POWER FAILURE IN SINGAPORE (Preventive measures)

Column No : 3157

POWER FAILURE IN SINGAPORE:

(Preventive measures): 16.

Mr Yeo Guat Kwang asked the Minister for Trade and Industry (a) whether precautions have been taken to prevent power failure in Singapore, as experienced in recent months in the United States, London and Malaysia; and (b) how will the opening up of the power generation market to more than one supplier benefit consumers.

The Minister of State for Trade and Industry (Dr Vivian Balakrishnan) (for the Minister for Trade and Industry): Mr Speaker, Sir, power failures can occur for a variety of reasons, including accidents, poor design, improper maintenance, inadequate investments in back up capacity and inappropriate regulatory systems.

Initial reports from the US indicate that they may not have invested sufficiently in their systems. In the US, there was a perception that the regulators had not finalised formulating the rules for the industry. This made investments in infrastructure more risky. Consequently, the grid companies in US were less willing to invest in new infrastructure. As a result, there was inadequate reserve capacity, so a problem that would normally have been contained led instead to a massive failure in the system.

The power failure in the UK was attributed to the installation of an incorrect protection relay. This is a shoebox-sized item of safety equipment designed to act like a normal domestic fuse. It disconnected a circuit when it should not have, thus causing the power failure. This is an example of human error.

In the case of the power failure in north Malaysia, it was reported that problems in the main power delivery system were responsible. A standby power line had tripped without warning while maintenance work was being carried out on a major transmission circuit.

Recently, Italy also joined the ranks of countries that had suffered a major blackout. Reports indicate that the Italians were buying electricity from France instead of building up their own capacity. Without adequate capacity or diversity of supply, the Italian system became vulnerable and collapsed when the power lines transmitting electricity from France to Italy failed.

Mr Speaker, Sir, system security is a top priority for Singapore. The Energy Market Authority oversees system planning and development to ensure that we have a well-designed, reliable system with adequate capacity for our needs. This regulatory framework must promote adequate and on-going investment in up-to-date infrastructure and equipment by all the stakeholders in the industry. Adequate reserves must be put in place to back up any single failure that leads to a sudden loss of capacity.

We also have precautions against disruptions in our fuel supply. For example, all gas-fired power plants are also capable of using diesel as an alternative fuel source, and all generation companies must stockpile diesel.

Other precautions include:

(a) a system to monitor the condition of critical cables in our electricity grid;

(b) carrying out regular exercises to test the combined readiness of the entire electricity system and the organisations that operate the system in order to respond to emergencies and to restore power supply promptly; and

(c) carrying out regular audits to confirm that the security of the system is maintained.

Sir, I must caution the House, however, that there is a need to balance these additional investments for system security against increased costs to consumers. In addition, I would also like to stress that while we can minimise the risk of failure, it is impossible to totally eliminate the risk even with the most modern systems in the world.

I will move on to the second part of the question which is on liberalisation of the electricity market. We have opened up both the generation and retail sectors to competition, and this has benefited consumers. Firstly, competition has incentivised the generation companies to actively pursue efficiency gains. The generation companies have installed gas-fired plants to replace the less efficient oil-fired steam plants. Within three years of its introduction into Singapore, natural gas now contributes to about 60% of the total electricity generated in Singapore.

This drive towards efficiency will, over the long term, exert a downward pressure on electricity prices. It has so far resulted in a 9.5% reduction in electricity prices, discounting for movements in oil prices. This saving has already been passed on to all consumers.

Retail competition has also benefited consumers. About 250 large electricity consumers with annual electricity consumption of 2 MW and above have become contestable since July 2001. About 97% of these consumers have already switched to buying electricity from a retailer of their choice. These consumers have reaped discounts of up to 20% to SP Services' regulated tariffs.

The next phase involving 10,000 large industrial and commercial consumers is currently being implemented. About 75% of total electricity sales in Singapore will be open to competition when this exercise is completed around mid 2004.

3.00 pm

Mr Speaker: Order. End of Question time.

_[Pursuant to Standing Order No. 21(3), Written Answers to Question Nos. 17, 20-21 and 32 on the Order Paper are reproduced in the Appendix * . Questions Nos. 18, 19, 22-31 have been postponed to the next available sitting of Parliament.] _

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