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1.
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If competition benefits consumers, why not open up the market earlier and allow households to choose their electricity retailers?
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It is currently more expensive to allow households to choose their electricity suppliers due to the high costs incurred by the electricity retailers in maintaining and servicing such small accounts. This is the reason why EMA has embarked on the Electricity Vending System (EVS), which was designed specifically as a cost-effective platform to facilitate the full liberalization of the retail market.
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2.
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If feasible, when would Electricity Vending System (EVS) be implemented on a nation-wide scale? How long will the entire implementation take?
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A full roll out of the EVS could take about 3 years or more. The implementation process is complex as, among other things, we will need to put in place the right regulatory framework to encourage competition in the industry and replace the existing electricity meters for more than 1 million households. The actual timeline will be determined after EMA concludes its assessment of the system following the end of the pilot project this year.
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3.
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How would putting up part of the domestic load for competitive tender benefit electricity consumers?
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We can expect the generation companies to compete hard for the tender. This will provide more scope for competitive pricing of electricity, with the benefits flowing through directly to consumers.
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4.
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What proportion of the domestic load will be put up for competitive tender?
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EMA is studying this in consultation with the industry and other stakeholders. We will provide further details in due course.
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5.
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Why not put the entire domestic load up for tender?
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There are currently only 5 generation companies in the market. If the entire domestic load is put up for tender, we may not be able to achieve a competitive bidding outcome due to the limited number of participants in the tender.
This is why we need to take an incremental approach, and tender the domestic load in stages. EMA will assess the outcome of the first tender and then consider increasing the proportion of the domestic load to be put up for tender in subsequent periods.
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6.
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Are there any other countries that have successfully implemented such open tenders?
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Some states in the United States have implemented such open tenders. For example, since 2002 the state of New Jersey has successfully used a competitive auction / tender process to set its regulated electricity tariffs. The state of Illinois has also adopted a similar method since 2007.
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7.
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Will the revised tariff formula result in lower prices? How would the historical tariffs look like based on the revised tariff formula?
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The revised formula was designed to reduce volatility and to better reflect prevailing conditions in the fuel markets. It was not meant to achieve lower prices. Based on historical fuel prices over the last four years, the average tariffs based on the revised tariff formula would be about the same as that based on the current formula. The revised formula will take effect from July 2009 onwards.
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8.
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How would the revised tariff formula benefit electricity consumers?
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Consumers will benefit from a tariff that is less volatile and more reflective of the prevailing fuel market conditions. The revised formula will take effect from July 2009 onwards.
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9.
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How would the revised tariff formula affect the generation companies and Singapore Power?
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The revised tariff formula should not affect the fuel purchase costs of the generation companies, as they would lock in their gas purchases at the forward fuel oil price set using the revised tariff formula to minimise their exposure to market fluctuations.
Likewise, Singapore Power would not be affected as they would continue to buy electricity from the generation companies and sell to domestic consumers at the revised tariff rates. The revised formula will take effect from July 2009 onwards.
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