
Citing the electricity-tariff hike and financial support from authorities for Singaporean households’ utility bills, the NCMP claimed this was an example of the government “giving with one hand and taking with the other”.
Senior Minister of State for Foreign Affairs and Transport Chee Hong Tat also weighed in on the debate, saying that Leong had made a “wrong attribution” with regard to SP Group’s business model. He stressed that SP Group merely provides the infrastructure to transmit and distribute the electrons that are produced by the gencos, and its returns are regulated by the Energy Market Authority.
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