NEW ELECTRICAL TARIFFS (Statement by the Minister for the Environment)

[Mr Speaker in the Chair]

Mr Lim Kim San: Mr Speaker, Sir, about a year ago, in reply to an Oral Question in this Chamber, I said:

`Singapore is still saddled with the antiquated system of wiring and metering separately for lighting and power'. I also informed the House that the Public Utilities Board had employed a firm of consultants to advise on the changeover to a single meter tariff system for implementation as soon as is conveniently possible. The Consultants have since submitted their report and their recommendations have also been carefully examined and studied.

The existing tariff structure is complicated and unwieldy. To give one example: a hotel operator today pays his electricity bill based on three different tariffs. The Board's concern has been to replace the existing outmoded set of tariffs by tariffs which are simple, easily understood, rational, fair and equitable. The new tariffs will promote electricity consumption without penalising the small consumers. The primary objective of introducing the new tariff is rationalisation and not the increase of revenue.

The Old Tariffs

The existing tariffs were formulated and developed when the maximum load arose from lighting in the evening. It was then desirable to keep the evening peak as low as possible. This was to keep down the number of generators which had to be kept running for only two or three hours a day to meet the evening peak demand. Hence, higher rates for lighting were charged since the major portion of the costs incurred by the Electricity Department were principally to meet the lighting load in the evening. The situation has now changed. There are now three peak loads. One at 10.00 a.m., one at 4.00 p.m. in the evening, and one at 7.00 p.m. It means that the cost of supplying electrical lighting and power to various consumer categories is nearly the same. So there is no point to meter lighting and power separately and charge differently.

The New Tariffs

It is now proposed to replace the existing twelve tariffs by six tariffs. The six new tariffs are: -

(i) The low tension domestic tariff for dwelling houses. There are 231,808 accounts under this category.

(ii) The low tension non-domestic tariff for shops, offices, small industries and small commercial buildings. There are 40,696 such accounts.

(iii) The high tension industrial tariff for large industrial concerns using above 100,000 kilowatt hours (kwh) per month. 115 accounts come under this category.

(iv) The high tension non-industrial tariff for large commercial buildings, hotels, statutory boards, the armed forces, etc. There are 98 such consumers.

(v) The entertainment tariff for the 54 existing theatres and amusement parks.

(vi) The public lighting tariff for public lighting and traffic lights.

Mr Speaker, Sir, for ease of reference. I have asked to be handed to Members a Table* (*See Annex, cols 131-42) showing details of the existing tariffs, interim tariffs and the new tariffs for the different categories of consumers.

[Copies of the Table handed in to the Clerk and distributed to hon. Members].

The Low Tension Domestic Tariff

At present, as Members are aware, there are two domestic lighting rates:

(a) a rate of 12 cents per kwh for a monthly consumption of less than and up to 20 kwh.

(b) a flat rate of 18 cents per kwh for a monthly consumption of more than 20 kwh.

The present domestic power consumption, i.e, power for cooking, heating and all domestic appliances, except fans, is charged at seven cents per kwh. Power for fans is charged the, lighting rate of 18 cents per kwh. This, I think, is the bone of contention of many Members, especially those who have the welfare of the low consumers at heart. The new tariff will do away with this anomaly of charging 18 cents per kwh for power for fans and a much lower rate for power for air-conditioning.

The new tariff will be a simple single rate for both lighting and power, and is as follows: Running Kwh Cents Charge per month per kwh 1st Block 1 - 20 12 2nd Block 21 - 750 8.25 3rd Block 750 and above 7.25

There will also be a minimum charge of $1.20 per month, instead of the present minimum charge of $1.50, separately for lighting and for power, making a total of $3.00. At present domestic consumers using lighting and power have to pay a minimum charge of $1.50 for metering of power and $1.50 for the metering of lighting, making a total of $3.00 per month. In place of this, we will now have a minimum charge of $1.20.

Financial Effects of New Tariffs

There are altogether 231,808 domestic consumers. They use only 21 per cent of total electrical energy. Under the new tariff they will collectively pay 3 per cent less, i.e, the PUB will lose 3 per cent of its present revenue from these domestic consumers. About 61 per cent, or 141,771 of these consumers to be exact, use 20 units or less of lighting. They now pay 12 cents per unit. Of these 141,771 consumers using 20 or less units per month of lighting, 33,707 will pay less under the new tariffs. They are the small consumers who use less than 30 units of electricity for both power and lighting. They have a rebate through the new minimum charge of $1.20 as against the present minimum charge of $3.00 per month (i.e., as I have explained just now, $1.50 minimum charge for lighting and $1.50 for power). The rest of the 141,771 consumers of domestic lighting and power, i.e, the remaining 108,064 consumers will pay slightly more. Now, those whose consumption of power is 5 to 10 times their consumption of lighting will pay more; not slightly more, but more. I have here a Table which will illustrate this: Additional Consumers payment as % age of original No. % age Additional charges payment (Average) 13,380 12 less than 50 cts 5 % 34,631 32 50 cts to 99 cts 12 % 33,243 31 $1.00 to $1.49 14 % 21,900 20 $1.50 to $2.49 17 % 4,276 4 $2.50 to $5.00 17 % 634 1 More than $5.00 17 % ------- --- 108,064 100 ======= === Removal of Illegal Tapping of Power

A single tariff for both lighting and power will remove the temptation of tapping power for lighting because rates for power are cheaper.

88,518 consumers use more than 20 units for lighting. They are now charged at 18 cents per unit. Of these, the majority, that is, about 76 per cent or 67,412 consumers, will pay less because their consumption is predominantly lighting. The remaining 21,106 consumers will pay more because their consumption is predominantly power.

Low tension non-domestic consumers

We come now to the low tension non-domestic consumers. At present, there are several tariffs for the low tension non-domestic consumers. They are known as Tariffs, A, C, D, and F, and consumers are charged combinations of these. It could be (A + D), or (A + D + C), or (C + D). I have already circulated a Table* (*See Annex, cols. 131-42) showing details of the existing tariffs, the interim tariffs and the new tariffs.

The new tariffs for the low tension non-domestic consumers are in your hands for easy reference, and they are as follows: Running Kwh Cents Charge per month per kwh 1st block 1- 50 16.00 2nd block 51- 1,000 9.00 3rd block 1,001-10,000 8.00 4th block 10,001-50,000 7.00 Follow-on All in excess of 6.00 rate 50,000 Minimum Charge: $1.60 per month

Financial Effects

Fifty-one per cent of the 40,696 consumers under this category will pay less as their proportion of lighting to power usage is high. The remaining 20,020 consumers will pay more as their proportion of lighting to power usage is low. Collectively, however, the consumers will pay 9 per cent less under the new tariffs. High Tension industrial Tariff

There are at present 35 industrial consumers taking supplies at high tension and 80 taking supplies at low tension. With the new high tension industrial tariff, these 80 consumers will save money by converting from low to high tension supplies. The new high tension industrial tariff will be as follows: - Running Kwh Cents Charge per month per kwh 1st Block 1- 100,000 4.00 2nd Block 100,001- 500,000 3.00 3rd Block 500,001- 3,500,000 2.25 4th Block 3,500,001-10,000,000 2.00 Follow-on All in excess of 1.75 rate 10,000,000 Maximum Demand Charge: $4.00 per kw per month. Minimum Charge: $650 per month. Collectively, under the new tariff, they will pay 0.7 per cent more.

There are separate charges for energy consumption (kwh) and maximum demand (kw). The maximum demand charge will encourage consumers to lower their maximum demand for short periods and spread their consumption over longer periods. Thus, they will instead help to lower the cost per unit for themselves. By lowering the maximum demand for short periods, they will also help the PUB to defer capital investment in new cables, switchgears and power generating plants. Let me give you an example. For instance, if a consumer like a factory requires 100,000 kwh a month, it could schedule its load for three shifts and require at most only 200 kw of demand. However, if it works on one shift, it will require up to 600 kw of demand increasing the need for more power generating plants, switchgears and other equipment.

There is also a declared demand charge. This charge is to discourage consumers from asking for a greater supply of electricity than they require. For instance, a consumer like an oil refinery or a steel mill requires only 25 megawatts. But, to be safe, they ask the PUB to provide facilities to supply them with 50 megawatts. This means spending unnecessary capital expenditure on provision of equipment such as switchgears, cables, substations, etc, for 50 megawatts instead of 25.

I have said earlier that it is expected that the 80 consumers who are receiving low tension supplies will convert to high tension supplies. This is because the low tension non-domestic tariff is higher than the high tension industrial tariff.

High Tension Non-industrial Tariff

The new tariff is as follows: - Running Kwh Cents Charge per month per kwh 1st Block 1- 100,000 5.00 2nd Block 100,001- 500,000 3.50 3rd Block 500,001- 3,500,000 3.00 Follow-on All in excess of 2.75 rate 3,500,000 Maximum Demand Charge: $4.50 per kw per month. Minimum Charge: $700.

There are 71 large non-industrial consumers receiving low tension supplies and 27 large non-industrial consumers receiving high tension supplies. The new tariff is also known as a two-part tariff with a maximum demand charge of $4.50 per kw per month. For similar reason as I have just stated, it is expected that the 71 consumers receiving low tension supplies will convert to high tension supplies. Collectively they will pay 6 per cent less.

Entertainment Tariff

Overall, there are 54 consumers and they will pay 4 per cent more than at present. Amusement parks and small theatres will pay less on the new tariff, while the large cinemas will pay 10 per cent more.

The new entertainment tariff is as follows : - Running Kwh Cents Charge per month per kwh 1st Block 1- 500 16.00 2nd Block 501- 50,000 10.00 3rd Block 50,001- 100,000 9.00 Follow-on All in excess of 7.00 rate 100,000 Minimum Charge: $80 per month. Public Lighting Tariff

Public Street Lighting and Traffic Signs, Traffic Signals and Bollards or beacons are not affected by the tariff changes. However, the two tariff categories applicable to them are consolidated into one (both rates being the same).

Fuel Oil Variation Clause

One important feature of the new tariff structure is the fuel oil variation clause. It will be applied uniformly to all the six new tariffs.

We are completely dependent upon imported fuel oil. It accounts for 35 per cent of our operating expenditure excluding capital cost. The fuel oil variation clause provides that the cost of every kilowatt hour shall be increased or decreased by 0.0033 cent for every 10-cent increase or decrease per ton in the cost of fuel oil. The increase will be calculated over a basic oil price of $40 per ton and the decrease under a basic oil price of $38 per ton.

Although prices of oil have been reasonably stable for many years, there was an increase of 30 per cent in fuel oil prices to the Board since early 1971. There is possibility of further increases as the OPEC countries charge higher royalties for their crude oil. For this reason, a fuel price adjustment in tariffs for all consumers is necessary. There will be no need for tariff changes with every change in oil prices.

Interim Tariffs

I must inform the House that, pending the introduction of the single meter tariffs, several interim tariffs have been implemented. Anticipating the introduction of single meter tariffs, the Board in 1969 advised hotels under construction to wire their premises with a single distribution system for lighting and power instead of having a separate wiring circuit for each. On completion, these hotels were charged the interim rates.

The former British bases and some Government and Statutory Board quarters for employees were metered on a single wiring system for lighting and power, and they were charged a bulk rate. Those occupying these premises ale now required to have separate meters for separate consumers. They also had been placed on the interim tariff.

Summary

To sum up, of the six new electricity tariffs, i.e, the Low Tension Domestic Tariff, Low Tension Non-Domestic Tariff and Entertainment Tariff are block rates metered on a single meter. The High Tension Industrial and High Tension Non-Industrial Tariffs, which are known as two-part tariffs, also have block rates for units consumed. However, in addition, they will contain a flat rate maximum demand charge. The Public Lighting Tariff is a flat rate tariff.

The new tariffs do not require separate lighting and power circuits. Thus, developers of all types of property will benefit from lower capital expenditure on electrical installations. Householders also in future will pay less for their internal wiring.

The block rates of all the new tariffs are promotional. The greater the consumption, the cheaper the rates become. With the new High Tension Tariffs, industrial and non-industrial users taking supplies at high voltage can reduce their bills by reducing their maximum demand.

The new High Tension Tariffs are lower than the new Low Tension Tariffs. But to convert to High Tension supplies, consumers will have to invest in capital equipment. Nevertheless, it is expected that large Low Tension consumers will switch to High Tension supplies, because they will recover their capital investment in one or two years through the lower tariffs.

All new tariffs carry a Fuel Oil Variation Clause to avoid messy revisions of the tariff rates as a result of increases in fuel oil prices by increased royalties imposed by the OPEC countries. Introduction of New Tariffs in December

The new tariffs will be introduced from the December billing cycle. Gazette notifications will be published accordingly. In a general adjustment and rationalisation of tariffs covering so many different rates and categories, it is impossible to introduce a new set of tariffs which will enable the many categories of consumers to pay exactly the same as under the old tariffs. It is inevitable that some will have to pay more and some slightly less.

I must emphasize, Mr Speaker, Sir, that this change to be introduced in December is not to increase the revenue of the PUB. In fact, as I have stated, the PUB's revenue estimates for 1973 show that receipts will be $1.8 million less under the new tariffs. The PUB will also have to spend about $1 million to convert the existing 240,000 dual meter accounts to single meter accounts. In the long term, however, there will be savings in capital expenditure as the recovered meters can be used for new consumers or to replace old meters. There will also be savings in administration costs because instead of reading two meters, only one meter need be read.

The new tariff structure is in line with latest practice. It is simple and clear-cut, rational and fair, because it does not discriminate between the use of electricity for lighting and power. The small consumers benefit. Those who consume less than or up to 30 kwh per month for both power and lighting will pay less under the new tariffs.

On the other hand, the greater the consumption, the lower the rates, therefore benefitting also the large consumers. This new tariff also removes the anomaly. As I have said earlier, of charging a higher rate of electricity for use of fans as against use of air-conditioning and other domestic power appliances. It saves all consumers expenditure by making unnecessary duplicate wiring circuits.

The majority of the public, including hon. Members, will benefit from the new tariffs. They are being introduced only after careful study and detailed examination over a period of nearly three years. Consumers on the whole will pay less. The PUB's revenue for electricity in 1973 under the new tariffs, as compared to the existing tariffs, will be less by $1.8 million.

Dr Tan Eng Liang (River Valley): Mr Speaker, Sir, on a point of clarification. I was just wondering why 1st December is the date for the implementation of the new tariff. I was thinking that perhaps 1st January. 1973, or the period January 1973, would be a better date to implement. The second point is whether, in the review of the old tariff, through the interim tariff, and on to the new tariff which took three years of study, consumers were represented or consulted in the process.

Mr Yeo Choo Kok (Delta): Sir, I would like to take this opportunity to enquire from the Minister into the reason for the fairly substantial increase in the PUB bills of many consumers in recent months.

Dr Ong Leong Boon (Kim Seng): Sir, may I ask the Minister a couple of questions? (1) He has not actually given a breakdown of consumption of the social-class. Will the introduction of these new rates affect the lower income group, particularly those who are poor and living in the $20-a-month Housing and Development Board cats? (2) I notice that the Minister has given us figures which, to my mind, are too many for us to study at this hour. Anyway, he did say that those who consume up to 33 kwh per month and those who largely consume power will benefit from these new rates. Who then will be the ones who have to pay more?

Mr Teong Eng Siong (Sembawang): (In Mandarin): Mr Speaker, Sir, I would like to ask the Minister three questions. The Statement given by the Minister contains many figures and terms. Many Members of Parliament, and I believe some Ministers too, are confused by such figures and terms. I would like to know whether the small consumers will pay less after the introduction of these new tariffs. If they have to pay more, then it will not be beneficial to them. It will be a greater burden to them. Secondly, since our generators produce enough supply of electricity, we should encourage consumers to use more electricity so that more revenue can be collected by the PUB. In this way, with more revenue, I believe it is not necessary for the PUB to introduce these new consolidated tariffs. The third question is this. With this new tariff, I would like to know whether the PUB will also introduce a uniform tariff for water.

Mr Ong Teng Cheong (Kim Keat): Mr Speaker, Sir, I would like to ask The Minister one very simple point of clarification. He mentioned that with the introduction of the new tariff, the revenue of the PUB will be less by approximately $1.8 million, and that it will cost the PUB approximately over a million dollars to switch over to the single meter system. The Minister mentioned that in the new system there would be savings in the administrative cost, but he did not indicate the figures. I was just wondering how much savings there will be.

Mr P. Govindaswamy (Anson): Mr Speaker, Sir, I would like to ask a very simple question. It is about meter readers. Whenever meter readers take a reading of the meters, the consumption seems to increase every month. Will the Minister do something about that? While he is equalising the rates on the one hand, he is increasing the meter readings on the other. Will the Minister look into this matter first, after introducing the new tariff?

Mr Lim Kim San: Mr Speaker, Sir, first, to take the Member for Sembawang. I do not know whether he was paying very close attention to my Statement or not. I have already stated that the new tariff is a promotional tariff. Therefore, if you use more, the rates will be less. Thus, it encourages people to use more. So it is promotional, that is why there is a new tariff. But he says there is no need for a new tariff.

Kwh is a unit of measurement of the amount of electricity consumed, just as it is so many gallons of water, it is so many kilowatt hours of electricity; that is the simple explanation.

I have also stated that it is not possible in a review of this nature to see that everybody pays the same rate. Our main concern is to see that the small consumers or those people who live, as the hon. Member said, in $20-a-month Housing Board flats, should not be asked to pay more. I have said that those who use a combined total of 30 kwh or less of electricity per month for both power and lighting will pay less. There is the question that if some people pay less, who pays more? Let me tell him who pays more. I, for one, will be paying more because of air conditioning, for which I use more power than lighting. As I have explained, the cost of supplying electricity, either for power or lighting, is about the same. So the charges should be the same. At present, the rate for lighting is higher. We are paying 18 cents per unit for lighting, and only 7 cents per unit for power. It means that lighting has been subsidising power. So now, those people who use power are now asked to pay their due share and those people who have been paying a higher rate for lighting, well, they do not have to subsidise those who use power. Therefore, in toto, if you use a very large proportion of power, compared to lighting, you will now have to pay more, and this is as it should be. That is why I have said that the new tariff is fair, equitable and just.

As regards the other question of how much savings there will be in administrative costs, I hope there will be some savings. But it is too early to anticipate the amount. There are priorities. We do not spend our time calculating something which we are not very sure of. Probably, by the time when we sit for our 1973-74 Estimates, and if the question is raised again, I may be able to give an answer. Otherwise, it is just futile because, as you have heard from my colleague, the Finance Minister, yesterday, there will be a review of salaries for those whose salaries have stagnated. Therefore, all these have to be taken into consideration before we make the calculations.

As to why the new rate should take effect on 1st December and not 1st January, 1973, we have been studying this question for three years, and I think December is a good time because people will be celebrating Christmas and the New Year, and they can turn on more lights as lighting will then cost between 8 1/4 cents and 7 1/4 cents, instead of 18 cents. I think it is a good month to start the new rates.

Mr P. Govindaswamy: Mr Speaker, Sir, the hon. Minister did not reply to my question about meter reading.

Mr Lim Kim San: Mr Speaker, this is a perennial complaint. I think that if you use more, and when the meter reader comes and takes the readings, you complain.

Mr P. Govindaswamy: No I am sorry, Mr Speaker, Sir, I think the meter reader does not take down the accurate figures, you know. So he will have to check up. I have received so many complaints about that. For example, for this month the bill is $20, and for the next month $30; and the following month it increases to $40. I do not know how or in what way they read the meter. He must check on this.

Mr Lim Kim San: Sir, we are on new tariffs. On this question of wrong reading of meters, as I have said, we have a quarter million domestic consumers altogether. If there are only one or two complaints, it is largely because probably consumers do not realise that they have used more. However, where there is a mistake or where the meter is out of order, we always investigate the complaint. When a consumer's bill goes up every month, then something may be wrong. I, too, have received a complaint from a consumer saying that his bill for the last month has more than doubled. I asked, "What did you do during that month?" He said, "We had a marriage in the house." So there you are. Things like this happen. The consumer is not consciously aware that there are occasions when he has to use more. But where there are legitimate complaints, we always look into them.

Mr Baptist rose -

Mr Speaker: Are you asking a supplementary question?

Mr Ivan Baptist (Potong Pasir): Just a point of clarification, Sir, Mr Speaker, Sir, at the present moment there are two meters, one for lighting and the other for power. So there will be a necessity to remove one of the meters so that this new tariff can be implemented. I wonder whether the PUB will refund to the consumer the cost of the meter.

Mr Lim Kim San: Mr Speaker, Sir, the meter belongs to the PUB.

Mr Ivan Baptist: I believe that when a flat or a house is constructed, the cost of the meter is charged to the householder when he moves in and he has to pay for it.

Mr Lim Kim San: Mr Speaker, Sir, that is installation charges, in the same way that you pay installation charges for a telephone.