Why electricity bills increase when natural gas prices drop, ST forum writer boldly asks

[kobayashiGT]

Why electricity bills increase when natural gas prices drop, ST forum writer boldly asks

source: https://mothership.sg/2020/01/electricity-bills-natural-gas-price-singapore/

Quote

Why arh?

A Straits Times forum letter writer has boldly asked a pertinent consumer interest question that many have thought about, but did not act upon.

In a forum letter published on Jan. 1, 2020, the writer, Alan Chiu Chen Hong, publicly questioned how could it be possible that electricity tariffs will rise on average about 3.5 percent in the first three months of 2020, when gas prices has been decreasing.

Such an increase in tariffs would translate to a rise of S$3.20, from S$92.75 to S$95.95, for a family in a five-room HDB flat.

Cheaper gas used to generate electricity, right?

The inability to logically parse this relationship between tariffs and gas stemmed from the news that electricity bills will rise and gas prices will fall in tandem.

It was first reported in ST on Dec. 31, 2019, in an article titled, “Electricity bills to go up, and gas prices to fall”.

But there was no clear explanation provided by the authorities for this phenomenon.

The letter writer then elucidated this link.

An inverse relationship between gas prices and bills?

Citing the Energy Market Authority Singapore, the letter writer wrote that about 95 percent of Singapore’s electricity is currently generated using natural gas.

This is a significant increase in utilising natural gas to meet Singapore’s power generation needs.

Previously in 2001, natural gas was used to produce just 26 percent of Singapore’s electricity, as oil was the preferred fuel.

Chiu then wrote: “Therefore, I am surprised by the tariff increase because the natural gas price has been very weak, and has dropped significantly in the past year.”

He continued: “Last year, the natural gas price was about 16 to 20 percent lower than in end-2014.”

And it appears the letter writer is on to something.

What determines tariffs?

ST reported in its original article that the cost of fuel determines the tariff.

ST wrote: “A key determinant of the tariff is the cost of fuel and power generation.”

ST also quoted Professor Subodh Mhaisalkar, executive director of the Energy Research Institute at Nanyang Technological University.

Subodh said the cost of electricity generation typically makes up 75 percent of the tariff, and as energy costs go up, it is natural for the costs to be passed on to customers.

He added: “The tariff hike would be directly correlated to global energy prices, plus supply and demand pressures.”

But the observable trend has been that natural gas prices have been going down.

What did the authorities say?

ST did try to get an answer from the authorities, but it appeared it wasn’t the clearest of responses.

Asked why electricity prices are rising and gas prices falling, an EMA spokesman said: “The difference between the electricity and town gas tariffs is mainly due to the different fuel types used and their prices moving in different directions.”

But now that the issue has been aired in the open, a fuller response from the authorities looks likely.

Keep your eyes peeled.

[Kusje]

Will be the same old reason lor. That they've locked in their previous gas contracts linked to oil prices and not gas price.

Why do we have to pay for their poor decision making? If they decide to buy gas based on gold benchmark how?

[Volvobrick]

9 minutes ago, Kusje said:

 

Why do we have to pay for their poor decision making? 

Cos they voted for the govt they deserve ...... Someone said one. 

[Beregond]

The cost price of the raw resource is only a small % of the price of the final product. 

this is their favourite excuse. 

[Kklim]

Answer can be found at http://www.tremeritus.net/2020/01/01/singaporeans-treated-as-idiots-and-taken-for-another-ride/

[Sx4falcon]

Ya.

When raw resource cost goes up, they increase the price citing cost increase.

When raw resource cost comes down, they said the raw resource cost is only a small % of the total, so price remain.

Either way, they huat ah.

 

 

[kobayashiGT]

Maybe they will say they are investing more on solar energy, the infrastructure is a hefty cost. 

https://www.straitstimes.com/singapore/housing/hdb-aims-to-more-than-double-solar-capacity-by-2030

🤷‍♂️

[Karoon]

6 minutes ago, kobayashiGT said:

Maybe they will say they are investing more on solar energy, the infrastructure is a hefty cost. 

https://www.straitstimes.com/singapore/housing/hdb-aims-to-more-than-double-solar-capacity-by-2030

🤷‍♂️

Haha... no... The solar panels and power are provided by private players who are killing each other trying to offer the cheapest price possible... Gahmen just sit back and watch the bloodied mess unfold and pay the winner pennies. 

[inlinesix]

1 hour ago, Karoon said:

Haha... no... The solar panels and power are provided by private players who are killing each other trying to offer the cheapest price possible... Gahmen just sit back and watch the bloodied mess unfold and pay the winner pennies. 

Solar power only got 30% efficient now.  It may not be that cheap yet.

[Enye]

1 hour ago, Kusje said:

Will be the same old reason lor. That they've locked in their previous gas contracts linked to oil prices and not gas price.

Why do we have to pay for their poor decision making? If they decide to buy gas based on gold benchmark how?

beggars cannot be choosers

i know...i am a peasant

😢

[Freeder]

PAP wanshui 🙏🏻🙇‍♀️

[Kusje]

1 hour ago, Sx4falcon said:

Ya.

When raw resource cost goes up, they increase the price citing cost increase.

When raw resource cost comes down, they said the raw resource cost is only a small % of the total, so price remain.

Either way, they huat ah.

 

 

Don't forget the petrol tax. Petrol price fall, they raise tax. Petrol price rise, did they reduce the tax?

Quote

"With falling oil prices, pump prices after the petrol duty changes would remain lower than the levels seen in the last two and a half years. These changes will take effect today, and yield about $177 million a year," Mr Tharman said.

 

[Watwheels]

Come to think of it whenever GE is coming nothing like this is allowed to raise prices. There must be a reason behind it so that maybe MPs dont have to go thru humiliation to answer tough questions and opposition MPs  dont get to have ammo to gain attention.

Did someone made a blunder and announced the price hike way too early or did someone screw up badly? In any case this someone gonna hurt real bad for breaking the norm.

[Voodooman]

2 hours ago, Kusje said:

Will be the same old reason lor. That they've locked in their previous gas contracts linked to oil prices and not gas price.

Why do we have to pay for their poor decision making? If they decide to buy gas based on gold benchmark how?

Don't think we have a choice then.  The first gas imports were from Indonesia and Malaysia and they were net energy importers, why would they benchmark their gas to European and USA prices?  
 

Even Japan, traditionally a big LNG importer, is buying LNG indexed to crude oil prices although that might be changing. Singapore is just a tiny red dot in global energy use. 

[Myxilplix]

“A key determinant of the tariff is the cost of fuel and power generation.”

 

This already says everything. Cost of fuel go down but cost of power generation go up lor. You can figure out for yourself what that covers.

[Showster]

12 minutes ago, Watwheels said:

Come to think of it whenever GE is coming nothing like this is allowed to raise prices. There must be a reason behind it so that maybe MPs dont have to go thru humiliation to answer tough questions and opposition MPs  dont get to have ammo to gain attention.

Did someone made a blunder and announced the price hike way too early or did someone screw up badly? In any case this someone gonna hurt real bad for breaking the norm.

Not true. The current protocol is to announce every price increase if required as transparently and beforehand as possible.

To prevent people from saying, get the votes then raise prices. 

[Watwheels]

10 minutes ago, Showster said:

Not true. The current protocol is to announce every price increase if required as transparently and beforehand as possible.

To prevent people from saying, get the votes then raise prices. 

Let's hear from their reply and see how transparent they can get. 😂

[kobayashiGT]

19 minutes ago, Myxilplix said:

“A key determinant of the tariff is the cost of fuel and power generation.”

 

This already says everything. Cost of fuel go down but cost of power generation go up lor. You can figure out for yourself what that covers.

erm, salary and bonus?