What about non-fuel cost?

Letter from David Boey

IT IS not surprising that the recent application by the two public transport operators to increase bus and train fares has raised the ire of some commuters.

Consumers do not welcome price increases for goods or services for which an alternative is out of their reach.

It is surprising, therefore, that households have generally accepted the electricity tariff without much fuss.

This may be due to most of them believing, somewhat mistakenly, that the tariff is closely correlated to the price of fuel and, as price-takers, there is nothing much they can do about the latter. And because the tariff has risen less rapidly than the price of fuel this year, perhaps it cannot be all that bad.

However, the cost of fuel accounts for about only half the tariff.

One component of the tariff that has received scant scrutiny is the non-fuel generating cost — the amount paid to the electricity generating companies to cover their non-fuel expenses (such as depreciation, staff costs, taxes) and profit.

For the first nine months of this year, the average non-fuel generating cost (excluding Goods and Services Tax) stands at 6.63 Singapore cents/kWh, an increase of almost 18 per cent from the 5.62 cents/kWh for the corresponding period last year.

These cents translate into about S$480 million annually for domestic consumers in total, compared to about S$410 million last year (annualised and based on last year’s demand).

Domestic demand is less than one-fifth of total demand, however.

Including non-domestic consumers, the total non-fuel generating cost paid to the electricity generating companies may be as much as, if not more than, the S$1.4 billion in combined annual passenger revenues of SMRT and SBS Transit.

The percentage increase, at least for domestic consumers, is much more than the proposed 2.8-per-cent increase in bus and rail fares.

How much of it goes towards the generating companies’ profits?