NEW ELECTRICITY MARKET

Mr Andy Gan Lai Chiang asked the Minister for Trade and Industry whether the new electricity market to be launched later this year will attract the participation of a sufficient number of generation companies so as to avoid an oligopolistic market.

The Minister of State for Trade and Industry (Mr Raymond Lim Siang Keat) (for the Minister for Trade and Industry): Mr Speaker, Sir, we have four generation licensees selling into the pool at the moment. Two other generation licensees have indicated that they are planning to commission their plants sometime in 2005.

Despite the number of generation licensees, about 90% of the total installed capacity in our system is concentrated in three big generation companies. These companies will have market power for about 12 years.

These companies can use this market power to bid up pool prices. To prevent this, we will impose vesting contracts on the generation companies to curb their market power. Vesting contracts place an obligation on the generation companies to sell part of their capacity into the pool at a specified price. Generation companies will have to compete to sell the rest of the capacity that is not vested into the pool. With market power removed, the pool price is likely to be competitive.

We will also prohibit the large gencos from expanding beyond their current licensed capacity so long as vesting contracts are in place. This is to ensure that the concentration of capacity and market power in the generation companies is not perpetuated. New capacity to meet demand growth will have to be met by companies other than the big three generation companies.

Mr Andy Gan Lai Chiang (Marine Parade): Sir, if we say that liberalisation does not necessarily mean lower prices for consumers, it means competitive prices, as what the Minister of State has just mentioned. So electricity need not be cheaper. Presently, we have installed capacity of about 11,000 megawatts of power and total consumption is only 8,000 megawatts. Senoko Power, Power Seraya and Tuas Power all account for 79% of capacity. On the demand side, we are planning ---

Mr Speaker: Are you asking a question, Mr Gan?

Mr Andy Gan Lai Chiang: I am sorry, Sir. I just want to explain my question. We have more and more electricity being consumed by households. Are there any educational programmes to educate Singaporeans on the cost of electricity and the rate of usage, so that we can take more responsibilities on ourselves?

Mr Raymond Lim Siang Keat: Sir, the answer is yes, Power Supply has been conducting educational programmes to educate consumers on how best to use electricity.