Safeguards against Volatility of Energy Prices under Revised Electricity Market Structure

14 Mr Yip Hon Weng asked the Minister for Trade and Industry in light of the plans to revise the electricity market structure (a) what are the safeguards in place to ensure that volatility of energy prices is minimised; (b) what are the benefits to residents and consumers; and (c) when are the changes targeted to be implemented.

The Minister of State for Trade and Industry (Ms Low Yen Ling) (for the Minister for Trade and Industry): Mr Deputy Speaker, I thank the Member for his question. Second Minister for Trade and Industry Tan See Leng has explained at length in his reply yesterday the safeguards that we intend to put in place to manage the risks of volatility in our energy market. Allow me to broadly recap these measures.

First, the Energy Market Authority (EMA) will introduce a centralised approach to facilitate investments in new generation through a competitive tender to ensure that we continue to have sufficient generation capacity in time to come.

Second, EMA will institutionalise some of the emergency measures that we had introduced late last year in the wake of the global energy crisis, as permanent features of our market. These are regulations requiring our gencos to maintain sufficient fuel for power generation and the standby fuel facility to guard against risks of gas supply disruptions. EMA will also be working with the industry to explore ways to aggregate gas procurement and obtain longer-term, more secure contracts. These measures will help to safeguard energy security and enhance the resilience of our natural gas supply.

Third, EMA will also enhance the regulatory requirements imposed on electricity retailers, to ensure that they are sufficiently prepared and better able to withstand market volatilities. EMA will also look into tightening the eligibility criteria for consumers on Wholesale Electricity Price plans, so that only the larger consumers who are better equipped to deal with the risks of price volatilities would be allowed to enter into such plans.

Collectively, these measures will bring about a stronger and more secure power system, so that residents and consumers can continue to look forward to a stable and reliable supply of electricity for years to come. EMA will be consulting the industry and the public on the details of these proposed changes in due course. We plan to implement these enhancements progressively from 2023 onwards.

Mr Deputy Speaker: Mr Yip Hon Weng.

Mr Yip Hon Weng (Yio Chu Kang): I thank the Minister of State for her answer. Now that we have increased Government involvement in the electricity market again, how would that affect or curtail the market and how will MTI and EMA ensure that electricity prices continue to remain affordable to consumers?

Ms Low Yen Ling: Mr Deputy Speaker, I want to thank the Member Mr Yip Hon Weng for his two supplementary questions. I want to assure him that MTI and EMA are very mindful that the enhancement could lead to higher regulatory costs and, to mitigate this, I want to assure him and the House that we will implement the measures in a very calibrated way by balancing the cost burden while ensuring that electricity remains affordable to our consumers, households and businesses. And how this is being achieved will become clearer when the details of the enhancements are released.

Meanwhile, despite the increased Government involvement, I want to assure the Member Mr Yip Hon Weng that the electricity market will largely remain liberalised and competitive. Yesterday, Second Minister Tan See Leng spoke about the guardrails that we are erecting in the power generation, gas supply and electricity retail markets. And these guardrails are intended to ensure that our energy market continues to function well even under volatile conditions.

So, our recommendations, for example, for a very structured process in the generation segment will allow EMA to better coordinate the investments in new generation capacity. This is important for two reasons. First, to minimise any risk of oversupply for generation companies, or gencos. In addition, this will also give greater assurance to the gencos to make investments in new capacity. Furthermore, for EMA, as the provider of last resort, there will be greater assurance of adequate generation capacity to meet demand.

I want to assure the Member Mr Yip Hon Weng and also the House that MTI and EMA will continue to review and consider all areas where our market structure can be enhanced to better deliver the outcomes of energy security, energy resilience, energy reliability and affordability for consumers as well as our businesses.