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1.
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How is the electricity tariff determined?
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There are two key components to the cost of electricity in Singapore: the fuel cost and non-fuel cost. The fuel cost, which includes the cost of imported natural gas, is pegged to the price of fuel oil. The non-fuel cost, which reflects the cost of generating and delivering electricity to our homes, has remained largely unchanged over the past few years.
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2.
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Why are electricity tariffs pegged to oil prices when Singapore uses mainly natural gas to generate electricity?
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While Singapore's electricity is mainly generated from imported natural gas, the prices of natural gas (which are determined by commercial contracts) are indexed to fuel oil prices. This is the market practice in Asia for natural gas contracts. Hence, if the prices of fuel oil increase by 10%, natural gas prices would also increase by 10%. This is why the fuel cost component of our electricity tariff is affected by movements in fuel oil prices.
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3.
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Why can’t the government help by reducing electricity prices instead of giving U-Save rebates?
(recent update)
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The Government recognises that there are households which may face difficulties coping with the rising cost of energy, and is ready to help them. Our approach is to price energy right. This ensures that consumers take into consideration the true cost of energy, make efficient use of a scarce resource, and avoid the wasteful consumption associated with subsidies. Rather than subsidising electricity consumption directly, the Government has chosen to provide assistance to HDB households through the use of rebates, with higher amounts of rebates going to lower-income households.
The Government has introduced a permanent GST Voucher - U-Save from this year to help lower- and middle-income HDB households offset part of their utility bills.
Households in one- and two-room HDB flats will receive a rebate of $260 per year. Three- and four-room households will receive $240 and $220 per year respectively.
Eligible households will receive their GST Voucher - U-Save every six months, in January and July.
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4.
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If electricity prices are pegged to fuel oil prices why is it that the increase does not correspond with the movement in fuel oil prices?
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The electricity tariff is set every three months, based on the average forward fuel oil price over the past three months. This means that if average fuel oil price from July to September decreases, we will see a corresponding dip in electricity prices for the next quarter from October to December. Similarly, the tariff for October to December will be adjusted upwards if the average fuel oil price increases during the period from July to September.
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5.
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Is privatisation / liberalisation of the electricity to blame for the electricity tariff increases?
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No, the liberalisation of the electricity market has not increased the electricity tariff. On the contrary, it has introduced competition into the market and helped to improve efficiency and drive down prices. For example, power generating companies have switched from oil-fired steam plants to more cost efficient ways of generating electricity such as gas-fired combined cycle gas turbines (CCGT). Had we continued to use steam plants, the electricity tariff today would be about 15 per cent higher, reflecting the relative efficiency of the CCGT turbines.
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