Law passed to allow EMA to recover costs of energy security measures

Parliament on Sept 9 passed changes to a law that will help the authorities recover the cost of initiatives undertaken to safeguard Singapore’s electricity supply in a climate-friendly way.

Second Minister for Trade and Industry Tan See Leng said the Energy Market Authority (EMA) – an agency under his ministry – will need to undertake new initiatives for energy security, market development and the transition away from pollutive fossil fuels to cleaner forms of energy.

The changes to the existing EMA Act, passed in Parliament on Sept 9, will allow the Government to recover costs associated with such initiatives to ensure the proper functioning of Singapore’s energy system, he said. It can do so by raising electricity prices for those who benefit from the initiatives.

A Ministry of Trade and Industry (MTI) spokesperson told The Straits Times there are safeguards in place to ensure any cost recovery measures are justified, such as requiring the minister’s approval for new rates.

“For example, it would potentially affect only the entities directly benefiting from such initiatives. This targeted approach would thus avoid having a broad-based hike in electricity prices that would affect the general population,” the spokesperson added.

In his speech, Dr Tan cited the example of the standby liquefied natural gas facility, which was introduced by the EMA in 2021 to stockpile supplies of the fuel, during the energy crisis after Russia invaded Ukraine.

“The (standby facility) reduced volatility in the wholesale electricity market and gave retailers the assurance to offer electricity contracts to more consumers,” said Dr Tan. “However, EMA is unable to legally recover the operating costs of such a critical facility despite the benefits conferred to all electricity users.”

The amended law will help EMA recover some of these costs, said Dr Tan, who assured the House that the authority would not seek to make any profit.

Besides the Minister for Trade and Industry approving any new rates that EMA may propose, Dr Tan said a cost recovery advisory committee with non-government representatives will be convened to provide the minister with independent advice on EMA’s proposals.

Dr Tan also said that the costs will be recovered from people who benefit from these initiatives, in line with the “user-pays” principle.

This is not new, said Dr Tan, as consumers now pay for the energy-related services they use, such as the billing and meter-reading services provided by SP Services.

“Households and businesses are understandably concerned about whether this proposal will increase electricity prices. I would like to assure consumers that EMA will only introduce new initiatives when necessary,” he added.

During the debate, MPs such as Mr Louis Ng (Nee Soon GRC), Ms Jessica Tan (East Coast GRC) and Mr Don Wee (Chua Chu Kang GRC) asked for details on how the cost recovery framework will be implemented.

Nominated MP Mark Lee suggested that such measures can be rolled out gradually in order to prevent sudden financial shock to businesses. In addition, he also called for the formation of a business advisory panel with industry representation to ensure fair distribution of costs.

In response, Dr Tan assured them that the Government will closely monitor such costs and ensure safeguards are in place.

For example, entities that benefit more from an initiative could pay a higher rate, he added. The cost recovery advisory committee could also include members who can advise on the impact of EMA’s proposed cost recovery rates on businesses, he noted.

EMA will also consult stakeholders and give them reasonable notice before introducing cost recovery measures, and, where possible, the measures will be implemented gradually to allow time for businesses to adjust, said Dr Tan.

The amendments to the EMA Act, Electricity Act and Gas Act that were passed in Parliament on Sept 9 will give EMA more regulatory teeth in ensuring Singapore’s energy security amid geopolitical tensions and climate change.

Other changes include provisions that give electricity and gas licensees access to critical infrastructure that may be owned by others, if such facilities are needed to support power generation units or for cross-border electricity imports.

The amendments to the legislation will empower EMA to direct owners and occupiers of critical energy infrastructure to allow licensees to access this infrastructure, and enter into agreements for this purpose.

Singapore has a multi-pronged approach to safeguarding its energy security in a low-carbon way.

This includes maximising the amount of sunshine it can tap for solar energy, exploring potential fossil-fuel alternatives such as geothermal and hydrogen, and importing low-carbon electricity from its neighbours.

The legislative amendments come amid Singapore’s progress in importing low-carbon electricity from its neighbours. It has inked deals with Cambodia, Indonesia and Vietnam to import up to 5.6GW of low-carbon electricity.

On Sept 5, Singapore also raised its ambition to import 6GW of clean energy by 2035 – up from 4GW previously – which is expected to make up around a third of its energy supply that year. As such, infrastructure like transmission cables and waterfront jetties may be needed to support Singapore’s electricity grid, Dr Tan said.

Licensees should first seek to privately negotiate with owners or occupiers of land where such infrastructure is located, he added. But if they fail to reach a commercial agreement, EMA will be given the powers to step in to facilitate access.

As a last resort, EMA can issue a direction should it deem that such access is necessary and in the public interest to ensure security and reliability, Dr Tan told Parliament.

The legislative amendments passed on Sept 9 also pave the way for the establishment of a Future Energy Fund. This fund will facilitate investments into clean energy technology that may involve high upfront costs and significant commercial, technological and geopolitical risks, said Dr Tan.

It will provide funding to improve the commercial viability of certain projects, helping to catalyse additional investments by other players, including private companies and statutory bodies. It will focus on supporting “capital expenditures” and cannot be used to subsidise fuel costs or recurrent expenditures. For example, the Government may provide financial support to develop Singapore’s first-ever hydrogen terminal, should it decide to utilise hydrogen as a fuel, in a bid to mitigate potential commercial risks of doing so, Dr Tan explained.

“We have begun saving up now for these infrastructure investments to reduce the burden on future generations. This prudent approach has also been adopted in other areas, such as via the Coastal and Flood Protection Fund, which protects Singapore against rising sea levels,” said Dr Tan.

This fund was first proposed in the Budget in February. The Government said then that it would inject an initial tranche of $5 billion in 2024. Dr Tan said on Sept 9 that further top-ups will be made when the “fiscal space allows”.

Other amendments to energy laws passed on Sept 9 will help to strengthen EMA’s ability to ensure the continuity of energy supply – including giving the authority oversight over key energy assets and the ability to implement power rationing, and centralising gas procurement in the country.

Source: Straits Times © SPH Media Limited. Permission required for reproduction.

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