Saturday, 1 November 2008

NCMP's Letter to ST forum and reply from MS Lee Bee Khim

Consider tiered charge in electricity tariff

I REFER to Monday's letter by Mr Paul Chan, 'Electricity prices: 82% higher here than in Hong Kong'.

Mr Chan's query about the price of electricity in Hong Kong and Singapore is partly answered by the fact that Hong Kong produces electricity largely from coal, and hence the impact of volatile fuel prices is not as amplified as it is here.

However, the unanswered part which the Singapore authorities should seriously consider is that Hong Kong has a system of tiered charging for electricity based on consumption.

Thus, for the first 150 units of electricity consumed, the rate is about $18. Progressively as consumption increases, the tariff rate goes up, so those who consume more electricity pay for additional units at a higher rate.

Such a tiered charging system has several benefits:

  • It ensures there is a humane rate for baseline consumption, while those who can afford it can consume more;

  • At the same time, it is green - encouraging everyone to save electricity so as not to cross to the next tier and be charged at a higher rate.

    Indeed, tiered charging is already in place in Singapore for water.

    At the parliamentary sitting on Oct 21, I raised this suggestion which the Ministry of Trade and Industry seemed reluctant to pursue.

    The other issue alluded to by Mr Chan is the lack of transparency surrounding the tariff formula.

    At the same sitting, I asked whether the electricity tariff formula was a state secret and if the full details of the formula would be published. The answer was that the Energy Market Authority would be happy to oblige, subject to considerations of commercial confidentiality.

    Electricity prices have risen more than 50 per cent since January last year and have doubled since January 2004. We await the ministry's response.

    Sylvia Lim (Ms)
    Non-Constituency Member of Parliament

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    Electricity prices: Why HK is cheaper

    IN HER letter on Thursday ('Consider tiered charge in electricity tariff'), Non-Constituency MP Sylvia Lim suggested adopting a tiered tariff system to make electricity more affordable, like Hong Kong.

    Ms Lim acknowledged that electricity prices are lower in Hong Kong partly because it produces electricity from coal, whereas Singapore produces most of our electricity from natural gas. In fact, this is the main reason, rather than Hong Kong's tiered tariff system.

    Singapore's approach is to charge everyone the full cost of electricity, and give targeted assistance, through U-Save rebates, to households that need it most. After taking U-Save into account, a three-room HDB household effectively pays an average of $50 a month for its electricity bill, comparable to what is payable in Hong Kong for the same amount of electricity consumed.

    Charging below full cost in a tiered system would reduce the incentive for households to save electricity and lead to wasteful consumption. It is also not an efficient way to help the poor because well-off households would also enjoy the lower tariff rate in the first tier. If we need to do more to help the poor, it is better to increase the U-Save amount, as the Government has done.

    Ms Lim pointed out that Singapore does have a tiered system of tariffs for water. However, water is a strategic resource for Singapore, and the water tariff is set so the first tier recovers the full cost of water production, and the next tier is set higher to encourage water conservation. Applying this principle to electricity tariffs would therefore raise prices for Singaporeans.

    Ms Lim also asked for the details of the electricity tariff formula to be published. The Energy Market Authority has done so on its website.

    Lim Bee Khim (Ms)
    Director/Corporate Communications
    For Permanent Secretary
    Ministry of Trade and Industry

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