'There goes all my profit': Soaring electricity bills a rude shock for businesses in Singapore
SINGAPORE: Mr Bernard Tay recalled being gobsmacked when he received the electricity bill for one of the outlets of Jinjja Chicken, his Korean fast-food chain.
His Bugis Village outlet's power bill for December came up to a staggering S$10,654 – more than double what he paid in November and almost five times of October’s.
“When I saw the bill, I got a shock,” said Mr Tay, the chain's managing director. “It’s ridiculous.”
The spike came after the outlet's electricity account was transferred back to SP Group following the exit of its former electricity retailer, Best Electricity, in October last year.
With electricity usage exceeding 4 megawatt-hour (MWh) a month, the Bugis outlet is not eligible for a regulated tariff plan. At SP, such businesses with bigger power consumption can only buy electricity from the wholesale market, where prices fluctuate every half-hour based on demand and supply.
With wholesale electricity prices remaining elevated amid a global energy crunch, Mr Tay has had to contend with monthly bill shocks for his Bugis outlet.
Jinjja Chicken’s other outlets have seen milder bill increases, as they remain on contracts with other electricity retailers.
“December was my best month and my team worked so hard, but there goes all my profit,” he told CNA.
SMALL BUSINESSES FEELING THE HEAT
Rocketing wholesale energy prices – fuelled by disruptions in supply and unanticipated demand globally, as well as piped natural gas disruptions from Indonesia – have sent shockwaves across Singapore’s electricity market for months now.
The escalating situation between Russia and Ukraine is likely to stir more uncertainties, with global oil and natural gas prices already on the rise after Russia authorised a military operation in Ukraine on Thursday (Feb 24).
Already, the turn in market conditions saw six electricity retailers calling it quits between October and December last year, while two others terminated some customers’ contracts prematurely, said Second Minister for Trade and Industry Tan See Leng in a parliamentary reply earlier this month.
This resulted in around 11,000 business consumers having to buy electricity directly from the wholesale market, therefore being more exposed to volatile prices, he added.
The Restaurant Association of Singapore (RAS) said its recent poll of nearly 600 F&B business operators found that increases in electricity bills have ranged from about 40 per cent to a whopping 472 per cent.
“Many of the respondents were the ones who were caught in the situation where their account was switched back to SP after their previous electricity retailer left the market,” an RAS spokesperson said.
The Singapore Manufacturing Federation (SMF) also heard similar concerns from its members. “One of them commented that the increase is three-and-a-half times due to their previous retailer exiting the market and they had to switch,” said SMF’s president Douglas Foo.
Businesses can switch out of SP by taking up fixed price plans with other electricity retailers but the search for a cheaper alternative has not been easy.
F&B firm Aesopica said it has been turned away by many retailers over the past months.
“When the different players started dropping out like flies last year, the remaining retailers said they won’t be sending (quotations) until after Chinese New Year. More recently, they said they won’t quote until April, or even July,” an Aesopica spokesperson told CNA.
The company, which operates frozen dessert outlets, has seen “crazy” increases ranging from 150 to 300 per cent in its monthly electricity bill under wholesale rates. Having to stomach such hefty charges for potentially another half a year is a torrid prospect for many small businesses, the spokesperson added.
Authorities have rolled out some support.
In December, the Energy Market Authority (EMA) announced the Temporary Electricity Contracting Support Scheme to help large businesses – those with an average monthly consumption of at least 4 MWh – secure one-month fixed-price electricity plans.
The scheme, which allows generation companies (gencos) to draw on EMA’s standby fuel facility to generate electricity, was recently extended by another three months to May. Prices are capped at 39.895 cents per kilowatt-hour (kWh).
Businesses that are keen to take up the scheme have to contact the participating retailers when the contracting window for each month opens. The availability of contracts each month is not made known, but demand has thus far outstripped supply, with businesses telling CNA that they have not had much luck in applying for the scheme.
Mr Tay said he has tried applying twice but failed.
“(The scheme) helps if everyone can get it but my friends also cannot get (sic). So I think there is maybe very limited supply bandwidth,” he said.
Citing its poll, the RAS also said that many F&B operators did not manage to secure a temporary contract under this scheme, “which has resulted in (them) experiencing huge price hike pressures”.
SOME RETAILERS RAMP UP OFFERINGS
Amid growing demand for fixed price plans, at least two electricity retailers told CNA that they are ramping up their offerings.
Last week, Sembcorp Power rolled out new six- and 12-month plans targeted at businesses that have an average monthly consumption between 4MWh and 8MWh.
The latest fixed-price plans are part of the company’s “ongoing efforts to continue offering consumers with the right solutions to tide them through unprecedented volatility in the Singapore energy market”, a spokesperson said.
The company said its plans under the Temporary Electricity Contracting Support Scheme were fully subscribed when the scheme was first launched in January. It also offered another 110 large businesses with month-long contracts last month after EMA announced further temporary price plans to meet demand.
Flo Energy also launched new month-long contracts for March last week, with fixed prices that are slightly lower than under the electricity contract support scheme. The independent renewable energy retailer, which set up shop in Singapore in 2020, said it continues to offer longer-term fixed-price plans, ranging from six months to two years, at “competitive” rates.
“Unlike any other retailer in Singapore, we have not turned away any customers interested in our renewable fixed-price plans,” said chief commercial officer Ernst Westendorp, adding that the firm has signed up “hundreds” of new business customers since December last year.
“Furthermore, we have not offloaded any customers on fixed-price contracts up to this day. We have experienced tremendous growth during this period.”
Asked why it is able to do so, Mr Westendorp said the company hedges more than is required in the electricity futures market so that it can “scale (its) business safely”.
Tuas Power said it has “retailed at least 20 per cent more electricity” in January, compared to December, through its own offerings and EMA’s various initiatives.
But the genco acknowledged that demand for new electricity plans has been “quite overwhelming”.
“Despite increasing our plan intake by more than 20 per cent, there are requests on the ground that we were not able to fulfil,” said its senior vice president of retail business Sam Lim. “There are limitations because we’ve only got that amount of generation capacity.”
In fact, the firm has also told existing customers requesting to renew their contracts that it needs “some time” for planning purposes.
“It’s about understanding our own capability and whether we can secure the fuel needed to support some of these contracts,” said Mr Lim.
Other electricity retailers that CNA approached declined comment or did not reply to queries.
Explaining why some retailers may have stopped taking on new customers, Dr David Broadstock, senior research fellow at the National University of Singapore’s Energy Studies Institute, noted that heightened and persistent volatility in the wholesale electricity prices have made it difficult for retailers to identify “viable commercial opportunities … without taking on considerable risk”.
For instance, wholesale prices averaged S$480 MWh in January – a rate much higher than the tariff rate and the current fixed-price cap under the electricity contract support scheme, he said.
Other factors in the mix include “unprecedently high” prices in the electricity futures market and continued uncertainties in the global energy commodity markets.
“Power market participants, both gencos and retailers, are likely very aware … that global energy commodity markets have not yet escaped from their own phases of instability which have been central to a global energy crisis,” said Dr Broadstock.
MORE HELP NEEDED?
Manpower Minister Tan See Leng said in his parliamentary reply that authorities will continue to monitor market developments, including heightened geopolitical tensions and their potential impact on global energy markets. If necessary, measures will be put in place to secure Singapore’s energy supply, enhance stability and ensure the orderly functioning of the market.
Businesses which need financing support can also make use of programmes such as the Temporary Bridging Loan and the Enterprise Financing Scheme SME Working Capital Loan.
SMF president Mr Foo hopes that the Government can provide firms with more support such as rebates or subsidies.
“As the subscription is only on a monthly basis, it brings a lot of uncertainties to companies that subscribe to TREC (Temporary Electricity Contracting Support Scheme) as they do not know if they can subscribe to the scheme every month,” he said.
As for Jinjja Chicken's Mr Tay, he feels that electricity retailers who exited the market and terminated their customers’ contracts prematurely should be made to compensate their customers.
“In any contract like the one I have with my landlords, I need to compensate if I exit before the contract ends. But for my electricity contract, I wasn’t compensated in any way. They also didn’t help me to cushion anything,” he said.
"That is not fair. I hope EMA can look into this."
The monthly electricity bill shocks also come amid escalating costs on other fronts, such as essential food ingredients like cooking oil and fries.
“Electricity, oil and fries – these are the three things that have taken my costs out of the equation,” Mr Tay said with a sigh.
“For food, I can still try to adapt by looking at other sources but for electricity, I can’t switch off my fryer. I can’t turn off my equipment. There’s nothing I can do, except to continue to lose money.
“If that’s the case, how can we continue to be sustainable?”