Tuesday June 30, 2009

Singapore electricity rate to go up 6.93% from July 2009

This article belongs to the Singapore inflation watch story arc.

channelnewsasia.com :

After two quarters of downward adjustments, Singapore household electricity tariffs will go up by 6.93% or 1.25 cents per kWh from 1 Jul 2009 to 30 Sep 2009. Electricity supplier SP Services said the increase is due largely to higher average fuel oil prices from April to June, which hit S$76.24 per barrel, up 26% from the previous quarter. The tariff is calculated based on a new formula which kicks in next month, under which Singapore electricity rates for the next quarter will be based on the average fuel oil prices in the preceding three months instead of the prices in the first month of the previous quarter.

- You know, I haven't even heard of this slightly wacky first-month-of-previous-quarter formula to determine Singapore electricity rates until relatively recently. For years I had been assuming that they were using some form of 3-month moving average, or 90-dma, of fuel oil prices, which being the refined product would tend to be linked to and slightly higher than crude oil prices. After all that would just have been common sense. Guess it took quite a few years for the implementation to catch up with the common sense.

But let's see what might happen if we were to take common sense to its logical conclusion, given the following factors, that :

a. Singapore electricity prices are determined by natural gas prices, since :
b. natural gas is currently used for 80% of Singapore's electricity production
c. natural gas prices are related by formula to fuel oil prices
d. fuel oil prices are naturally related, as a refined product, to crude oil prices.

Hence, logic dictates that electricity prices should be linked in real-time to live oil prices and that is exactly the direction that we seem to be heading. Now, as a peakoiler, part-time crude oil trader and general observer, I am rather used to crude oil's stomach-churning volatility, ranging from the record-breaking highs of $147.27 back in July 2008 down to the lows of $32.40 in Dec 2008 and now more than doubling back up again to the $70 range barely 6 months later. It would be interesting to see how society reacts when the price signal of electrity rates moves from the current leisurely 3-monthly rate to the more rapid 30-minute pace that is being proposed. Those who are watching crude oil prices on a second-by-second basis (you know who you are) would probably shrug and think nothing of it, but to everyone else it could seem like some kind of roller-coaster ride.

Of course, the pro-market people would say that this is a very fair and market-driven price mechanism, and I would have to tend to agree with them. But I would like to see how the government explains to the good common folk, the non-crude-oil-trading citizens, exactly how speeding up their lives by 4320 times (do the math) would help us all in the long run. I'm all ears.

See also :

1. Singapore to trial EVS (Electricity Vending System) with 1000 users from Nov 2008
2. Singapore electricity rates to rise 21% from Oct 2008 (up 89.6% in 3 years)
3. Singapore electricity tariff rates lowered by 25% from Jan 2009

(2009-06-30 15:40:23 SGT) [Energy] Permalink

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