The Electricity Tariff Puzzle

Electricity bills would decrease 0.3 cents per kwh i.e. it now costs 26.98 cents/kwh for 4Q 2011 (oil cost S$121.68 /barrel). In 1Q 2010, it cost 22.87 cents/kwh (S$99.38/barrel).  From the start of 2010 until now in this 2 year period, tariff has crept up steadily, except for 4Q 2010 when it dipped from 24.13 cents/kwh to 23.34 cents/kwh. (S$95.41/barrel).

Crudely measured, crude oil barrel price jumped up by 22% from 1Q 2010 to 4Q 2011, from S$99.38 to the current S$121.68. Tariff has jumped by 17% from 1Q 2010 to 4Q 2011, from 22.87 cents/kwh to 26.98 cents/kwh.

The weird thing for us to understand is why the high oil cost is affecting our electricity tariff. Singapore’s electricity is generated from natural gas, not oil. Already in 2006, 78% of the electricity generation was from natural gas imported from Malaysia and Indonesia.  That figure would have increased since then.  EMA’s explanation is that  the price of natural gas is pegged to that of oil and so if oil goes up, the cost of gas would also go up.

Another confusing bit for someone like me uninitiated in exchange rates is how the cost of oil, which is in USD, has become cheaper over 2010-2011 as the SGD is stronger but yet tariff has climbed over the last 2 years, albeit slowly. With possible appreciating USD compared to SGD in 4Q2011 and generally increased demand in oil as winter approaches pushing price of oil upwards, tariff might go up again in 1Q2012 after this brief respite in 4Q2011.

From EMA, tariff and weightage of component costs

SP Releases

4Q2011
For the quarter 1 Oct 2011 to 31 Dec 2011, electricity tariffs will decrease by an average of 1.2% as lower fuel oil prices resulted in lower power generation costs. The average fuel oil price over the last three months (1 Jul to 15 Sep 2011) has decreased from S$125.16 to S$121.68 per barrel.

The electricity tariff for households will decrease by 1.1% (or 0.3 cents per kWh) from 27.28 to 26.98 cents per kWh. On average, families in four-room HDB flats will pay about $1.24 less a month.

3Q2011
For the quarter 1 Jul 2011 to 30 Sep 2011, electricity tariffs will increase by an average of 6.8% as higher fuel oil prices have resulted in higher power generation costs. The average fuel oil price over the last three months (1 Apr to 15 Jun 2011) has increased by 13.8% from US$88.63 to US$100.84 per barrel. As the Singapore dollar has appreciated vis-à-vis the US dollar, the increase in S$ terms is 10.4%, from S$113.37 to S$125.16 per barrel. The formula for electricity tariff is based on the average fuel oil prices in the preceding quarter. The objective of this approach is to smoothen out fluctuations in the fuel oil markets.

The electricity tariff for households will increase by 6.6% (or 1.70 cents per kWh) from 25.58 to 27.28 cents per kWh. The increases in the average monthly electricity bill for households will range from $2.13 for 1-room HDB flats to $6.71 for 4-room HDB flats.

2Q2011
The average fuel oil price increased sharply by 14% from S$99.45 to S$113.37 per barrel over the last three months. At the same time, there was an annual review of the grid network cost or the cost of transporting electricity through the power grid, which resulted in network charges being lowered by 3% for the year ahead. The significant increase in fuel cost, however, more than offsets the reduced network charges. As a result, electricity tariffs will increase by 6.5% on average.

For households, the electricity tariff will increase by 6.1% or 1.48 cents (S$0.0148) per kWh to 25.58 cents (S$0.2558) per kWh. On average, families in four-room HDB flats will pay about $4.85 more a month for their electricity based on the new tariff.

1Q2011
The average fuel oil price over the last three months has increased to $99.45 per barrel. Hence, the average electricity tariffs will increase by 3.3% for the quarter 1 Jan 2011 to 31 Mar 2011.

The electricity tariff for households will increase by 0.76 cents ($0.0076) to 24.1 cents (S$0.241) per kWh. Families in four-room HDB flats will on average pay about $3.15 more a month on electricity charges.

4Q2010
The average fuel oil price over the last three months has decreased to $95.41 per barrel. Hence, the average electricity tariffs, including that for households, will be reduced by 3.3% for the quarter 1 Oct 2010 to 31 Dec 2010.

The electricity tariff for households will be reduced by 0.79 cent per kWh to 23.34 cents (S$0.2334) per kWh. On average, families in four-room HDB flats will pay about $3 less a month.

3Q2010
For the quarter 1 Jul 2010 to 30 Sep 2010, the electricity tariff for households will increase by 2.42% or 0.57 cents (S$0.0057) per kWh to 24.13 cents (S$0.2413) per kWh. The average increase in tariffs across all customer categories for Jul to Sep 2010 will be 2.42%. On average, families in four-room HDB flats will pay about $2.33 more a month.

The average fuel oil price over the last three months remained stable at about S$102 per barrel. However, the non-fuel components of the tariff have increased due to higher capital and operating costs of power generation. The tariff also includes an adjustment for under-collection in the previous quarter.

2Q2010
The fuel oil price has continued to increase since the electricity tariffs were last reviewed in Dec 09. The average fuel oil price over the last three months has increased from S$99.38 to S$102.95 per barrel.

The electricity tariff for households will therefore increase by 3.02% or 0.69 cent (S$0.0069) per kWh to 23.56 cents (S$0.2356) per kWh for the coming quarter 1 Apr 10 to 30 Jun 10. On average, families in four-room HDB flats will see a $2.47 increase in their monthly electricity bill for the quarter.

1Q2010
For the quarter 1 Jan 2010 to 31 Mar 2010, the electricity tariff for households will increase by 5.4% or 1.18 cents (S$0.0118) per kWh to 22.87 cents (S$0.2287) per kWh. The average increase in tariffs, across all customer categories, for Jan to Mar 2010 will be 5.5%

The increase in tariffs in the coming quarter is due largely to higher fuel oil prices. The average fuel oil price over the last three months has increased by around S$7.35 to S$99.38 per barrel. This is 8% higher than the S$92.03 per barrel used in setting the tariffs for the current quarter.