22 October 2012, Singapore. After a couple of years of talking about the possibility of having an electricity futures market, the Singapore government is close to implementing it but not before seeking views from the industry and stakeholders.
Mr. S. Iswaran, Minister in Prime Minister’s Office and Second Minister for Home Affairs and Trade & Industry, announced this at the Singapore Energy Summit today, which is also the start of the Singapore International Energy Week (SIEW).
An electricity futures market is believed to keep prices competitive for consumers. It will complement Singapore’s wholesale market, enabling independent retailers to dabble with futures contracts with the end goal of offering attractive packages to consumers. Consumers may hedge their risks by locking in longer-term prices. Power generation companies can use the futures contracts to hedge against their fuel price and operational risks during plant outages. Financial intermediaries and energy traders will stand to gain from related investment and risk management activities.
End-consumers will also stand to benefit, said the Minister.
Establishing an electricity futures market would be the latest in the string of liberalization moves that the Singapore Government had undertaken since 1995 (Figure 1) with regards to the electricity sector.
Source: EMA, “Introduction to the National Electricity Market of Singapore”, July 2009 (http://www.ema.gov.sg/media/files/books/intro_to_nems/Introduction%20to%20the%20NEMS_Jul%2009.pdf)