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There have been many of articles in the newspapers telling us that the hike is fair as our electricity tariffs is linked to the price of fuel oil. See how reasonable Singapore Power is - they understand the plight of Singaporeans and won't burden us by hiking prices unnecessarily especially when Singaporeans have already gone through many rounds of price hikes. Yes, the price of oil has increase so electricity tariffs have to go up.
From the Singapore Power website:
Q2 What are the main cost components in the tariff?
A2 Generation cost accounts for more than 70% of the total electricity cost. Fuel is the key component which takes up about 50% of the power generation cost. The quarterly tariff adjustments mainly reflect the changes in the fuel component of the generation cost
Q3 Why do tariffs increase in tandem with higher fuel oil prices when 60% of our country’s power generation uses natural gas as fuel?
A3 The natural gas contracts are pegged to fuel oil prices. Hence the prices of natural gas will also change accordingly when there is a change in fuel oil prices.
The Q&A is from 2005, today a higher % (>80%)of our electricity is generated using natural gas. Some of you find that it is strange that our tariffs are pegged to oil prices rather than natural gas prices. Here's why:
See the price of natural gas has fallen from a peak of $16 a year ago to about $7.7. Throughout 2007, it has remained relatively flat.
Singapore Power make $800-$1B a year in profits and has been active in acquisitions:
- June 2000 : Aussie transmission GPU PowerNet business for A$2.1B.
- July 2004 : Aussie company TXU for A$5,1B
- Oct 2007 : Together with Babcock & Brown pays $7.4B for Alinta
Isn't it great? Singaporeans are paying not just for electricity but for Singapore Power to make enough profits to takeover companies overseas. It is something that Singaporeans can be proud of.
While public utilities of other countries have are perpetually under pressure to provide electricity at he lowest possible cost to its citizens, as a monopoly Singapore Power makes enough to make billion $ acquisitions overseas. In other countries, people would clamor for the profits/reserves to be used to offset future costs to keep prices down especially in hard times but Singaporeans are more enlightened than that. They know how important it is for their power elite to expand its opportunities overseas using Singaporeans' money.