‘We are here to stay,’ says electricity retailer PacificLight after recent industry shake-up

One reason? The company has its own S$1.2 billion power plant on Jurong Island.

| Candice Cai | Sponsored | January 04, 2022, 05:55 PM

PacificLight is one of nine electricity retailers left in Singapore, following a multitude of changes in the industry recently.

But one person who has seen its ups and downs is Geraldine Tan, General Manager at PacificLight.

Front row seat

Tan has been in the front row seat in the power industry for the past 22 years.

For one, she has witnessed the fruition of the Open Electricity Market (OEM) after two decades of talks.

“It took almost 20 years to see that through,” she said, calling it “a challenging and rewarding journey.”

And even though tough people last, tough times too, it appears.

Should we be worried about the recent price surge?

One thing that has captured consumers’ attention as of late is the seemingly inopportune increase in electricity prices amidst a global pandemic.

But there is a method to the madness and this random surge might not have been so unpredictable.

Tan shared that the mechanics of electricity pricing boils down to one simple economic principle — the law of demand and supply.

How electricity is bought and sold

Small businesses in Singapore that utilise less than 4 MWh per month and residential consumers in Singapore can opt to buy their electricity from the wholesale electricity market via the SP Group, or via a contract from retailers in the Open Electricity Market (OEM), which was launched in 2018.

As for the larger businesses, most of them have been buying at fixed-price contracts with the gentailers for many years.

A gentailer is a retailer backed by its own power generator.

When the electricity market started to be liberalised in 2001, there were only a handful of gentailers back then.

Based on the buying patterns of most businesses, many prefer to have their electricity costs fixed for a period of time, such as for one to two years.

Likewise for the majority of residential consumers.

However, those who choose to buy directly from the wholesale market will pay for electricity at prices that vary every 30 minutes.

“The wholesale market tends to be more sensitive to price fluctuations due to the immediate demand and supply measurement every half an hour,” shared Tan.

The reasons for wholesale price fluctuations can range from unexpected demand surges, low gas pressure, higher costs of fuel supplies, power plant outages, and other factors.

No plans based on wholesale prices at PacificLight

Due to the high price volatility in the wholesale market, which is difficult for most consumers to ascertain the risks that they are facing, PacificLight does not offer any plan on wholesale prices to its residential customers.

The “closest” plan available is the Easy Peasy plan, which has no fixed contract term.

Customers on this plan do not get locked in for any minimum contract term and they also do not get shocks.

This has happened before to customers who saw their SP bill increase by more than double due to the increase in wholesale prices.

“I think we all understand the analogy that when you try to buy something at the last minute, when demand is high and supply is short, the price goes up," Tan said.

"So we do not encourage anybody to do last-minute purchases of electricity. It is better to pace your purchase annually or every two years. Most people do not monitor electricity prices on a half-hourly basis and decide whether you should run or turn off your electrical appliances."

Will PacificLight quit the market too?

With the recent exit of three independent electricity retailers from the OEM in quick succession, consumers may be jittery that they too, may one day be left in the lurch.

To allay fears, consumers should know more about the industry and how the electricity market works, what they should look out for, and why PacificLight customers have nothing to worry about.

Reason #1: PacificLight is a gentailer

To introduce how electricity retailers in the OEM buy and sell electricity to end-consumers, it helps to know that there are “gentailers” — a retailer backed by its own power generator — as well as independent retailers that are not involved in power generation.

As independent retailers do not generate electricity, they need to procure electricity from the wholesale market and are thus exposed to the half-hourly price changes in the wholesale market.

They will also need to hedge their costs when they contract with consumers.

Without a power-generating asset and without hedging in the electricity futures market, independent retailers’ profits or losses will rely solely on buying at the wholesale market prices and reselling to customers.

They may then run into difficulty if the independent retailers do not have sufficient cash flow and/or are under-hedged against rising electricity prices.

As a result, they may find that they are unable to sustain their operations.

“As a power generator, PacificLight is able to shelter itself from fluctuating prices,” said Tan.

One reason it is able to do so is due to the operation of PacificLight’s own power plant on Jurong Island.

The power plant is a S$1.2 billion investment that is capable of powering more than one million households in Singapore.

“We are 100 per cent backed by our generation asset,” said Tan of the 800-megawatt plant, which has been operating since 2013 and is one of six key power generators in Singapore.

“We also spent millions of dollars since the plant was built to upgrade the efficiency of our plant  and reduce our carbon emissions, so we are definitely here to stay,” she added.

PacificLight currently provides 10 per cent of Singapore’s annual electricity demand.

Reason #2: Not affected by energy commodity prices

Singapore is almost wholly reliant (about 95 per cent) on imported liquified natural gas (LNG) or piped natural gas (PNG) to generate electricity.

The other 5 per cent comes from coal, petroleum products and other sources, such as solar energy.

Inside a power plant, these fuel resources are converted into electricity before being sent out to Singapore’s main power grid operated by energy utility firm, SP Group.

PacificLight was the first power generation company in Singapore to use 100 per cent LNG imported from overseas.

Tan shared that PacificLight has not been affected by the global surge in energy commodity prices, including natural gas prices, due to its long-term contracts with the liquified natural gas aggregator.

A gas aggregator’s job is to establish deals with different countries and to ship the LNG to buyers like PacificLight.

Reason #3: Always having contingency plans

“Most people don’t realise that in order to give consumers that constant and stable supply of electricity, it requires large investments to build, operate and maintain power plants. It also requires effort and support from many people within the industry,” said Tan.

This includes purchasing the gas, “be it via long-term contract or at the spot (immediate),” shipping it, converting and supplying it to the power stations, before it is converted into electricity.

“The entire process is very complicated, and not fully understood by most people.”

“They may not know or appreciate too, that power plants don’t just have to buy natural gas, but we also have to keep a large volume of sufficient backup fuel for contingency purposes.”

“Keeping backup fuel supply is not cheap as well. All these add up in the cost of generation,” said Tan.

There is also a “supply cushion,” where in order to maintain a steady supply of electricity to end-users, generators have to provide electricity that is over and beyond the required wattage.

Managing costs for all customers

How PacificLight value-adds to consumers, especially for industrial and commercial customers, is in helping them to manage their costs.

Tan said: “Our relationship with our commercial and industrial customers is a long-term partnership. Given that electricity can be a large proportion of their costs, we always look to understand their needs first before advising and finding the right price plans and solutions for them.”

Some of PacificLight’s commercial clients include MNCs, government agencies, town councils and integrated resorts.

And even though the fixed rate for electricity is currently high, Tan said gentailers like PacificLight would usually still provide a promotional rebate for those who are switching to or renewing their contracts with PacificLight.

The Easy Peasy plan, for example, is catered to those who do not want to be confined to any contract duration and may want to be able to make a decision to either move out of their house or switch to another retailer.

Promoting sustainability

To support sustainability, PacificLight also offers the Sunny Side Up plan that provides users with renewable energy certificates from solar farms overseas.

There are also plans to harness renewable energy, with PacificLight spearheading efforts.

In October 2021, PacificLight Power signed a joint development agreement with a consortium comprising independent power producer Medco Power Indonesia and investment company Gallant Venture to work on a pilot offshore solar import project.

The goal? To provide green energy to consumers, in line with the Singapore Green Plan 2030.

In addition, PacificLight’s power plant is the only one in Singapore that is registered with the United Nations Framework Convention on Climate Change (UNFCCC) on its Clean Development Mechanism, which awards projects with emission-reduction credits.

These days, PacificLight is also helping business consumers with solar panel installations on their roof buildings.

Looking at the bigger picture

Barring localised power trips, Singaporeans don’t have to worry about finding themselves without electricity for an extended period of time.

“Singapore always prides itself as being one of the cities or countries that has the most reliable supply of electricity, and our electricity grid system is ranked top among major cities,” Tan said.

Singapore had an average interruption time of less than one minute per customer a year, which is a lot less voltage dips experienced in major cities such as Tokyo, London, Hong Kong, and New York.

Of her experience in the industry, Tan shared: “The power generation industry is very technical and ever-changing. The next few years will see the energy landscape change even more with increased use of renewable energy and greater use of technology to drive efficiency."

“But it’s an industry that I enjoy because there are always challenges to overcome. Even at this stage in my career, I am still learning new things because the industry keeps changing, and so do the rules."

“I don’t have an engineering background but I’m interested to learn and to see how a power plant operates so that I can explain it to our customers.”

PacificLight is having a Chinese New Year promotion with $88 bill rebates for 24-month electricity plans. Huat ah!

Grab up to $118 in bill rebates with HSBC Credit Cards by signing up and setting recurring bill payment arrangements. Valid for both new and existing PacificLight customers. T&Cs apply.

This article is sponsored by PacificLight.