The launch of the Open Electricity Market is one of the best things to hit Singapore this year. That’s because each and every Singaporean can benefit from it in by choosing who they purchase their energy from, thereby lowering their electricity bills in the process.
But apart from looking at prices and tactical promos, many people don’t actually know what else to look out for when comparing electricity providers.
Here are some common myths that need to be dispelled.
Myth: There is no difference between buying electricity from a power generation company and an independent retailer
Before selecting an electricity provider, find out whether the company (or its parent company) is generating the electricity themselves, or whether they are an independent retailer.
The big difference is that independent retailers buy electricity from power generation companies and then resell it to you, instead of generating the electricity on their own.
Power generation companies such as providers like Geneco and Pacific Light tend to be more financially stable than independent retailers, while independent retailers can be nimbler but also need time to scale up their business.
For instance, earlier this year, Red Dot Power, an independent retailer, pulled out of the electricity market. This underscores the benefits of purchasing electricity from a power generation company rather than an independent retailer. Thankfully, the Energy Market Authority (EMA) is putting measures in place to protect consumers and ensure that this is not a recurring theme.
Myth: The more promotions an electricity company dangles, the more money you’ll save in the long run
Chasing after the electricity providers with the most generous promotions does not necessarily lead to the highest cost savings in the long run.
Smaller companies tend to try to win customers over with cheap pricing and discounts, but without the scale, they will eventually have to make back their money in the form of higher pricing later on.
Myth: If an electricity company’s power plant goes down, my power will go out
On paper, all electricity companies appear to be offering the same thing—an electricity supply to your home.
However, some people actually think that the power generated from a company’s power plant goes directly to their home, and as such if the power plant goes down, they will stop receiving power to their home.
In actual fact, power outages in Singapore don’t have anything to do with that. Because SP Group provides the main infrastructure that supplies energy to homes, a disruption to their supply line has a more direct impact on your home than anything else, as we saw in the most recent 1.5 hour outage in Jan 2019.
Myth: You will pay only the rates indicated by the company
Don’t be surprised if the total amount payable on your bill looks quite different from the charges the electricity company promised you.
Electricity companies can slap on hidden costs such as administrative costs, security deposits and more. Check out this article elsewhere on MoneySmart to find out more about hidden costs.
Myth: There isn’t any real difference between a normal electricity meter and an AMI meter
As a residential household, you are likely to already have an electricity meter. While cumulative meters were previously used by households using SP Group, you might be asked to install an Advanced Metering Infrastructure (AMI) Meter when switching providers.
The biggest advantage of AMI meters is that they can measure your electricity consumption every half hour. Cumulative meters, on the other hands, are only read every two months. This lets you track your electricity consumption much more closely.
It’s important to note that there is an installation fee of $42.80 that you are required to pay but what the AMI meter does allow you to do is track your consumption more accurately, and if you are signing up for a special package such as one that gives you free electricity on Sunday, for example, you’re going to want to make sure that is tracked as accurately as possible.
These are some of the essential things you should know in order to make a more informed decision when picking an electricity provider. If you take only one thing away from this article, it should be that it’s a safer bet to sign up with power generation companies rather than independent retailers who are just reselling other companies’ electricity.
Do you have any other questions about purchasing electricity on the open energy market? Leave them in the comments!
Personal finance tips delivered to your inbox!
Receive news, subscriber-exclusive promotions and guides on how to become smarter with money.
We promise never to spam you!