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The price of
crude oil has been dropping steadily. Since seeing the high
of S$122.45 on May 3rd, crude oil has fallen to a
low of S$98.78 today. Will small consumers and households
benefit from this downward trend in crude oil prices by seeing a
reduction in their electricity bill?
Singapore’s electricity rates are calculated using a formula
pegged to crude oil prices, reviewed every three months and were
last raised in April 2010.
Singapore’s Energy Market Authority (EMA) which recently revised
the electricity tariff formula by using the average of crude oil
prices in the preceding three months to determine the tariff for
the current quarter, approved this revised tariff.
Although Senior Minister of State and Industry S Iswaran said
that the revised formula had key advantages and would help to
reduce the volatility of electricity tariffs, it has yet to benefit
the majority of households and small consumers in Singapore.
Since the EMA chooses to peg the price of electricity to crude
oil (although the power plants predominantly use natural gas to
generate electricity for Singapore), they should perhaps consider
better capturing prevailing conditions in the oil markets, and use
the ‘next months contract’ formula which takes into account prices
of fuel oil for delivery a month later.
Although adopting this formula will mean frequent changes and
more uncertainty, it may mean more actual savings on the
electricity bill for the average household and for the small
consumers.
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By: Ravi Philemon