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Is the Pub Electricity Rate in Singapore Inflated
The PUB electricity rate in Singapore can be rather complicated to understand once you start diving deep into it. However, understanding a few basics should help you save some money on electricity by scouting for a better deal.
Up until late 2018, everyone used to pay the same rate for electricity. This is because the entire market was regulated, and everyone had to pay the same tariff. Until then, the PUB electricity rate in Singapore was calculated by SP Group, and everyone had to pay the same. The tariff was calculated quarterly. This tariff variation was attributed to fluctuation in generating the electricity as it was and still is produced using natural gas. Around 95% of the electricity produced is made using natural gas.
After November 2018, the Open Electricity Market was introduced in Singapore, allowing over 1.4 million consumers to buy electricity from retailers at the regulated tariff or preferential tariff. However, many consumers still preferred to stay with SP Group and pay the regulated tariff.
Regulated vs. Unregulated Tariff
The introduction of the OEM or Open Electricity Market also introduces the opportunity to save money. Depending on what electricity retailer you go for, you can save money on your bill, and the savings can be considerable. For example, the regulated tariff for the first quarter of 2021 was 24.13¢ per kWh. However, some retailers would offer the option for a 12-month contract with a fixed tariff that can be as low as 18.38¢ per kWh. That is about 25% cheaper than the standard tariff. Paying 25% less on electricity may not seem like a substantial amount of money saved every month, but adding the savings over 12 months becomes substantial.
Locking in a tariff for 12 or 24 months offers a general degree of predictability as the fluctuations in your energy bill will only be governed by your consumption rate. However, this is a high risk taken by the electricity retailer since, according to specialists in the industry, the prices for fuel used for electricity generation changes every 30 minutes.
How Can Some Retailers Afford a Lower Tariff?
Some retailers offer a lower tariff than the PUB electricity rate in Singapore does not automatically imply that they operate at a loss. They achieve this through various means that, in the end, lead to savings for retail customers.
The first step they take to reduce costs is to negotiate a lower rate for electricity from suppliers. They also negotiate the price for electricity transport using the national infrastructure. When the regulated tariff is calculated, there are standard rates for transport and production, using strict rules to determine these prices. By negotiating, the tariff paid by customers can be lowered.
Another method that allows retailers to sell cheaper electricity is reducing their overhead. Many new electricity retailers develop their business around efficiency and constantly look for opportunities to reduce costs. This again offers the opportunity to sell electricity to retail customers at lower prices. In turn, this approach makes them more competitive and helps increase their market share. For this reason, each retailer compares their tariffs with the PUB electricity rate in Singapore to attract new customers.