DEPOSITS COLLECTED AND TRANSFERRED TO SP SERVICES

Mr Chiam See Tong asked the Minister for Trade and Industry (a) what is the total amount of deposits collected to-date from domestic consumers and transferred to SP Services by its predecessor (PUB); (b) how much interest has been earned on the said deposits; and (c) whether SP Services will offset the interest earned by each consumer against his/her monthly utilities charges.

The Minister of State for Trade and Industry (Mr Raymond Lim Siang Keat) (for the Minister for Trade and Industry): Mr Speaker, Sir, as of end June 2003, the total deposit collected from domestic consumers was $148 million.

For each consumer, SP Services buys electricity for immediate delivery while the consumer pays for the electricity only 1.5 months later. By law, SP Services is allowed to charge a deposit, up to 1.5 months of the consumer's monthly bill, to finance SP Services' purchase of electricity for the consumer's use. Therefore, SP Services does not earn interest on these deposits.

The deposit also acts as a safeguard to minimise the risk against default payments. Without the safeguard, default payments will end up being recovered through higher electricity tariffs, which will be borne by all consumers.

Mr Chiam See Tong: Sir, is it correct for me to say that SP Services does not deposit these deposits in fixed deposit accounts in the banks?

Mr Raymond Lim Siang Keat: I do not know the details of SP Services' practice with regard to the deposits. I think the intent of his Question was how much they have collected, which is $148 million. As I have said, this basically gets offset because it purchases the electricity without the consumers paying for it. The consumers get a credit of 45 days. For his information, only 75% of consumers pay on time and 25% actually pay after the 45 days. Right now, as at June 2003, the amount of arrears with domestic consumers is about $246 million. In other words, we have $246 million that is owing to SP Services and they have collected $148 million. So they do not make money on these deposits.

Mr Chiam See Tong: Is the Minister of State saying that the deposits collected are, as he has said, in fact, used by SP Services for the purchase of oil or fuel? If that is the case, then it is a misuse of deposits. As I understand it, in law, a deposit is a deposit and it has to be returned when it is due. You cannot use the deposits for your business purposes. No doubt SP Services can collect up to 1.5 months of deposits. But is it also, in law, that they can make use of these deposits for their business purposes?

Mr Raymond Lim Siang Keat: Let me explain it again to Mr Chiam. SP Services buys upfront the electricity that the consumers use. So, they are out of pocket. This is one part of the transaction. The other part is they have the deposits which they collect from the consumers. It gets offset. They do not make any money out of this. As I have said, there are $246 million in arrears and $148 million which they have collected.

Mr Chiam See Tong: My question is: do they have a right to make use of the consumers' deposits for their own business purposes? Because, as I understand it, a deposit is just a deposit to offset any overuse of electricity by the consumers. Now the Minister of State is saying that SP Services takes the deposit and uses it. That means they are using the consumers' money for their own business purposes, which is not right in law.

Mr Raymond Lim Siang Keat: I am actually puzzled with Mr Chiam's question. When you put money into an account, as you know, money is basically fungible ---

Mr Chiam See Tong: This is not SP Services' money. This is a deposit.

Mr Raymond Lim Siang Keat: Yes, if you close the account, you get back the deposit. That is the issue.

Dr Wang Kai Yuen (Bukit Timah): Sir, I would like to ask the Minister of State whether any other public utilities company in the world pays interests on their deposits.

Mr Raymond Lim Siang Keat: Not that I know of.

Mr Low Thia Khiang (Hougang): The Minister of State said just now that the deposits would be offset against the arrears. But how do you actually use the deposits to offset the arrears. Because arrears are arrears. Money collected as deposit is deposit. So I do not understand whether, in accounting term, we can say we have no deposit balance because we have so much arrears. Can he explain that?

Mr Raymond Lim Siang Keat: The issue here is whether or not they earn interest. I think that is the intent of the question. Did they earn interest? If they earn interest, can we use this interest to offset electricity tariffs? What I was saying is that when we net it all off, there is no interest that is earned - a 45-day deposit against a 45-day credit. The separate issue that Mr Chiam brought up is how can we use the security deposit. The real issue is that when you want the security deposit back, when you close the account, do you get it back? The answer is yes.