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SINGAPORE: Two political office holders from the People’s Action Party on Wednesday (October 14) addressed criticism from Non-Constituent Member of Parliament (NCMP) Leong Mun Wai about the timing of the electricity tariff hike in Parliament.
In response to Mr. Leong’s comment that SP Group “spared no time in raising (tariff) prices at the earliest available opportunity”, Deputy Minister of Commerce and Industry Tan See Leng said: “I would like to clarify that SP it buys electricity at the maximum cost of producing it and delivering it to all consumers … what is purchased is passed on to gencos (generating companies) and then genco charges consumers the same price.
“And that is known as the entire regulated tariff. SP does not directly benefit from the rate increase. ”
Adding that the increase in electricity rates in the fourth quarter of this year was “mainly” due to rising fuel costs, Dr. Tan noted that the price of crude oil rose a “huge” 47% between July and September. of this year. year.
“So these increases in the cost of fuel are incurred by many of these power generation companies. The additional amount of electricity rates that SP may or may have collected from consumers in the fourth quarter of 2020 will be transferred to these power generation companies to offset increases in the cost of fuel, ”he continued.
READ: The electricity rate for homes will increase by 9.3% in October to December
SP Group announced on September 30 that the electricity rate for homes would increase from 19.6 cents to 21.43 cents per kWh, excluding goods and services tax (GST), or by 1.83 cents, for the quarter. which ends on December 31st.
Including GST, the fourth quarter rate is 22.93 cents per kWh. This means that the average monthly electric bill for families living in four-bedroom apartments will increase by S $ 7.01 before GST, SP Group said.
Despite the increase, the revised rate and that of the previous quarter are the lowest in the last three years, the company added.
In his clarification, Dr. Tan also noted that about 48 percent of households have already switched to an Open Electricity Market (OEM) retailer.
“So a large majority of this 48 percent are in fixed price plans, so they are not affected by the change in electricity rates,” he added.
Leong, who is from the Progress Singapore Party, had questioned the timing of multiple increases in various taxes and fees, including MediShield Life premiums, electricity rates, and Electronic Road Pricing (ERP) costs at six gateways in Singapore.
“This raises the question of when these tax and fee increases will occur when the support measures are phased out. Can’t these hikes be archived for later? “asked Mr. Leong
“Can’t SP Group absorb the rate increases with its past earnings? Can’t wait for the ERP increases? Can’t premium increases be deferred for a period of one to two years, since current insurance claims are still well below the premiums charged after all?
Adding that members of the public “must be baffled” by the “seemingly contradictory actions” of the Government, Mr. Leong said: “On the one hand, the Government is supposed to be contributing $ 100 billion to help with support measures. of COVID, but on the other hand, the implementation of tax and fee increases.
“Is the country so financially overburdened that we have to replenish our coffers with those hikes in such a hurry?”
In multiple follow-up responses to Dr. Tan’s clarification, Mr. Leong continued to question the timing of the electricity rate increases.
“We know that SP made a lot of profit when the wholesale electricity market collapsed from 2012 to 2018. And they didn’t actually pass the benefits on to the consumer at that time because consumers, the retail market was still in the works. to be liberalized, ”Mr. Leong said.
“So they made some gains, actually a lot of gains during those years. Why can’t they wait a little longer? ”
At the end of the exchange, Chee Hong Tat said that Leong made “an incorrect attribution” regarding the SP Group’s business model.
SP Group is the grid operator and provides the infrastructure to transmit and distribute the electricity produced by the generation companies, said Chee, who was previously Minister of State for Commerce and Industry.
The company’s returns are determined by the Energy Market Authority (EMA), which “will analyze which assets SP Group has put into operation” and will calculate the “fair rate of return” for those assets, he added.
“It is actually separate from the price of electricity on the wholesale market. That’s not what the SP Group earns, ”Chee said.
“That is what the gencos charge to produce electricity. The SP group is the entity that transmits the electrons, so they get a return from the network infrastructure they have implemented. ”
Responding to Mr. Leong’s questions about SP Group’s earnings, he added: “I think it’s important for us to be clear about the business model of the various entities before making comments like ‘Why are they making so much money and not Pass it? Why are they making so much profit and not passing some of it on to consumers? ‘”
“I think Mr. Leong needs to understand what the facts are so that we can have a meaningful discussion based on accurate facts.”
