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Wednesday, October 15, 2008

Justice Bao Gong: Increase in Electricity Prices NOT justified

(Source: The Straits Times)

Good morning Singapore and the Rest of the World,

This is a good opportunity for everyone in the world to see what really happens in Singapore- Whatever the Government says is always correct and everyone else is wrong, regardless of the facts that are backing the man in the street.

Attached is the reply from Director of Corporate Communications, Energy Market Authority (EMA), which we assume should be responsible for the increase in the electricity tariffs, since they replied in the forum to our good man, Mr Bruno Serrien, who has written in to question on the increase of electricity tariffs at a time when oil prices have been falling.

Mr Bruno noted that electricity prices have shot up 48% in the past 12 months, whereas oil prices have went down. The reply from the director of Corporate Communications was that price of electricity is pegged to the cost of fuel, and she claims that the increase was necessary because of the 38% spike in FORWARD fuel oil price from US$83 to US$115 per barrel between April and July this year. She also mentioned they will also continue to help households to conserve energy and thus save on our electricity bills.

OK, let us analyse the statistics: From October 2007 last year, oil prices closed at US$81.27pb. Today's Crude Oil nov contract is US$73.07 as I type. Thus, there is a decrease of 10% in oil prices since last year, but electricity tariffs have went up by 48% in the past 12 months: So am I doing the sums wrongly or is it the Energy Market Authority (EMA)? Details of world oil prices can be found here.

Maybe we give the director the benefit of doubt, as there was a substantial increase in oil prices in the previous quarter. So, going by her calculation, by next quarter, we should have a decrease in electricity prices by 58%. Let us see how electricity is priced next quarter then. Bookmark our page & follow this blog & wait for our update on this issue.

In light of the need for more transparency and disclosure following the financial turmoil debacle such as structured products being widely mis-sold to retirees who have lost their life savings, Singaporeans and the world would want to see greater disclosure and transparency on how pricing is actually calculated- If there is no arbritrary increases in pricing, then why shy away from disclosure and transparency?

We hope that the increases are not passed down to consumers because of poor market hedging. We welcome ALL comments from everyone around the world. If you are an expert in oil and electricity pricing, kindly do assist the man in the street by giving us a comment on how oil prices affect retail electricity prices.

Your humble servant.

The Straits Times
Energy Information Administration

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