On 8 May 2024, the Ministry of Trade and Industry (“MTI“) and Energy Market Authority (“EMA“) announced that they are seeking public feedback on the proposed legislative amendments to the Energy Market Authority of Singapore Act 2001, Electricity Act 2001 (“Electricity Act“), and Gas Act 2001 (“Gas Act“). The consultation period ended on 5 June 2024.
The proposed amendments aim to update EMA’s regulatory regime for the energy markets and infrastructure to ensure energy security, keep Singapore’s power sector cost competitive, and achieve Singapore’s net zero target by 2050. The proposed amendments provide EMA with significant powers and authority.
Overview of the Proposed Amendments
Feedback was sought on the five proposals below.
(a) Establish a regulatory regime for centralised gas procurement. MTI and EMA intend to establish a Central Gas Entity (“CGE“) to aggregate the demand for gas from power generation companies and centralise gas procurement for the power sector.
By establishing the CGE, MTI and EMA seek to avoid reliance on individual power generation companies’ gas procurement strategies, which could potentially lead to sub-optimal system-level outcomes. For example, during the 2011 to 2012 global energy crisis, the generation companies reduced the volume of their gas contracts due to high gas prices, which led to considerable volatility in electricity prices.
The intended benefits of the new gas procurement framework under the CGE include that the CGE will be well positioned to negotiate for more favourable contracting terms for gas procurement. The CGE will also be able to capitalise on its greater economies of scale to procure gas from diversified source countries, hence reducing concentration risk.
Implementation of this proposal requires amendments to the Electricity Act and Gas Act to (i) require power generation companies to procure gas solely from the CGE, with existing gas supply contracts to be exempted from this requirement till the existing contracts expire; (ii) empower EMA to introduce gas procurement terms on generation companies; and (iii) allow EMA to regulate the CGE on matters such as sources and tenures for upstream gas contracts.
This is a material change from the current regime, and would necessarily involve the power generations companies having less flexibility and discretion in their gas procurement strategy and terms. We expect further details to be published after MTI and EMA has reviewed the feedback obtained from the consultation exercise.
(b) Allow EMA to recover costs for energy security, market development, and decarbonisation related services. During the energy transition, EMA may need to implement new initiatives to strengthen energy security, develop a competitive market and/or support the decarbonisation of the power sector. These initiatives include the procurement of domestic back-up power capacity (including battery energy storage systems) to address potential disruptions to electricity imports when they are introduced into Singapore’s power system and to address the intermittent nature of renewable energy sources, such as solar and wind.
Proposed amendments to the Electricity Act and Gas Act will allow EMA to recover the costs for such initiatives from licensees or consumers who benefit from the new initiatives.
We anticipate that this may be implemented as an additional non-fuel cost component of the regulated electricity tariff.
(c) Facilitate shared access to critical energy infrastructure. Critical energy infrastructure are installations required by licensees to provide electricity and gas supplies. There may be instances where electricity or gas licensees need to access critical infrastructure owned by other persons, including non-licensees, in order to carry out their functions.
Therefore, it is proposed that the Electricity Act and Gas Act be amended to allow EMA to direct owners of critical energy infrastructure to enter into an agreement for licensees to gain access to the critical energy infrastructure, with reasonable compensation provided for the owner. Where both parties fail to reach an agreement, either party may request for the Minister to establish an appeal panel to determine the agreement’s reasonable terms.
(d) Approval obligation for repurposing of critical energy infrastructure. The energy transition may result in owners of existing critical energy infrastructure deciding to repurpose such infrastructure for other uses. EMA propose to amend the Electricity Act and Gas Act to require owners of critical energy infrastructure to seek EMA’s approval before repurposing critical energy infrastructure. This proposal seeks to facilitate EMA’s system planning and safeguard its energy security.
(e) Empower EMA to implement power rationing during emergencies. To mitigate risks that could result from global gas supply disruptions, it is proposed that the Electricity Act be amended to empower EMA with powers to direct licensees and consumers to ration power for extended periods of time to maintain the overall stability of the power system.
While EMA has not provided further details on the mechanics of these power rationing powers, they have assured that these powers will be exercised as a last resort under extreme situations, and that the duration of power rationing will not be longer than necessary. Where circumstances are not severe, voluntary energy conservation may be encouraged as EMA’s first response, before power rationing is implemented.
Click on the following links for more information:
- MTI Press Release titled “Public consultation on proposed legislative amendments to the Energy Market Authority of Singapore Act, Electricity Act, and Gas Act” (available on the MTI website at www.mti.gov.sg)
- Public Consultation: Proposed Amendments to the Energy Market Authority of Singapore Act, Electricity Act, and Gas Act (available on the Reach website at www.reach.gov.sg)
