One of Singapore’s largest independent electricity retailers has exited the market and according to company sources at least three others have stopped accepting new clients amid rocketing wholesale energy prices.
A surge in global wholesale gas prices has multiplied in recent months as production and transit problems have lowered gas supply just as demand took off in a post-pandemic economic recovery.
Asian spot LNG prices have surged by over more than 500% from a year ago to over US$30 per million British thermal units (mmBtu) this month while Brent crude oil prices on which majority of Singapore’s long-term gas contracts are priced off, rose to multi-year highs.
iSwitch Energy, one of Singapore’s largest independent electricity retailer, said on its website that it will be ceasing electricity retail operations on Nov 11, due to “current electricity market conditions”.
Elsewhere in the sector, Diamond Electric, Best Electricity Supply and Ohm Energy have stopped accepting new customers with Diamond Electric in the process of handing over existing term contracts to another utility provider, company sources told Reuters.
iSwitch declined to comment, while Diamond Electric, Best Electricity Supply and Ohm Energy did not respond to an emailed request for comment.
“Not only are retailers unable to sell to retail customers at a level that is economic because the set quarterly tariff implies a price that is well below where futures are trading, they are also getting hit on the front-end because spot prices have gone ballistic,” said James Whistler, global head of energy at Simpson Spence Young.
“Add the failure of the once well-designed market-making scheme and things become untenable for many.”
Open Electricity Market website shows only 8 out of the 12 existing retailers offering plans for consumers.
With the spike in energy prices, “several Singapore retailers are now potentially closing their doors,” said a senior industry participant who declined to be identified due to the sensitivity of the matter.
Singapore’s retail electricity market opened to competition for business consumers in 2001 and to residential households in 2018, according to the Energy Market Authority (EMA) website.
EMA did not reply to a request for comment.
Surging gas prices, which rose to record highs in Europe and in Asia this month, have also hit utility providers in Britain, where a number of energy companies have collapsed, forcing about 1.7 million customers so far to switch providers.
China and India are being hit with power shortages and blackouts.
In Singapore, electricity tariffs are calculated using fuel costs and non-fuel costs.
The fuel cost component for each quarter is calculated using the average of daily natural gas prices in the first two-and-a-half month period in the preceding quarter while the non fuel-cost is calculated based on the cost of generating and delivering electricity to homes.
Singapore LNG Corp is currently scouting for LNG cargoes and exploring options to increase inventory of LNG at its terminal given the tight global LNG supply.
Commercial load power prices have risen by 50% from last year and are set to go higher, Whistler said.
“This is a pretty big difference for a country that has been relatively used to reasonably priced power now moving into a less competitive market and essentially being subject to global commodities prices as well.”