5 key reasons why Singaporeans are hesitant to switch to an electricity retailer

It's been four years since the Open Electricity Market (OEM) launched in Singapore… aka four years since Singapore Power (SP) Group gave up its monopoly and let private electricity retailers shoot their shot at scoring a slice of the power pie.

For consumers, that means the freedom to choose the cheapest electricity retailer, resulting in significant savings.

Liberalisation efforts in Singapore - the Open Electricity Market (OEM)

The OEM was launched by the Energy Market Authority (EMA) in April 2018 in Jurong. The launch comprised of four phases which slowly covered the residential areas in Singapore, starting from before finally completing the nationwide rollout in May 2019.

Back then, there were 13 electricity retailers jostling for customers in an acquisition frenzy, pushing prices to new lows, inspiring encouraging early switch rates of up to 40 per cent for the first few phases. (Today, there are only nine retailers left).

With that, everything seemed on track and en route to success. After all, Singaporeans are a bunch of price-conscious shoppers (read: cheapos) who are known to go to ridiculous lengths for free things and jump through hoops for discounts.

So when given the choice of cheaper electricity prices, we sure chiong what, right?

...Perhaps not.

How many Singaporeans have switched from SP Group?

Although there was an initial spike in activity when the OEM first launched, now that the initiative has done its rounds, the results are meh.

According to the Energy Market Authority, 49 per cent of Singaporean households and 47 per cent of businesses have switched to electricity retailers from the OEM. That means… a majority 51 per cent of Singaporeans are still too lazy to make the switch.

5 reasons why some Singaporeans have yet to switch to an electricity retailer

The inertia is quite surprising, to me at least.

Do people not know that they can save money by switching to a new electricity retailer? Literally every retailer is cheaper than SP's tariff rates.

Personally, I made the switch the moment my household became eligible. So to understand the others who are hesitant, I asked around the MoneySmart office for some insight.

"I thought you very MoneySmart? Why you never change?"

For reference, I asked a good mix of our local and expat team members living in Singapore. Most of them are in their 20s to 40s, and are aware of the OEM.

Here are five reasons why they didn't switch from SP Group to the OEM's electricity retailers:

1. Insufficient savings - "It's not that much, right?"

As mentioned, the respondents all knew of the OEM and presence of new electricity retailers that advertise cheaper electricity prices.

They were all aware that there are savings, but the question is, how much? And is it worth it?

"I know that there are now options, but so far, the comparison sites don't look like they offer much savings," shares Caitlin, who lives in an HDB flat.

She further explained that when she compared the rates online, there was no more than one cent difference in the rates. So since her bills are still manageable, she doesn't feel the outrage needed to motivate a switch.

That makes complete sense.

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In fact, many respondents shared the same sentiment, asking, "Is it really that much cheaper (than the tariff)?"

Well, it depends on the type of plan you pick and how long you're willing to bind yourself to a contract.

So if you just compare the rates, the potential savings are (almost) indisputable.

However, while the percentage savings may seem impressive, the actual dollars and cents may not be so.

For those who stay in four-room HDB flats or smaller - i.e. most of Singapore - the estimated consumption is about 136 kWh to 367 kWh, which only translates to savings under $20 monthly.

For some, that's just not enough to go through all the hassle…

Which brings us to our next point.

2. Administrative hassle - "For that few dollars, I can't be bothered."

One of the respondents, Terence, admitted that his reasons can be summed up with one word: "lazy".

Again, he wasn't the only one. Albert, who lives in a one-room condo apartment, agreed, sharing that even though his friends and family may have switched, their decisions don't affect him because he's "just too lazy to switch" and wouldn't, unless "it's really very easy".

This is totally understandable. Everyone hates dealing with paperwork, hidden costs, and administrative fees. Previously (with SP), we literally had to do nothing - except pay, of course.

Now, we have to do things like transfer our accounts and change our billing systems? No, thank you.

But while I empathise to a certain extent, as someone who's personally gone through the process, switching from SP was surprisingly painless. I only took about 20 minutes to get it all settled.

The only gripe I have is that I happened to pick a retailer that doesn't consolidate their billing with SP, so I receive a separate monthly bill from my other utilities.

It's probably no big deal for most, but to me, it's one more bill I may forget to pay.

3. Analysis paralysis - "Ugh, just which one is the best?"

So there's the group who just can't be bothered… And then there are those who just. can't. decide.

With the need to now choose not just a new retailer, but your preferred pricing mechanic too, many of us end up with what's called analysis paralysis.

Overwhelmed with so many packages and providers, many just end up not doing anything at all. It's not that they're actively choosing the incumbent.

Jeanne, who's recently been spending about $90 to $110 per month on electricity says that she's "really put in the effort to keep up with the introduction of new retailers" and that she "knows that prices are more competitive and way cheaper than SP".

And it's not that she's loyal to SP or anything, but she would probably only switch if she could have a summary of the retailers, something like a "starter pack" to help her decide.

Sure, it isn't rocket science and it's arguably not that complicated, but it's the first time many Singaporeans are doing this, so there will definitely be some level of uncertainty regarding which option will actually provide the most savings.

4. Unsure of new electricity retailers - "Better not risk it."

When asked if their reluctance to switch may stem from a distrust of the new entrants into the market, all respondents from the MoneySmart team said no.

Our head of content, Adrian, shares, "I don't feel there is much risk in switching to any of them other than the offered package. One would just default back to SP should anything go south."

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So it would seem that EMA's public education efforts have paid off - everyone said they are not concerned with things like the reliability of the supply because they fully understand that all the retailers are operating on the same grid.

So what's this apprehensiveness that I'm talking about?

Well, those responses are only representative of the younger, more well-informed crowd. Our editor, Valerie, highlighted that she knows many older folks who are still concerned about "brand".

She's right - even my parents have yet to make the switch, despite my incessant nagging.

So although you and your peers may feel safe that we can always fall back on SP, the elder generation may think differently. Brand does matter, and they trust SP.

To them, the price difference is a small premium to pay for peace of mind. Even if they were to switch, they'd only consider established players like Sembcorp, Tuas Power, Keppel Electric, Geneco, and the like.

5. Waiting for early adopters to go first - "It's just not that important."

From speaking with the respondents, the general vibe that I got was that this whole electricity thing is just not that important.

More than half of them said they fully intend to eventually switch from SP, but there just isn't any urgency to it. In other words, it's not a priority.

Plus, waiting for the hype to die out also means that they can learn from the early adopters' mistakes and make more informed choices.

We've already seen Red Dot exit the residential market in Jan 2019, along with other retailers such as Ohm Energy, Best Electricity, and iSwitch follow suit and exit in Oct 2021.

There's been quite a bit of commentary on the subject, with experts expressing the view that the Singapore market is far too small for this many players. Before long, only the "worthy" ones will be left.

Perhaps that's what some of us are waiting for.

Conclusion - should you switch from SP Group to an electricity retailer?

I'm by no means an expert, but I have written quite a few articles on the OEM and electricity retailers and spoken to many friends and my family about the topic.

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Singapore is not the first to launch an OEM initiative, and based on other markets, there are usually significant benefits to liberalisation.

Just look at the UK, who beat us to it by about a decade. They opened up their electricity market in 2001, and saw prices drop due to significant efficiency gains and increased competitiveness.

So yeah, my thoughts are that in general, the OEM is a good thing. But if you're looking for a recommendation, sorry - I'm not going to tell you whether or not to switch from SP.

That's your decision to make, and if you don't mind paying the extra few dollars for convenience, who is anyone to say it's not worth it?

You decide how much savings will motivate you to get your a** off the couch and make the switch. Don't worry about the rest, the retailers will react accordingly

This article was first published in MoneySmart.