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  Business Times Singapore 9 Feb 07
S'pore needs to cut utilities charges, usage
Letter to the Editor from Leong Sze Hian

I REFER to the report 'New energy standard to help reduce bills' (BT, Jan 19).

According to the Yearbook of Statistics Singapore, the water, electricity and gas tariffs' price indices have increased from 43.9 to 100, 83.8 to 110.1 and 69.2 to 104.4, respectively, for the period from 1995 to 2005.

The above is an increase of 128, 31 and 51 per cent respectively for water, electricity and gas, for the 10-year period. In annual percentage increase terms, the increase was 8.6, 2.8 and 4.2 per cent per annum.

Against the inflation rate for this period, which I understand was about one per cent, the increase relative to inflation was about 9, 3 and 4 times more than inflation.

Why is it that basic utilities which are essential items of consumption for Singaporeans have been allowed to increase so much over the years? To what extent has this contributed to the high profits of the utilities operators?

Electricity was increased a few times this year although Singapore Power's (SP) profit growth last year was 53 per cent.

As the FY2005/2006 net profit after taxation was S$1.3 billion and $404.3 million (A$335.2) for SP and SP AusNet respectively, does it mean that SP's Singapore operations contributed 71 per cent of its profits?

This profit does not include the profits of the power-generating companies which sell electricity to SP Services, which I understand are to the tune of a few hundred million dollars a year.

What is the profit margin in the monopolistic provision of utilities in Singapore?

As electricity is an essential item that is operated as a monopoly, should there not be some consideration on the level of increase of the profits derived from practically every Singaporean?

Since NYMEX natural gas futures prices have fallen from about $16 around January 2005 to about $6 in December 2006, why are we still pegging gas prices to fuel oil futures prices?

Just because this peg has been used in the past, why can't we unpeg them, since gas prices have been falling many times faster than fuel oil prices?

Currently, consumers are losing out big time, because gas tariffs have fallen by only about 5 per cent, despite a drop of about 40 per cent for gas prices.

The Electricity Tariff Reduction advertisements in the newspapers state that 'Frequently asked questions - Q3: Why do tariffs fluctuate with higher fuel oil prices when 75 per cent of Singapore's power generation uses natural gas as fuel? A3: The natural gas contracts are pegged to fuel oil prices. Hence the price of gas will also change accordingly when there is a change in fuel oil prices'.

In the past, whenever enquiries were made in the media on electricity tariff increases, the reply was that it is pegged to forward fuel prices, and an adjustment for over or under-collection in the previous quarter.

Since NYMEX crude oil futures have dropped by about 20 per cent from a high of about $78 around July 2006 to about $62 in December, why is it that the tariff for the current quarter is only being reduced by an average of 7.53 per cent?

In addition, was there an over-collection for the last quarter, and if so, shouldn't there also be a downward adjustment for the current quarter?

According to my monthly utilities bill, the national average monthly consumption for electricity is 1,233kWh and 32.9CuM for water. Therefore, the monthly average bill paid by Singaporeans is $280.16 (1,233kWh x electricity rate $0.2164 + 5% GST) and $66.06 (32.9CuM x water rate $1.17 + waterborne rate $0.30 + $3 sanitary application fee per one fitting + 5% GST).

Does this mean that the average household is paying $346.22 a month?

According to the Department of Statistics, there are 1,049,011 households in Singapore. So, does it mean that the total utilities bill annually is about $4.36 billion ($346.22 x 12 months x 1,049,011 households)?

I believe that while utilities bills have gone up over the years, the incomes of about 40 per cent of households have not caught up, and declined in inflation-adjusted terms from 2000 to 2005.

Instead of once-off rebates for utilities, why not consider some criteria or guidelines to temper utilities profits, so that lower charges may be permanent savings for consumers?

I remember when I was young there used to be national campaigns to save water and electricity. Perhaps we could start such national campaigns again, because if Singaporeans can just reduce their utilities consumption by, say, 10 per cent, there could be savings of about $436 million a year.

This may help to improve the statistic in 2005 that only about 20 per cent of those who reach 55 years old were able to meet the CPF minimum sum of $90,000 without pledging property, as the utilities savings may be accumulated to give more money for retirement.

According to the Economist Pocket World in Figures 2007, Singapore is ranked 11th in the world for 'Energy - largest consumption per head'.
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