Singapore electricity rates to go up by 2.3% next quarter

channelnewsasia.com, singaporepower.com.sg :

Electricity tariffs will go up by an average of 2.3 percent or 0.49 cents per KWh (kilo-watt hour) between October 1 and December 31 this year. SP Services explains that electricity price is pegged to the forward price of fuel, which is higher for the next quarter at $88.52 per barrel, compared to $87.49 per barrel previously.

The tariffs are reviewed every quarter and adjusted in line with fluctuation of fuel oil prices. The tariff adjustments have been approved by industry regulator Energy Market Authority. The next review will be in December.

- The new electricity rate for residential users will be 21.64 c/KWh from Oct 2006. The rate of increase is 10.6% since Oct 2005 (19.57 c/KWh), and 30.9% since Oct 2004 (16.53 c/KWh).

And you might have thought that falling oil prices this past month might have led to lowered electricity rates. Nope, it doesn't quite work that way. That's because they review prices quarterly, and use a 3-month moving average for their calculations. In traders' terms, that might be roughly equivalent to a 90dma. So for a drop to happen, oil prices must have dropped for the past 3 months or more.

But why have petrol prices dropped then? This is because, from empirical experience and scattered news reports, the supply chain here has about a 1-2 week inventory in the system. So when crude oil prices go up (/down), it takes about 1-2 weeks for the price change to filter through to the petrol stations, compared to 3 months for the electricity rates.

These are interesting system dynamics. Something to think about.

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