Three generators to dominate Singapore power market

9 July 2002 – When Singapore launches its new power market later this year, trade in electricity will remain in the hands of three government -linked power companies whose positions will be protected for 12 years, a government official said on Monday.

Raymond Lim, Minister of State for Foreign Affairs and Trade and Industry, said the three electricity generating companies would be joined by a fourth licensee later this year and two more in 2005.

The wholesale power trading system is part of Singapore’s drive to liberalise and privatise its S$2.75bn ($1.54bn) wholesale electricity market.

The market, however, will remain state-led for some time by Tuas Power – wholly-owned by the government’s investment arm Temasek Holdings – Power Senoko and Power Seraya, which together control some 90 per cent of the total electricity capacity on this island nation.

“These companies will have market power for about twelve years,” said Lim, referring to the “three big generation companies.”

Singapore’s Energy market Authority (EMA) confirmed that Tuas, Senoko and Seraya were the three firms concerned and that SembCorp Cogen, would be the fourth company to receive a power trading licence.

The two firms to be licensed for the power market in 2005 will be Island Power Company Pte Ltd and Keppel FELS Utilities Pte Ltd, the EMA official said.

Lim’s comments came in response to a question by Andy Gan Lai MP who questioned whether the new arrangements would lead to sufficient competition in the power market.

Lim said the Ministry of Trade and Industry would prevent the three dominant power generators from bidding up electricity prices by imposing a system that obliges them to sell part of their capacity into a pool at a specified rate.

“Generation companies will have to compete to sell the rest of the capacity that is not vested into the pool. With market power removed, the pool price is likely to be competitive,” Lim said.

The three large generators will also be prevented from expanding their market share during the time that the pooling system is in place, leaving the door open to new competitors.

“New capacity to meet demand growth will have to be met by companies other than the big three generation companies.”

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