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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/ 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.