HIGH OIL PRICES (Impact on costs of utilities and public transport)

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HIGH OIL PRICES:

(Impact on costs of utilities and public transport): 1.

Mr Gan Kim Yong asked the Minister for Trade and Industry (a) what impact will the high oil prices have on the costs of utilities and public transport in Singapore; and (b) whether these costs will be passed on to the consumers, and if so, to what extent.

The Senior Minister of State for Trade and Industry (Dr Vivian Balakrishnan) (for the Minister for Trade and Industry): Mr Speaker,fuel costs constitute about 10% of public transport operating costs. As such, an increase in oil prices will raise the operating costs of the public transport operators.

As to whether this will translate into fare increases, it will only be known at the next fare review exercise which is scheduled forMay 2005. As of now, the Public Transport Council (PTC) has not yet received any formal indication or application from the public transport operators seeking a fare increase next year. If an application is received, PTC will

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take into account the conditions facingthe operators and commuters before making a decision.

Fuel cost makes up about 50% of the cost of electricity. Our fuel sources for power generation are oil and gas, and gas prices in Singapore are indexed to oil prices. An increase in oil prices will thus lead to higher electricity costs. The electricity tariff is reviewed quarterly and reset if necessary, to allow a full pass through of changes in the costs of electricity, including increases in oil prices.

To mitigate the increase in electricity bills, we would like to urge consumers to adopt good energy conservation practices, such as using energy-efficient electrical appliances like fluorescent tubes, choosing the correct capacity of air-conditioner for their needs, and so on.

Mr Gan Kim Yong (Holland-Bukit Panjang): Mr Speaker, Sir, I would like to ask the Minister, in view of the unemployment rate still on the high side and also there are quite a number of residents who are unable to pay their utilities bills, whether he would consider deferring some of the increases in the utilities fees in time to come when they are due for review.

Dr Vivian Balakrishnan: Mr Speaker, electricity costs are not subsidised in Singapore. We do not subsidise these costs because we do not want to distort the price signals which the subsidised price would have on our economy.

With respect to lower income families who require assistance, we have specific assistance schemes run by the Community Development Councils (CDCs) and by the local community organisations to help these families. Members may be aware of the Rental and Utilities Assistance Scheme for those who are living in rental flats who experience cash

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flow problems from time to time. Similarly, for those who live in purchased flats, there is the Interim Financial Assistance Scheme to help them with specific needs which may arise from time to time.Even in the case of public transport, Members may be aware that the public transport operators, together with NTUC Club, SLF and the CDCs, have set aside a sum of $6 million in a public transport fund and this fund is used to help low income families pay for public transport expenses of their school-going children.

In summary, the point is that we do not subsidise these prices but we will customise specific assistance programmes for those segments of our society who need help.

Mr Andy Gan Lai Chiang (Marine Parade): Sir, can the Minister please explain what he means by "gas price is indexed to the oil price", especially when they are from different sources?

Dr Vivian Balakrishnan: Thank you for that question. 97% of our gas comes from Indonesia and 3% from Malaysia. In the market for gas, we entered into long-term contracts which are indexed to oil prices because, in the case of production of electricity, these two fuels are, in a sense, interchangeable. When oil prices go up, because of the nature of the contracts which we have entered into, our gas prices will also go up. Similarly, if oil prices come down, so will our gas prices. This means that, as far as we are concerned, at this point in time, our cost of producing electricity is indexed to the cost of oil although 60% of our electricity production is produced using gas.

Dr Tan Boon Wan (Ang Mo Kio): Sir, I am glad to hear the Minister saying that there are CDC-run schemes to provide support for our needy families. Can I ask

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the Minister to request the Government to provide for more money so that the CDCs can do more in supporting all these families?

Dr Vivian Balakrishnan: Thank you for the request. At this point in time, the CDCs are not short of funds to support assistance schemes for specific sectors of our society. Butonthe question of whether or not prices should be subsidised overall, the answer is no. Specific assistance schemes are present and funding is not the limiting factor at this point in time.

Mr Gan Kim Yong: Further clarification and requestfor the Minister, Mr Speaker. I understand that some of the power supply companies do provide instalment plans for residents who are in arrears. That has been very helpful. I would like to ask the Minister whether he could consider reducing the upfront payment that Singapore Power is charging the residents. As I understand it, Singapore Power usually asks for 50% upfront paymentin order for them to qualify for an instalment plan. Can I ask the Minister whether this amount could be reduced to make it easier forthe residents to pay by instalments?

Dr Vivian Balakrishnan: Mr Speaker, I do not want to get involved in the specific details of what is a commercial arrangement between the power retailers and the specific customers concerned. But the point is, so long as the customer is paying and has a realistic plan to pay off and settle his arrears, usually the commercial operator will not take drastic steps. I think Members of this House will agree that the minimum is that they have to at least settle their on-going charges which they are incurring every month because if they do not even settle that, it means that their arrears are going to escalate and they end up in a deep, deep hole which they cannot recover from.

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Mdm Ho Geok Choo (West Coast): Sir, I would like to ask the Minister whether, in light of what he has said about not getting involved in the nitty-gritties, he would consider the intervention of the CDCs so that we will have a more robust arrangement in helping these low-income families when they come for assistance with regard to their financial help in this area. This is in relation to Mr Gan Kim Yong's question about some assistance to lower the requirement for the payment before assistance is given.

Dr Vivian Balakrishnan: It is really a repetition of the same question. I think our retailers exercise a considerable amount of forbearance and the key point they want to see is that there is a serious and concerted effort to settle the arrears and not to just allow things to escalate out of hand. If we do that, we are really not doing anyone any favours and, in fact, Members will know that a few years ago, when there were problems with the billing system which resulted in delayed billing of power bills, it actually caused a situation in which households were stuck with huge amounts of arrears whichtook time to clear, both on the part of the households as well as the retailers. So the general principle which I want to emphasise is that power is not subsidised in Singapore.

Secondly, please conserve energy to the maximum extent that you can and, thirdly, make serious efforts to settle your bills, and if you really have difficulties,please seek help from the local community organisations. We do not want to confuse the role of the retailer with the community assistance organisation or with that of the Government either.