ELECTRICITY TARIFFS

ELECTRICITY TARIFFS

29.

Mr Low Thia Khiang asked the Minister for Trade and Industry (a) what is the reason for the continuous upward adjustment of the electricity tariff since April this year; and (b) whether he is aware that the escalating electricity charges have become a financial burden to many households.

**

**

30.

Mr Steve Chia Kiah Hong asked the Minister for Trade and Industry what is the basis for allowing an increase in the electricity tariffs when Singapore is using more natural gas than diesel to generate electricity.

Dr Vivian Balakrishnan: I will answer MP Mr Low Thia Khiang and NMP Mr Steve Chia's questions on electricity tariffs together.

Approximately 60% of our electricity supply is generated from gas plants, with the remaining 40% from oil-fired steam plants*. The power plants do not usually run on diesel fuel. Diesel is only used as an emergency back-up. Fuel costs account for about half of the cost of generating electricity. Consequently, changes in fuel costs will affect electricity tariffs because we do not subsidise electricity.

Column: 269

The price of our natural gas is pegged to fuel oil prices under long term contracts. This follows international practice in this part of the world. Hence, when oil prices increase, gas prices also increase and electricity tariffs will have to increase.

Over the last one year, households have experienced both increases and decreases in tariff rates. Rates today are 1.3% lower compared to the same quarter (ie, July-September 2003) last year, even though oil prices have gone up by 5% in July 2004 compared with July 2003. This is a result of the electricity market becoming more competitive.

I have attached a chart (Annex A**) showing movements in electricity tariffs for households. Tariffs came down by 3.4% for October-December 2003. Rates then increased by 1.1% for January-March 2004, by 2.3% for April-June 2004, and by 3.5% for the current period of July-September 2004. Overall, tariffs will move in line with changes in fuel costs.

Most households are able to pay their bills. Data from SP Services show that the billing arrears rate has declined from 1.2% in May 2003 to 0.9% in May 2004 and stabilised at this new level.

Nevertheless, some households may face financial difficulties. In such circumstances, SP Services will assist them with suitable instalment plans to ease their cashflow. Electricity supply is disconnected as a last resort only if the households refuse to settle their arrears or commit to an instalment plan.

Any household facing financial difficulties may seek assistance from the CDCs and CCCs. CDCs administer MCDS schemes such as the Rent and Utilities Assistance Scheme, and the Interim Financial Assistance Scheme. CCCs also offer localised schemes to assist families who need help with their utilities bills.

• 60% of installed generation capacity comes from oil-fired steam plants and 40% comes from gas plants. However, because gas plants are more competitive, 60% of our electricity supply (as distinct from installed capacity) is generated from gas and 40% from oil .

** Cols. 291-2

Column: 269