Malaysiakini: Shedding light on S’pore’s power tariff hikes

I refer to the article, ‘Electricity tariff hike put on hold, says Chin‘ on Dec 9.

Although the Malaysian cabinet had earlier agreed to an electricity tariff revision, Energy, Green Technology and Water Minister Peter Chin Fah Kui has recently announced that electricity rates have been put on hold for now, and the government will review the rates when the environment is more conducive.

In this connection, in the article ‘TNB urban household electricity poll 290506 billgains from tariff hike offset by rising fuel costs’, a research house said that the key obstacle to the implementation of a tariff revision is the current political climate, as the government appears to be gearing up for a general election.

In contrast, how does Singapore handle increases in their electricity tariff? How does Singapore manage increases, considering that an election is also looming this year?

Singapore has just announced another electricity tariff increase from Jan 1, 2011, by another 3.3 percent.

Singapore’s electricity tariff is adjusted quarterly, relative to fuel prices and other costs. Every once in a while, the Singapore government gives out rebates to help cushion electricity tariff increases.

Over the last three years, the Singapore domestic electricity tariff increased by 14 percent, from 22.62 Singapore cents (54 sen) on Jan 1, 2008 to 25.79 Singapore cents (62 sen) on Jan 1, 2011.

On the same day that the tariff increase was announced, the Singapore government also announced that about 800,000 Singaporean HDB (public housing) households can expect to receive about S$50 million (RM120 million) worth of Utilities-Save (U-Save) rebates in January 2011 and a second tranche of S$30 million (RM72 million) of rebates  in July 2011.

I estimate the average rebate per household to be about S$100 (RM240) or S$80 million divided by 800,000.

This is a far cry from what almost all Singapore media reports had said, that a Singaporean household may receive up to S$190 (RM456) worth of U-Save rebates in 2011, depending on HDB flat type.

Since the tariff will increase by 3.3 percent this quarter, and SP Services, the only provider of domestic electricity in Singapore, said families in four-room HDB flats will on average pay about S$3.15 (RM7.57) more a month, the average bill may be about S$100.

Media reports have  also cited the example of a three-room flat household having an average bill of $100.

What is the average electricity bill for households in Malaysia?

U-Save enough

If the average monthly utility bill per household is S$100, the 14 percent increase in the electricity tariff means that the increase for this year alone is about S$168  (RM404) – S$100  times 12 months times 14 percent.

taman wahyu tnb electrical power cables tower 051206 02So, how do the U-Save rebates help Singaporeans, especially low and middle-income households, cope with the higher cost of living?

In order to truly help Singaporeans cope with the higher cost of living, shouldn’t the rebates be enough to at least cover the increase in the tariff, since the U-Save rebates are part of the S$4 billion (RM9.6 billion Goods & Services Tax (GST ) offset package, when GST was raised from 5 to 7 percent in 2007?

Just like Medisave top-ups that never seem to be able to catch up with increasing medical costs, CPF (Central Providend Fund) housing grants that never catch up with HDB price increases, the U-Save rebates may also not catch up with rising electricity tariffs.

In order for subsidies to effectively help Singaporeans, they must offset price increases as well.  Otherwise, it may just be akin to the left pocket getting more money than what the right pocket is giving out.

How many households in Singapore will get rebates of not more than S$120 (RM288)? How many will get rebates that are enough to offset the tariff increase?

Without such statistics, how do we know whether the majority of households are better or worse off?

How it all began

U-Save rebates were first given out in 1996 to help offset increasing electricity tariffs, and the highest amounts doled out were S$226 million (RM543 million) in 2001 and S$200 million (RM480 million) in 2008 respectively.

I could not find a record of the electricity tariff in 1996.  The oldest that I could find on Singapore Power’s web site was August 1, 2000, at 17.66 Singapore cents (42 sen).

So, if we take 2000 as a starting point, the tariff has increased by 46 percent. And we are just getting S$80 million (RM192 million) of rebates?

In this connection, in the Singapore Budget Speech 1996, it was said that “Singapore Power’s electricity tariffs are too low, and we must raise them gradually over several years, to enable SP to earn an adequate return on its capital… This is the real reason for raising SP’s tariffs.  It is not to raise more money for the government”.

Finally, have you ever wondered why Malaysia and Hong Kong’s electricity tariff at 21.8 to 33.4 sen and 12.30 US cents (38 sen)  respectively, are so much lower than Singapore’s 62 sen (25.79 Singapore cents)?

Profiting from power

By the way, according to Singapore Power’s annual report financial highlights, underlying net profit after tax rose by 18 percent, from S$616 million (RM1,480 million) to S$728 million (RM1,750 million) in its last financial year.

NONEIn contrast, Tenaga Nasional Berhad’s net profit was MYR917.9 million in FY2009, a decrease of 64.6 percent compared with FY2008.

All three power generation companies in Singapore that were given to Temasek, Singapore’s government investment holding company, have been sold to foreign companies, including a Malaysian company.

In this regard, have any of Malaysia’s power generation providers, that in most countries are generally prized as important state assets, been sold to foreign companies?

About the Author

Leong Sze Hian has served as the president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), Hotel Mumbai (associate producer), invited to speak more than 200 times in about 40 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of 2 countries. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.