Full opening of electricity market in Singapore to fire up competition: What will retailers do?

Full opening of electricity market in Singapore to fire up competition: What will retailers do?

SINGAPORE: When the nationwide roll-out of the Open Electricity Market begins next month, consumers here will stand to enjoy the benefits of a liberalised retail power market with industry experts expecting sizzling competition to fire up price cuts and other promotions. 

This after a pilot test in Jurong saw retailers trying to outdo each other in similar fashion over the past five months. 

Simply put, the expansion of the Open Electricity Market, to be done in batches from Nov 1 to May 1, means that households and small businesses will no longer have to buy power solely from SP Group at the quarterly-reviewed regulated tariff. Much like getting mobile phone plans, they will be able to sieve through price plans offered by as many as 12 approved retailers. 

As part of a pilot programme that started in April, 120,000 consumers in Jurong were the first to enjoy this flexibility. 

To entice those shopping for electricity for the first time, 13 retailers doled out a buffet of plans that were priced on average 20 per cent below the regulated tariff. Freebies such as iPads, shopping vouchers and air tickets were also up for grabs at a roadshow organised by the Energy Market Authority (EMA) in April.

Experts and industry players told Channel NewsAsia that it would not be a surprise if that repeats during the nationwide roll-out. 

“There will definitely be a push to maximise market share so consumers can expect incentives to be offered,” said Professor Subodh Mhaisalkar, executive director of Nanyang Technological University’s (NTU) Energy Research Institute. 

Echoing that, Ohm Energy’s managing director Jomar Eldoy said: “We have seen, what I would call, subsidised prices in Jurong and that may very well be what our competitors will put out when the next section of the market opens later this year.” 

Given that they are only allowed to start marketing from Nov 1, retailers that Channel NewsAsia approached were tight-lipped about their upcoming plans. For those that are already retailing, they declined to reveal if further price changes are in the pipeline. 

Nevertheless, almost all said that they will be closely monitoring market conditions. 

“I suppose things like discounts will be something that every retailer has under wraps for now… so it’s inevitable that a price war will happen,” said Union Power’s executive director Ellen Teo. “We will wait and see what happens.”

“ENCOURAGING” SIGN-UP RATE IN JURONG

For now, electricity retailers are feeling upbeat following an “encouraging” response in Jurong where more than 30 per cent of consumers have opted for a different provider.

EMA roadshow on Open Electricity Market 2
Electricity retailers and consumers at a Open Electricity Market roadshow held at Westgate mall on Apr 21, 2018. (Photo: Energy Market Authority)

Among those willing to reveal sign-up rates, Ohm Energy said it now serves about 1,500 households while PacificLight Energy is fast approaching 6,000 sign-ups. 

“Considering that it’s been only five months, I think this is a very good response compared to other markets,” said the latter’s general manager Geraldine Tan. 

“The pick-up rate has been very fast though it has slowed down a little over the last two months. This is because there are consumers that are probably adopting a wait-and-see approach… This is always the case when there’s something new so we are exploring ways in which we can reach out to this group of consumers,” she added. 

READ: Singapore consumers can choose electricity provider from November

READ: Sizzling competition, ‘encouraging’ sign-ups as electricity market opens up in Jurong

This includes clarifying questions about switching retailers, such as whether it affects the reliability of electricity supply, and simplifying consumer choices. 

In announcing the nationwide roll-out, the EMA said it will limit standard price plans to those that offer fixed prices and discounts off the regulated tariff. A peak and off-peak plan will be removed due to a low take-up rate. 

It also standardised price plan durations to six months, one year and two years after retailers started offering “confusing” trial plans as short as three months. 

Retailers agreed that having simple and transparent price plans, alongside a fuss-free transition process, will be crucial. This is especially the case when the idea of shopping for electricity remains a new concept for consumers, said Mr Stefano Boscaglia, senior vice president of SME and consumer sales at Senoko Energy. 

Still, some maintain that there is merit in offering non-standard price plans. For instance, Geneco, a brand under YTL PowerSeraya, said it will continue to offer six plans, including a peak and off-peak option targeted at consumers who wish to monitor their own consumption. 

“With varying lifestyles, there are customers who want different types of plans so even though they may not be as popular, we will make them available,” said the company’s executive vice president of retail Low Boon Tong. 

READ: Singapore to open up retail electricity market from November: What it means for consumers

ELECTRIFYING COMPETITION

Also feeling confident, the new players entering the Open Electricity Market are looking to develop their own competitive advantage. 

Union Power, a subsidiary of home-grown bottled-gas supplier Union Energy, told Channel NewsAsia that it will focus on customers who are already using its liquefied petroleum gas (LPG). 

Said Ms Teo: “We have a natural base of customers after being in the LPG business for 40 years now. The objective is to offer them value-added services. 

“For instance, if you use LPG in your kitchen, we can come in to supply electricity for your entire home. We see this as having a lot of synergy with our core business.” 

ES Power, on the other hand, is hoping to differentiate itself with its carbon-neutral electricity. With the exit of Sunseap and Sun Electric, the energy brand of local firm Environmental Solutions is the only green energy player in the Open Electricity Market for now. 

Citing results from the company’s recent survey, co-founder and executive director Sivakumar Avadiar said there is demand for green energy in Singapore. 

Among the 600 people it surveyed from April to June, nearly 10 per cent will be willing to pay more for green energy plans, while close to 20 per cent will opt for a green product if the pricing is competitive. 

“If we can offer cleaner energy together with savings in excess of 20 per cent, we think consumers will appreciate it,” said Mr Avadiar, though he acknowledged that the process of convincing consumers to switch electricity retailers will likely be a multi-year “marathon, instead of a sprint”. 

Meanwhile, other electricity providers that have left the Open Electricity Market told Channel NewsAsia that they will be back. 

Sun Electric, Sunseap and Red Dot Power cited system upgrades and development of new products for their pull-out but stressed that they will re-join the competition when they are ready. Diamond Electric did not respond to queries. 

Hyflux Energy, which had a short-lived participation in the pilot test from April to June, also said via email that it plans to participate in the Open Electricity Market “at a later stage” and is “preparing for it accordingly”. 

Citing “competitive reasons”, the spokesperson declined to reveal the number of customers Hyflux Energy has in Jurong, as well as the reason for its exit though she stressed that “Hyflux Energy is not involved in the restructuring exercise that is currently being undertaken by some entities within the Hyflux Group”. 

“As there were no disruptions to any service, Hyflux Energy continues to actively retail electricity to commercial and industrial customers, and has been serving the residential customers in Jurong who have already signed up with Hyflux Energy,” said the emailed response.

READ: Electricity tariffs to rise by 2.1% for October-December period

READ: Commentary: Assessing the benefits of an Open Electricity Market for households and small businesses

HOW WILL IT PAN OUT

On whether the Singapore market is big enough for so many players, Professor Mhaisalkar from NTU reckons that consolidation might happen in three to five years hence retailers need to differentiate themselves beyond price. 

This will involve offering unique bundled services and innovative solutions involving technology.

“Just like how the introduction of Uber and Grab disrupted the taxi market, the opportunity would be innovation. Similarly in the telco space, we’ve seen how telco players now allow their customers to monitor data usage via an app,” said Professor Mhaisalkar. 

“Something similar could happen in the electricity market.” 

On the other hand, Mr Allan Loi, a research associate at the National University of Singapore’s Energy Studies Institute, is less sure. 

He cited New Zealand, which is a much smaller market that continues to have more than 30 retailers after being deregulated for more than a decade. 

“A consumer will likely not complain if having many retailers can bring down electricity costs. So I would say we are probably not at saturation point right now.” 

However, independent retailers, especially clean energy brands, may need time to find their footing. 

“(New Zealand’s) smaller retailers started to gain ground around 5 years after operation. Hence, we may require this amount of time for consumers to fully trust smaller retailers with their electricity supply,” explained Mr Loi. 

“Having said that, many smaller retailers may eventually merge with the vertically-integrated market players. It is too early to tell when market consolidation will occur.”

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