DEREGULATION OF ELECTRICITY MARKET

Mr Ong Kian Min asked the Minister for Trade and Industry if he will brief the House on the progress in deregulating the electricity market, and whether, in the interim, tariffs for non-peak periods will be reduced, thereby allowing manufacturers and large industry users to alter their consumption pattern to take advantage of non-peak excess generation capacity to reduce their electricity bills.

Mr Lee Yock Suan: The electricity and gas departments of PUB were corporatised on 1st October 1995. A Pooling and Settlement System, which facilitates competition in the generation and supply sectors, has commenced operation on 1st April 1998. Power Senoko Ltd, Power Seraya Ltd, the Ministry of the Environment (ENV), which generates electricity at its refuse incineration plants, and Power Supply Ltd have begun trading electricity at the Pool. Tuas Power Ltd will also begin trading in the Singapore Electricity Pool when its first power plant commences operation sometime in 1999. Another company, SEMPEC Utilities and Terminal (SUT) Cogen Pte Ltd has been given in-principle approval to construct a power plant on Pulau Sakra.

To encourage private sector participation in the electricity industry, the Government has initiated the divestment of Tuas Power Ltd. The tender for prequalification of interested parties was called on 23rd September 1998. Further competition in the generation sector will come from additional generation capacity from independent power producers (IPPs) and co-generators in future.

Currently, large consumers whose maximum demand exceeds 5MW may negotiate and enter into special supply arrangements with Power Supply Ltd on a commercial basis. Such consumers may also choose their electricity suppliers when new electricity suppliers are licensed. The supply sector will be further liberalised at a later stage to allow private electricity suppliers to sell electricity to consumers whose demand is less than 5MW.

The peak and off-peak tariffs for High Tension consumers were introduced on 1st August 1986 to encourage large industry users to shift their demand to the off-peak period (11 pm to 7 am). Large industry users can adjust their consumption pattern to take advantage of the off-peak rate which is 12% lower than the peak rate. In particular, consumers who operate three shifts have benefited from the lower off-peak rate.

With the operation of the Pooling and Settlement System, the setting of electricity tariffs will take into account the cost of generation at different times of the day as indicated by pool prices. The use-of-system charge, which is currently a flat rate, will also be unbundled on 1st January 1999 into Low Tension, High Tension and Extra High Tension categories to reflect the cost of transmitting and distributing electricity at different voltages. The use-of-system charges for High Tension and Extra High Tension categories will be further unbundled into peak and off-peak categories. As such, electricity tariffs, including peak and off-peak tariffs, can be expected to be more cost-reflective.