In response to the global energy crunch and disruptions to piped natural gas (“PNG”) supply, EMA has introduced pre-emptive measures to secure our fuel and electricity supply. These include directing generation companies (“gencos”) to procure sufficient fuel for the generating stations owned and operated by the gencos undersection 27(1) of the Electricity Act, as well as establishing a standby liquefied natural gas facility (“SLF”) which gencos can draw upon if their PNG supplies are affected.In addition, in the event of a supply shortfall in the Singapore Wholesale Electricity Market (“SWEM”) to meet demand, EMA has established a framework to pre-emptively direct gencos to generate, including using gas from the SLF (“Standby Gas”).

EMA has also put in place the Temporary Electricity Contracting Support (“TRECS”) scheme to help large consumers who are not able to obtain retail electricity supply contracts. Under the TRECS scheme, EMA will provide Standby Gas to gencos with affiliated electricity retailers (collectively referred to as “gentailers”) so that they can offer monthly fixed price retail contracts to large business consumers who would otherwise be exposed to buying electricity from the SWEM at volatile half-hourly prices ,i.e. the Uniform Singapore Energy Price (“USEP”). However, the demand for TRECS contacts has outstripped the limited supply, and the large business consumers who cannot secure the TRECS contracts will remain exposed to USEP volatility. 

Despite the pre-emptive measures implemented, the USEP remains volatile especially during PNG supply curtailments, with significant adverse impact on the functioning of the broader electricity market affecting both energy security and electricity consumers. In particular, there is risk aversion among the gencos and inturn reluctance to increase their contractual obligations and offer more supply into the SWEM, as they would be exposed to high and volatile USEP should their generation units trip. As such, there is less buffer capacity for the system to react when there are system stress events such as unplanned gas supply curtailments or unplanned outages of generating units. This has also led to a vicious cycle of reduced supply in both the SWEM and retail electricity market and even higher USEP volatility which reduced liquidity in the Electricity Futures Market (“EFM”), and consequently the exit of some independent retailers (“IR”). The large business consumers who are affected by the IRs’ exit or non-renewal of their retail contracts and still unable to secure more stable electricity prices through the TRECS Scheme will remain exposed to USEP volatility in the coming months.

EMA therefore intends to introduce a Voluntary Standby Capacity Scheme (“VSCS”) which will help to stabilise our power system and market, and curb the vicious cycle of reduced electricity supply and retail contracts affecting all market participants and consumers. More details in the attached consultation paper. As part of implementing the VSCS, the Market Support Services Code (“Code”) will need to be modified to reflect the hedging provided to Wholesale Consumers under the VSCS. Given the urgency to protect the interests of consumers exposed to USEP volatility during these extraordinary times, and accordingly the need to avoid extensive, costly and time-consuming IT system changes, EMA intends to:

a. Administratively determine the half-hourly adjustment to the Monthly Energy Uplift Charge (“MEUC”) component in the Electricity Charge formula set out in Equation 6.1(a) under clause 6.1.2 of the Code taking into account the CfDcredit/debit to be passed through. The required modifications to the Code areas shown inAppendix 1.

b. With respect to the Code, direct MSSL under section 17(1)(e) of the ElectricityAct to adopt the said modifications to the Code which are necessary in relationto the VSCS to protect the interest of consumers.