IN THE letter, "Govt and EMA should consider middle-class too" (my paper, Oct 7 ), Mr Alex Chan expressed concerns over the increase in the electricity tariff and the cost of living.

The tariff is updated every quarter to reflect changes in the forward fuel-oil price in the first month of the previous quarter.

The revised tariff is therefore not based on a "projected increase in oil prices", but on actual prices traded in the commodities market.

For example, SP Services used the forward fuel-oil price in April this year of US$83 (S$121) per barrel to set the tariff for July to September, and the price in July of US$115 (S$168) to set the tariff for October to December.

This 38-per-cent increase in the oil price between April and July is the reason for the spike in the electricity tariff.

As Mr Chan has noted, the fuel- oil price has started to come down recently. If the oil price continues to stay down, then the tariff would also fall in due course.

Mr Chan suggested that the Energy Market Authority (EMA) should have intervened to suppress the tariff increase. However, all of Singapore's electricity is generated from imported fuel.

When the global price of fuel oil goes up sharply, it is untenable for us to keep the electricity price down.

Some governments try to subsidise electricity prices, but they find it very hard to sustain such a policy.

Hence, our approach is to price electricity properly, while providing focused and targeted assistance, especially for lower- income groups.

In the long term, the best way to keep the electricity price down is to make use of competition to drive efficiency gains in the industry, for the benefit of all consumers.

This is why EMA is taking steps to liberalise the electricity market for the household sector. When liberalisation is completed, households will be able to purchase electricity from competing providers and price plans.

The Government is mindful of the impact of the higher cost of living on middle-income Singaporeans. They have not been left out of the Government's surplus- sharing and assistance schemes.

For example, in this year's Budget,middle-income Singaporeans received their share of Growth Dividends, personal income- tax rebates, Medisave top-ups and other benefits.

These measures will help them offset the increased cost of living.

Ms Jenny Teo
Director
Corporate Communications
Energy Market Authority

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