<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Gencos don't make 'extraordinary profits'
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->I REFER to Tuesday's letter by Mr Quek Soo Beng, 'Power rate formula can be more fair', and last Saturday's editorial, 'Should power rate formula be tweaked?'
Mr Quek expressed concerns about the profits of power generation companies (gencos) due to the way the electricity tariff formula is structured.
The current arrangement does not allow gencos to make 'extraordinary profits' as they have to lock in their gas purchases at the same forward fuel oil price as that used in the electricity tariff to minimise their exposure to market fluctuations. Hence, this forward price determines the actual fuel costs of the gencos.
Mr Quek also commented on the time lag for falling fuel oil prices to be reflected in electricity rate reductions. The current electricity formula works both ways - although the tariff moves down gradually in a falling oil market, it also moves up slowly in a rising market.
As a result, consumers have been better off with this formula over the past few years and have, for the most part, paid less for their electricity when the fuel oil price was on a persistent rising trend. For example, under the present formula, the electricity tariff between October last year and September this year was, on average, 10 per cent lower than it would have been if we had used the prevailing oil market price as the benchmark.
=> Ah! It's the same "it could be worse" theory, but she was silent that Sporns are the "most sucked" in the world!
While the current tariff formula has served us well, we recognise that the situation today has changed because of a markedly volatile energy market. The editorial also called for a more dynamic formula to make market pricing of the electricity tariff more efficient.
The Energy Market Authority is reviewing the tariff formula to make it more reflective of the prevailing market oil price, as well as to minimise volatility of the tariff.
We welcome and will take into consideration all feedback and suggestions before deciding on any change to the formula. Jenny Teo (Ms)
Director (Corporate Communications)
Energy Market Authority
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->I REFER to Tuesday's letter by Mr Quek Soo Beng, 'Power rate formula can be more fair', and last Saturday's editorial, 'Should power rate formula be tweaked?'
Mr Quek expressed concerns about the profits of power generation companies (gencos) due to the way the electricity tariff formula is structured.
The current arrangement does not allow gencos to make 'extraordinary profits' as they have to lock in their gas purchases at the same forward fuel oil price as that used in the electricity tariff to minimise their exposure to market fluctuations. Hence, this forward price determines the actual fuel costs of the gencos.
Mr Quek also commented on the time lag for falling fuel oil prices to be reflected in electricity rate reductions. The current electricity formula works both ways - although the tariff moves down gradually in a falling oil market, it also moves up slowly in a rising market.
As a result, consumers have been better off with this formula over the past few years and have, for the most part, paid less for their electricity when the fuel oil price was on a persistent rising trend. For example, under the present formula, the electricity tariff between October last year and September this year was, on average, 10 per cent lower than it would have been if we had used the prevailing oil market price as the benchmark.
=> Ah! It's the same "it could be worse" theory, but she was silent that Sporns are the "most sucked" in the world!
While the current tariff formula has served us well, we recognise that the situation today has changed because of a markedly volatile energy market. The editorial also called for a more dynamic formula to make market pricing of the electricity tariff more efficient.
The Energy Market Authority is reviewing the tariff formula to make it more reflective of the prevailing market oil price, as well as to minimise volatility of the tariff.
We welcome and will take into consideration all feedback and suggestions before deciding on any change to the formula. Jenny Teo (Ms)
Director (Corporate Communications)
Energy Market Authority
