Gov’t sets up strengthened ‘guardrails’ for energy retailers

This includes stricter qualifying criteria and higher capital requirements.

Amidst risks of gas supply woes and price shocks, the government announced a set of tightened measures for energy retailers in the Lion City.

Dubbed as guardrails, the Ministry of Trade and Industry (MTI) said the Energy Markets Authority (EMA) will ensure secure and sufficient gas supply by establishing a current crisis management measure that will require gencos to maintain enough fuel for power generation.

“This will help to safeguard energy security especially given the uncertainties and volatilities in global energy markets,” said MTI, in a statement.

Another task for EMA is maintaining the Standby LNG Facility which will resolve risks of gas supply problems as the government sees supply disruptions to be more prevalent.

“This was also introduced as part of the crisis management measures to guard against risks of gas supply disruptions,”the MTI said as it admits that PNG supplies are depleting.

EMA must also work with the industry to enhance procurement of gas such as by contracting for longer-term gas contracts for greater security of supply or “demand aggregation to provide economies of scale.”

Intensify consumer protection

EMA will also strengthen consumer protection by improving regulatory requirements for electricity retailers.

Such requirements are “stricter qualifying criteria for retailers such that only industry participants with sufficient financial strength and sustainable business propositions to withstand some degree of market volatility can enter the market.”

The government is also eyeing to impose higher capital or hedging requirements on retailers to make sure that they are resilient versus market volatility. It also plans to put up additional protections for consumers if retailers prematurely end contracts.

There will also be tightening the eligibility criteria for consumers on Wholesale Electricity Price plans, “so that only those who are equipped to deal with the risks of price fluctuations can purchase electricity at wholesale electricity prices.” 

Power generation capacity

To ensure there is enough generation capacity to meet system demand, EMA will conduct a structured process to oversee private investments in new generation.

The EMA will establish a competitive tender for about five years in advance of the year in which the generation capacity is projected to be required.

“The most competitive proposal will be awarded a licence to build, own and operate the new capacity. All new generation plantings will be coordinated within this process to avoid risks of over- and under-capacity,” read the statement.

If there is not enough private sector interest to create new generation capacity, EMA will do so as a last resort, MTI added.

MTI said EMA will initiate industry and public consultation in the next few months and will enforce these enhancements starting next year.