SINGAPORE, Nov 3 (Reuters) - Singapore is
looking at an electricity futures market that will allow industry players to
hedge their pricing risk while providing new business opportunities for
financial firms and energy traders, the head of the city-state's energy
regulator said on Thursday.
Such a market will help to raise transparency
and reduce risk for new power generators and retailers entering the market,
said Chee Hong Tat, the chief executive of the Energy Market Authority.
"An electricity futures market presents
an opportunity for third parties such as financial intermediaries and energy
traders to participate in investments and risk," he told delegates at
Singapore International Energy Week.
The authority has started speaking with
industry participants and will seek wider feedback at a later stage, Chee told
Reuters on the sidelines of the conference, without giving a time frame.
"We have some initial views from the
industry which have been supportive, but we plan to launch a more structured
consultation," he said.
The government will study the power markets in
Australia, the United Kingdom and New Zealand, which feature trading of
electricity derivatives.
"For a long-term hedge market to develop,
participants need to have confidence that the government is not going to step
in," Carl Hansen, the chief executive of New Zealand's Electricity
Authority, told Reuters.
Contracts offered in a power derivatives
market in Singapore could also allow players to hedge their fuel costs, said a
senior executive at derivatives exchange Nasdaq OMX.
"The next step for Singapore could be to
combine the gas and power markets, because the country is so dependent on the
fuel. Then you could offer contracts that allow generators to buy gas and sell
power at fixed prices," said Kjell Asserlind, Head of Global Sales,
Commodities Solutions, at Nasdaq OMX.
This will encourage generators to enter into
long-term contracts, he added.
Singapore depends on natural gas for 80
percent of its power generation needs. A liquefied natural gas (LNG) import
terminal is due to start operations in 2013 that will allow utilities to
diversify their sources of gas.
The city-state's electricity market has been
partly liberalised, with around 75 percent of total electricity sales open to
competition. It is currently studying the prospect of full retail competition
for the market.
Reuters
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