<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Power rate formula can be more fair
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->I REFER to last Saturday's editorial, 'Should power rate formula be tweaked?', which lamented the long time lag of about six months for falling fuel oil prices to be reflected in electricity rate reduction.
I fully agree with the editorial as it parallels a letter I wrote to Forum the day before.
In the illustrations, the forward fuel oil price prevailing in July was US$147 (S$262) a barrel or thereabouts. This was used to price the power rate in the final quarter, October to December, when fuel oil prices dropped drastically from US$100 to US$60 to US$40 currently.
Let us say the average oil price comes to US$70 in this quarter. Depending on the actual purchase timing and costs of the power generation companies (gencos), there could be an extraordinary margin of as much as 50 per cent to be gained, simply from the way the present formula is structured.
This prompts a further question consumers need to be answered. Who pockets such extraordinary profits, whatever the actual amounts, and is it fair that consumers are made to pay for these profits, which arise simply from the leakiness of the present formula?
Hence I believe the case for the power rate formula to be tweaked is even more iron-clad and urgent as this situation will extend to the impending first quarter of next year, given the continuing falling trend in oil prices.
I hope the authorities can illuminate and comment. Much as oil price movement is an uncontrollable fact of life, we should not accept the inevitability of our 'sitting duck' fate by even making controllables uncontrollable.
Quek Soo Beng
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->I REFER to last Saturday's editorial, 'Should power rate formula be tweaked?', which lamented the long time lag of about six months for falling fuel oil prices to be reflected in electricity rate reduction.
I fully agree with the editorial as it parallels a letter I wrote to Forum the day before.
In the illustrations, the forward fuel oil price prevailing in July was US$147 (S$262) a barrel or thereabouts. This was used to price the power rate in the final quarter, October to December, when fuel oil prices dropped drastically from US$100 to US$60 to US$40 currently.
Let us say the average oil price comes to US$70 in this quarter. Depending on the actual purchase timing and costs of the power generation companies (gencos), there could be an extraordinary margin of as much as 50 per cent to be gained, simply from the way the present formula is structured.
This prompts a further question consumers need to be answered. Who pockets such extraordinary profits, whatever the actual amounts, and is it fair that consumers are made to pay for these profits, which arise simply from the leakiness of the present formula?
Hence I believe the case for the power rate formula to be tweaked is even more iron-clad and urgent as this situation will extend to the impending first quarter of next year, given the continuing falling trend in oil prices.
I hope the authorities can illuminate and comment. Much as oil price movement is an uncontrollable fact of life, we should not accept the inevitability of our 'sitting duck' fate by even making controllables uncontrollable.
Quek Soo Beng
