Tan See Leng and Chee Hong Tat address NCMP Leong Mun Wai’s criticism of timing of electricity tariff increase
SINGAPORE: Two political office holders from the People's Action Party addressed Non-Constituency Member of Parliament (NCMP) Leong Mun Wai’s criticism of the timing of the rise in electricity tariffs in Parliament on Wednesday (Oct 14).
In response to Mr Leong’s comment that SP Group spared "no time in raising (tariff) prices at the first available opportunity", Second Minister for Trade and Industry Tan See Leng said: “I would like to clarify that SP buys electricity at the full cost of producing it and delivering it to all consumers ... whatever is procured is passed on to the gencos (generation companies) and then the genco charges consumers at the same price.
“And that is known as that entire regulated tariff. SP does not benefit from the increase in tariffs directly.”
Adding that the increase in electricity tariffs in the fourth quarter of this year was “primarily due” to the increase in fuel costs, Dr Tan noted that the price of crude oil went up by a “whopping” 47 per cent between July and September this year.
“So these fuel cost increases, they are incurred by many of these power generation companies. The additional amount of electricity tariffs that SP can collect or have collected from the consumers in Q4 of 2020 will then be passed on to these power generation companies to offset their fuel cost increases,” he continued.
SP Group announced on Sep 30 that the electricity tariff for households would increase from 19.6 cents to 21.43 cents per kWh excluding Goods and Service Tax (GST), or by 1.83 cents, for the quarter ending Dec 31.
Including GST, the fourth quarter rate is 22.93 cents per kWh. This means that the average monthly electricity bill for families living in four-room flats will increase by S$7.01 before GST, SP Group had said.
Despite the increase, the revised tariff and that of the preceding quarter are the lowest in the last three years, the company added.
In his clarification, Dr Tan also noted that about 48 per cent of households have already switched over to a retailer in the Open Electricity Market (OEM).
“So quite a vast majority of this 48 per cent are on fixed price plans, so they are not affected by the change in that electricity tariffs,” he added.
Mr Leong, who is from the Progress Singapore Party, had questioned the timing of multiple hikes across various taxes and fees, including MediShield Life premiums, electricity tariffs and Electronic Road Pricing (ERP) costs at six gantries across Singapore.
“This begs the question of the timing of these tax and fee hikes when the support measures are being phased out slowly. Can these hikes not be shelved till later?” asked Mr Leong
“Can SP Group not absorb the tariff increases with their past profits? Can’t ERP increases wait? Can’t premium increases be deferred for a period of one to two years, as the current insurance claims are still way below the collected premiums after all?”
Adding that members of the public “must be baffled” by the “seemingly contradictory actions” of the Government, Mr Leong said: “On the one hand, it is purported that the Government is putting up $100 billion to help with the COVID support measures, yet on the other hand, the implementation of the tax and fee hikes.
“Is the country so overstretched financially that we have to replenish our coffers with those hikes in such haste?”
In multiple follow-up responses to Dr Tan’s clarification, Mr Leong continued to question the timing of the electricity tariff hikes.
“We know that SP has made a lot of profit when the electricity wholesale market collapsed from 2012 to 2018. And they didn't actually pass on the benefits to the consumer at that time because the consumers, the retail market was still in the process of being liberalised,” said Mr Leong.
“So they have made some profits, in fact a lot of profits during those years. Why can’t they just wait a little bit longer?”
Chiming in at the end of the exchange, Mr Chee Hong Tat said Mr Leong made “a wrong attribution” regarding SP Group’s business model.
SP Group is the grid operator, providing the infrastructure to transmit and distribute the electricity that is being produced by the generation companies, said Mr Chee, who was previously Senior Minister of State for Trade and Industry.
The company’s returns are determined by the Energy Market Authority (EMA), which will “look at what are the assets that SP Group has put in place” and calculate the “fair rate of return” for those assets, he added.
“It’s actually separate from the price of electricity in the wholesale market. That is not what SP Group earns,” said Mr Chee.
“That's what the gencos are charging for producing the electricity. SP group is the entity that transmits the electrons, so they earn a return for the grid infrastructure that they have put in place.”
Addressing Mr Leong’s questions about SP Group’s profits, he added: “I think it is important for us to be clear what is the business model of the various entities before we make comments like ‘Why are they making so much money and they’re not passing on? Why are they making so much profit and they are not passing through some of these to consumers?’”
“I think Mr Leong needs to understand what the facts are so that we can have a meaningful discussion based on accurate facts.”