CNA Explains: Electricity tariffs are at a record high. Should you lock in a plan now or wait?

CNA Explains: Electricity tariffs are at a record high. Should you lock in a plan now or wait? Almost two-thirds of households still buy electricity under SP Group's regulated tariff. Here's what to consider before deciding whether to lock in a retail plan. SINGAPORE: Electricity tariffs have hit a record high in Singapore, as natural gas prices, driven skyward by the Middle East conflict, have pushed up the cost of producing electricity. For the July to September quarter, the household electricity tariff will rise by 17 per cent, or 4.64 cents per kilowatt-hour before Goods and Services Tax (GST), adding about S$17 (US$13.18) a month to the average electricity bill for a four-room HDB flat. Earlier this year, Manpower Minister and Minister-in-charge of Energy Tan See Leng warned that the July-September tariff would see "significantly sharper increases" because of the way Singapore's regulated tariff is calculated. He added that households wanting to hedge against higher prices could switch to a fixed-price contract. However, the Energy Market Authority (EMA) said on Tuesday (June 30) that if the Middle East situation improves, lower fuel prices could lead to lower electricity tariffs in the fourth quarter. That leaves households that have yet to lock in a fixed-price plan with a dilemma: Should they sign up for one now, or wait to see if electricity tariffs ease later this year? Will electricity tariffs come down? Possibly, but not immediately. Singapore generates about 95 per cent of its electricity using imported natural gas, leaving local electricity prices highly vulnerable to supply shocks in global fuel markets. Grid operator SP Group reviews the regulated electricity tariff every quarter, based on the gas prices in the first 2.5 months of the previous quarter, according to EMA. For example, gas prices between April and mid-June 2026, when global fuel prices were elevated, are used to set the tariffs for July to September 2026. This means that changes in fuel prices in the third quarter will only show up in the electricity tariffs in the fourth quarter. “The record high electricity tariffs are at a critical watershed now - much will depend on the still unfolding scenario on the Middle East oil and gas situation,” said Professor Lawrence Loh, director of the Centre for Governance and Sustainability at the National University of Singapore (NUS) Business School. “Even when there may be truces for the current periods, the setting can be volatile,” he said. “It is likely that the fuel and electricity prices will remain high, if not rise higher, before they can subside if the situation gets better” Dr Sung Jinseok, a Research Fellow at the NUS Energy Studies Institute, said that while electricity prices may fall in the fourth quarter if the geopolitical situation in the Middle East stabilises, the fall is more likely to be insignificant. “In many countries, Q3 is a peak demand season, and there are still a lot of uncertainties in the situation in the Middle East,” he said. “A return to the pre-conflict price level can happen in 2027, assuming the situation will be normalised in the Gulf region.” What are my options if I’m choosing an electricity plan today? Households may choose to stay on SP Group’s regulated tariff, or sign up for an energy retailer’s fixed-price plan. Some retailers also offer time-of-use plans, or plans that give a discount off the regulated tariff. According to EMA, 62.8 per cent of households purchased electricity from SP Group under the regulated electricity tariff as of Jun 1, while 37.1 per cent of households were on fixed-price retail plans. “Since EMA announced the expected increase in electricity costs in mid-June, we have seen daily sign-ups increase by approximately four times in recent weeks,” said CEO of energy retailer Geneco Lim Han Kwang. PacificLight Energy general manager Geraldine Tan said the retailer has observed a steady increase in its customer sign-ups since the fuel price increases due to the conflict in the Middle East. As of Jul 3, EMA's price comparison website showed 24-month fixed-price plans at 27.5 cents per kWh (including GST), below the regulated tariff of 34.78 cents. Households on the regulated tariff pay the rate reviewed every quarter under EMA's pricing framework. Because there is no retail contract, they remain free to switch to an electricity retailer later. The trade-off is that bills can rise when fuel prices go up. Fixed-price plans lock in a rate for a contract period, typically between six and 24 months, although some retailers offer longer contracts. The household pays the same contracted rate,even if the regulated tariff rises. But if the regulated tariff later falls below the contracted rate, the customer continues paying the fixed rate until the contract ends. "While no one can predict how electricity prices will move in the coming months, many customers value the certainty of knowing exactly what they will pay each month," said Senoko Energy head of commercial and corporate communications James Chong. "In today's environment of continued volatility in global energy markets, that peace of mind can be just as valuable as the immediate savings. Dr David Broadstock, a partner at energy consultancy Lantau Group, said a fixed-price plan makes sense only if consumers believe tariffs are unlikely to fall sharply. "This seems fairly probable since fuel prices have been hovering in reasonable steady levels," he said. Discount-off-tariff plans move with the regulated tariff, but apply a fixed discount to it. For example, Senoko Energy has a plan offering a discount of 1.64 cents per kWh off the SP tariff, while PacificLight Energy introduced a new plan on Wednesday offering an 18 per cent discount off the tariff. However, the downside is that electricity rates will change when the regulated tariff changes. “Discount-off-regulated-tariff options make more sense for consumers when the tariff rate itself is stable,” said Dr Broadstock. “This makes it easier for consumers to have confidence that they are likely to save money. However, the current context is different from that, with a tariff rate that has been moving around a lot, and with more changes possible.” Time-of-use plans charge different rates depending on when electricity is used. They may suit households that can shift more consumption to off-peak hours, such as by running appliances at night. But regardless of the plan chosen, the physical supply of electricity remains the same, with SP Group continuing to operate Singapore's power grid and deliver electricity to homes. The main factor is the consumers' risk tolerance, said Prof Loh. “If you think you can sleep better with the mitigation of upside risk, take the fixed-price plan but you are more concerned about the downside risk and care about the regret factor, then take the discount-off-regulated-tariff plans.” Should I wait for better deals or lock in now? Energy retailers CNA spoke to said the regulated tariff and retail fixed-rate plans are priced differently and therefore do not always move in the same direction. "The regulated tariff is determined on a quarterly basis, based on the average daily cost of natural gas in the first 2.5 months of the previous quarter. In contrast, electricity retailers price fixed-rate plans based on the forward energy futures prices over the tenure of the contract, which reflects market expectations of future energy prices," said Mr Chong. Mr Lim said that as fuel cost forms the largest component of the electricity rate, the fixed rate is largely determined by the hedged fuel cost. Dr Broadstock told CNA that retailers’ price adjustments are a reasonable reflection of further geopolitical risk, as the prices they are offering are based on the expectations of fuel costs over the coming months. “Pricing for continued instability is quite prudent from a commercial perspective, and would reduce the risk of market exit should fuel market conditions deteriorate any further, as retailers may have some buffer built in to their pricing,” he said. Prof Loh said energy retailers’ exposure to risk at the aggregate level is very significant. “In some ways, consumers paying this premium is like buying insurance for price increases,” Prof Loh added. In other words, current retail offers may already reflect retailers’ expectations of fuel prices, hedging arrangements and competitive pressures, not just the latest regulated tariff. Analysts cautioned households against “timing the market” for better deals. “There is never an easy time or way to confidently time the market, but when major uncertainty exists as in the fuel markets right now, things can move far from expectations very quickly,” said Dr Broadstock. Prof Loh said most households were unlikely to time the market better than institutional players. “Instead of trying to call the bottom, it’s better to settle for fixed prices if you want peace of mind when things go awry.” What should I compare before signing up? Before signing up, households should consider the different options against their own usage patterns and their ability to live with further price changes. “The beauty of a fixed-price plan is certainty, which is very attractive for household budgeting,” said Dr Broadstock. Prof Loh said that households with high energy consumption could face greater risks, so fixed prices are more appropriate for them. “Tight budgets may not be conducive to large price fluctuations - if the fixed prices are within your budgets, go for certainty - in other words, take the fixed-price plans,” he said. But for households who do not mind quarterly changes in electricity rates, so long as they are lower than the regulated tariff, a discount-off scheme may be a better option. “The opportunity with the tariff, or a discount-off scheme, is that they may, within the duration of a fixed price plan, lower far enough to make them cheaper”, said Dr Broadstock. Other factors to consider include sign-on bonuses, bill rebates or earlier contract renewals. For instance, Mr Chong said existing Senoko customers have been renewing their contracts earlier, taking advantage of the retailer's policy that allows renewals up to six months before contract expiry. But ultimately, the choice between a discount-off-tariff and fixed-price plan, or a shorter-duration and longer-duration plan, depends on the consumer’s risk appetite. “Make the decision depending on your situation and not as a game of chance,” said Prof Loh.