Should SME Business Consumers switch from SP Group to Open Electricity Market Retailers?
Wait-And-Watch Policy For Some SME Consumers on the decision to switch to Open Electricity Market Retailers or not In Singapore
There is an ongoing debate on whether SME business consumers should be switching from SP Group to open electricity market retailers or not. At present all businesses that have a minimum consumption of two thousand kilowatts or pay at least 400 USD as their monthly electricity bill enjoys the eligibility to select their preferred electricity provider. In Jurong, small businesses with postal codes in the range of 60 to 64 are also eligible to select their preferred electricity service provider.
From November 1, 2018, there will be an extension of the Open Electricity Market for consumers in Singapore by zones. With the launch of Open Electricity Market, consumers can purchase from the following:
- Consumers can choose the current SP group and pay the regulated tariff. When a consumer selects this option, there is no need for any action
- Choose their preferred electricity retailer and agree to a price plan, which is most suitable for their requirements [New]
- Consumers can also opt for the wholesale market of electricity through the SP Group at ½ hourly wholesale prices of electricity [New]
However, it is important to note in this context that it is not mandatory to purchase electricity from the wholesale market or switch to one of the retailers. Consumers will continue to purchase electricity at a regulated tariff from SP Group. Non-contestable consumers are those who decide that they will not switch over to a different provider. Meanwhile, the electricity supply of a consumer will not change irrespective of the electricity retailer chosen by them because the SP Group will still operate as the country’s national power grid for supplying electricity to all the consumers.
Although there is no doubt that the SME business consumers’ switch from SP Group to Open Electricity Market Retailers can lower the prices due to the increasing competition, the businesses need to still do a proper homework. Plus, they need to look at other parameters besides price to choose the best possible plan, according to the experts.
Looking at the current scenario in the country, it appears that purchasing electricity will be quite similar to selecting a plan for the mobile phone. Rather than procuring electricity at the quarterly regulated tariff from the SP Group, consumers can now review and choose from the price plans launched by twelve approved retailers.
In fact, the upcoming roll-out will include as many as 1.4 million consumers for the rest of the country with the date decided as November 1. However, the roll-out will take place in batches and as per the country’s postal codes.
It can be noted that the retail electricity market of Singapore has been witnessing a gradual liberalization, which began with large businesses in 2001 due to the steps were taken by the country’s Energy Market Authority. Ever since an increasing number of commercial consumers or businesses have been provided with the liberty to shop for their electricity according to the threshold of their contestability. Contestability threshold refers to the amount of power consumed by a consumer every month and it was lowered in a progressive manner. In fact, as of July this year, over 50 percent of 95,000 business accounts that are eligible are known to switch over to a retailer. This accounted for about seventy-seven percent of the entire electricity demand.
Option for homeowners in Singapore
For the first time, homeowners in Singapore were offered a choice on April 1 in Jurong. It was when the Open Electricity Market’s pilot test was launched. Now, five months have passed and over thirty percent of the consumers have opted to purchase their electricity from a separate provider and enjoyed about 20 percent savings as compared to their previous electricity bills according to the Energy Market Authority or EMA.
In fact, EMA also surveyed about four hundred consumers have already changed their retailers. Approximately, 80 percent of the respondents acknowledged that this new initiative has merits like certain innovative offers and competitive prices and a more or less similar percentage of survey participants said they felt the process of switching was an uncomplicated one.
At the same time, it is also a fact that there are many in Jurong who would like to carry on with the SP Group or have not made up their minds yet on to switch or not.
According to EMA, this dilemma could be because these consumers are being cautious and are adopting a wait-and-watch policy with anticipation for more attractive deals. It could be also because these consumers do not want to change their providers.
In particular, small households might feel that the expected savings may not be worth that additional effort to figure out the choices. This was stated by Ngiam Shih Chun, the chief executive of the agency.
Some consumers feel that since there are a number of players and so there is a need for careful comparison before making their final decision. There are others whose apprehensions are what will happen to their electricity supplies in case a provider closes down. Plus, Jurong’s acceptance rate is more as compared to other countries and cities that have also liberalized their electricity markets. This was shared by Chan Chun Sing, the county’s Trade & Industry Minister.
Some more details
It is necessary for the retailers to provide a minimum of 2 standard prices plans – a plan with a fixed discount on the regulated tariff and a plan with a fixed price. However, retailers can also come up with other non-standard plans.
As mentioned earlier, if a consumer decides to stick to the SP Group, as well as, purchase electricity power at the regulated rate, they are not required to take any more actions. Additionally, it is imperative to understand that no deadline exists to switch to a different retailer. In fact, consumers enjoy the benefit of getting an uninterrupted electricity supply irrespective of who their new supplier is. It is because the SP Group will still supply electricity across the island.
The bottom line is some SMEs seem to adopt a slightly cautionary stand with respect to switching to different open electricity market retailers.