The Energy Market Authority continually seeks to develop the electricity market for the benefit of consumers. These initiatives will enable both commercial and residential electricity consumers to enjoy more competitive electricity prices, increased retail options, and greater price transparency.
An example of such market development initiatives is the Electricity Futures Market, which was launched last April. This has enabled independent retailers with new business models to enter the electricity market offering consumers greater retail choices and price competition. For example, Town Councils have seen their electricity bills come down in new tenders. (Please see Question 2 for more details.) Another example is the progressive opening up of the electricity retail market, which will culminate in Full Retail Competition in the second half of 2018. All electricity consumers will be able to enjoy choosing from a wide range of electricity retail packages at competitive prices to meet their energy needs.
The MDSC will support a range of market development initiatives, such as developing the Electricity Futures Market and implementing Full Retail Competition in the second half of 2018. The initiatives will benefit consumers by bringing about more competitive prices and retail choices.
More competitive pricing
An example is the cost savings that Town Councils have enjoyed because of the emergence of independent electricity retailers (i.e. retailers not linked to generation companies) that the Electricity Futures Market has facilitated. In the Sep 2015 tender results (shown below) for the supply of electricity, 10 Town Councils were able to enjoy 22% discount off SP tariff – an additional 7.5% in savings compared to the most competitive quote from an existing generation company and retailer. This amounts to about $2.1 million savings a year, which will eventually benefit electricity consumers.
Greater retail choices
Since April 2015, five independent retailers with new business models have entered the electricity market offering consumers greater retail choices:
Power generation-linked retailers have been innovating to create value for customers as well. Among them is Tuas Power Supply, which provides electricity packages that promote energy conservation (through ways such as minimising energy wastage with advanced lighting solutions) and enhancing energy efficiency for its customers.
In another example, Apple awarded an electricity retail contract (33 MWp) to Sunseap for the premises of Apple to be fully powered by solar energy. Sunseap's business model entails procuring solar energy for Apple from the solar panels installed in other consumers’ premises, while using the Electricity Futures Market to hedge its pricing risk. This is possible because independent retailers can now leverage on the Electricity Futures Market to hedge any pricing risks for their consumers.
The MDSC revision to support market development initiatives is 0.2 cent/kWh of electricity consumed. This is kept small (about 1% of the electricity bill) to minimise the cost impact to consumers. For instance, a typical 4-room HDB flat will pay about 60 cents more for its monthly electricity bill.
The MDSC was set based on the cost of supporting various market development initiatives, such as developing the Electricity Futures Market and implementing Full Retail Competition in the second half of 2018. The MDSC forms part of the Market Support Service charges.
The “Retail Market System Related Charges”, which is a current charge under the Market Support Service charges, will be renamed to "Market Development and Systems Charge" (MDSC), and revised from 0.20236 cents/kWh to 0.40236 cents/kWh from July 2016, resulting in an increase of 0.2 cents/kWh – or about 1% of the average retail price. This is to better reflect the nature and purpose of the charge.
In some cases, the MDSC could be absorbed by your electricity retailer depending on the provisions in your retail contract. You can also explore other mutually agreeable arrangements with your retailer.
The MDSC will become part of the existing Market Support Services fee that is set in the quarterly electricity tariff review. The MDSC will be incorporated into the electricity tariff review from Q3 2016. The estimated 1% increase in the electricity bill for consumers is kept low to minimise the cost impact on them. For instance, a typical 4-room HDB flat will pay about 60 cents more for its monthly electricity bill.