Out-Law News 1 min. read

Singapore considers tightening licensing rules for electricity retailers

Singapore’s Energy Market Authority (EMA) is considering tightening licensing requirements for electricity retailers in order to protect consumers against the risk of provider failure, according to a press report.

The EMA may require electricity retailers to improve their physical hedging and capital positions and may even require them to provide performance bonds.

The EMA has conducted a review of the electricity retail licensing regime to improve retailers' tolerance for risk and further protect consumers. It may also require retailers to conduct periodic financial stress tests. The EMA will not approve any new retailer licenses until the review is complete.

Renewables expert John Yeap of Pinsent Masons said: “Global events have caused unexpected fluctuations in the cost of energy. Retailers with mismatched price positions could potentially face liquidity issues. The proposed tightening of the licensing requirements is no doubt aimed at minimising such risks, which on the one hand will lead to higher retailer prices, as retailers will seek to pass on these costs to consumers where possible, but on the other hand should deliver a more robust electricity supply industry for the island state.”

In November 2018, Singapore launched its Open Electricity Market (OEM) to all consumers across the country. Consumers can now buy electricity from any electricity retailer they want. However, in mid-2021, given the continued increase in global gas prices, many electricity retailers exited the market.

In February, the EMA extended its temporary electricity contracting support scheme (TRECS) until May 2022. The regulator has since extended the scheme further, until June.

The EMA launched the TRECS scheme in December 2021. Under the scheme, the EMA works with power generation companies and electricity retailers to provide one-month fixed price electricity plans to consumers.

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