Electricity tariffs up 5 cents

Tue, Sep 30, 2008

my paper

New rate is 30 cents per kWh but rebates will more than offset rise. -myp By Marcel Lee Pereira

FROM tomorrow, taxi driver Amir Hamzah will keep his water heater switched off, and take cold showers instead.

That's when the highest electricity tariffs since 2001 will kick in, and Mr Amir, 33, his wife and three-year-old son - who live in a five-room flat in Sengkang - could end up paying almost $23 more a month for electricity. "We will try and save on electricity as much as we can, and the water heater uses a lot of it," he told my paper. The latest tariffs, announced by SP Services yesterday, mean households will need to pay 30 cents per kWh of electricity, an increase of about 5 cents over the existing tariff of about 25 cents per kWh. Electricity prices have been rising every quarter since last July. The latest hike was due to higher forward fuel-oil prices for the last quarter of the year, said the Energy Market Authority (see box). With the increase, the total utilities bill for families in oneto three-room flats will go up by between $90 and $223 thi year. However, they will receive rebates of between $310 and $330 this year, which will more than offset the rise, said EMA chief executive Khoo Chin Hean. Those in larger flats will pay between $316 and $433 more in total for utilities this year, but will get rebates of between $130 and $295. Fuel costs make up 60 per cent of electricity tariffs, with the remainder coming from the cost of transmitting electricity, as well as machinery and equipment costs, among others. Since 2004, electricity tariffs have been pegged to forward oil prices, instead of spot prices as was the case before, said Mr Khoo. Pegging tariffs to spot prices makes electricity prices very volatile, he explained. Mr Khoo said that though crude-oil prices seemed to be sliding now, it is actually forward fuel-oil prices that are used to set electricity tariffs. He said: "When the spot price comes down, the forward price will follow, but after a time lag."However, he added that in a situation when fuel-oil prices are rising, pegging tariffs to forward prices means they generally will be lower than when pegged to spot prices. Tariffs are reviewed every quarter, and if forward fuel-oil prices come down next month, the tariff for the January to March quarter next year will be reduced accordingly. Mr Khoo added that about 40 per cent of households here are using more electricity than the average household, and encouraged consumers to do more to cut usage. Mr Amir, who currently pays about $90 in utilities a month, said: "I'll ask my wife not to turn on too many lights at night, while I'm out driving."