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Singapore's energy market has been bedevilled by disruptions and price volatility, but the authorities are working to implement safeguards to ensure affordable energy for the public, said Second Minister for Trade and Industry Tan See Leng in Parliament on Nov. 8.

Tan, who is also Manpower Minister, answered questions from various Members of Parliament (MPs) on Singapore's Open Energy Market (OEM), regarding the stability of energy and fuel supply, as well as whether Singaporean consumers were sufficiently protected.

Energy market at critical juncture

Tan said that Singapore's energy market is now at a critical juncture.

The competitive energy market had been in place since the 1990s and served Singapore well, incentivising generation companies, or gencos, to introduce more efficient technologies and offering more choice for consumers.

But Tan also laid out three ways that the energy landscape had changed, as well as new sources of supply risk and volatility.

First, the time lag between when gencos realised they required heightened capacity and when that capacity could be brought online, which could take up to five years. Such time lags could lead to shortages, protracted increased energy prices, and even blackouts.

Disruptions in global natural gas supply leads to price volatility

Second was the increased supply risk and price volatility arising from disruptions in the global natural gas supply.

Tan said that Singapore replied on imported natural gas for almost all its electricity production, and thus global supply and demand shocks would spill over into domestic electricity markets.

This was what happened in 2021 when fuel prices surged, due to gencos trying to protect themselves against uncertainty in the price of gas.

Third was the volatility due to failures of electricity retailers.

In the fourth quarter of 2021, six electricity retailers in Singapore exited the market. While consumers did not experience supply issues, they faced price surges while searching for alternative contracts.

As a result the Energy Market Authority (EMA) has put in place emergency measures since the fourth quarter of 2021, which has helped stabilise the market.

Safeguards and guardrails

"However, Members of the House, this is unlikely to be the last energy crunch that we will face and we will need to be even more prepared for more volatile global energy markets moving forward," Tan said.

To prepare for a more volatile global energy market, MTI will introduce safeguards to strengthen Singapore's energy market in three areas: power generation, gas supply, and electricity retail markets.

First, EMA will introduce a centralised approach, to facilitate investments in new electricity generation through a competitive tender.

Such a tender would be conducted in advance of when new capacity was needed, and would take into account the lead time needed for construction and development. If there is insufficient private sector interest, EMA will step in to build the required capacity.

Secondly, Singapore will institutionalise some of the measures introduced in 2021, as a permanent features of Singapore's energy market to safeguard energy security, and enhance the resilience of natural gas supply.

Gencos will be required to ensure sufficient fuel for power generation, and have a standby fuel facility to guard against gas supply disruptions.

Thirdly, regulatory requirements on electricity retailers would be enhanced, by raising the qualifying criteria in regards to financial strength and sustainable business propositions. This was to ensure only credible industry participants would be allowed to sell electricity to consumers.

Retailers cannot unilaterally terminate contracts in most cases

Tan also responded to questions about whether the EMA would allow retailers from prematurely terminating consumer contracts, Tan said this was already covered under the current Code of Conduct.

Retailers cannot unilaterally terminate contracts, unless they were exiting the sector or if the consumer had breached the contract.

Tan said that overall, MTI and EMA will work to implement the measures in a calibrated way that balances the cost burden and assured affordable electricity.

He added that the value of a stable and resilient energy system cannot be overstated as it is fundamental to a growing economy.

Consultation and Consumer education

In a supplementary question, He Ting Ru of the Workers' Party asked if EMA planned to improve consumer education in regards to the electricity retail market, in order to familiarise the public about their energy retail choices.

This was due to feedback she had received saying that consumers found the various options confusing, especially in regards to contractor options, lock in periods, and differing rates.

"We will certainly improve, we will certainly add on in terms of strengthening consumer education," Tan said in reply.

He referred to EMA's code of conduct, which required retailers to adhere to fair contracting practises, such as providing consumer advisories and factsheets with summaries of the key terms of their plans, which consumers must acknowledge before signing agreements.

Suggestions are welcome

Acknowledging that there were already consumer protections in place, He Ting Ru asked if the protections were effective, or it was just "one of the checkboxes that gets ticked" by the consumer in the process of signing up to a retailer.

Tan referred to what he said in his previous reply, that EMA would be conducting a public consultation on specific proposals to enhance regulatory measures and requirements for electricity retailers. This was to work collectively to see how address the increased volatility in the energy market.

"We welcome suggestions from members of this House, the industry and members of the public on our enhancements," Tan said.

Tan also said suggestions from MPs, the industry and the public would be welcome, and added in his reply to He Ting Ru that her concerns about consumer education would be part of that consultation.

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Top image via Ministry of Communication and Information /YouTube