It’s official.

Electricity tariffs will go up by an average of 2.3 percent or 0.49 cents per KWh (kilo-watt hour) between October 1 and December 31 this year.

If you care to check out Singapore Power’s website for the details on the tariff hikes, you might see that it went up 3.04¢ per kWh (+18.4%) in 2005 while in 2006, it’s an annual increase of 2.07¢ (10.6%).

Even though the increase has slowed, I believe consumers in Singapore can do certain things to offset their increased expenditure in this area.

Conservation.

Personally, I’ve started switching off home appliances (with standby modes) at the source for about 2 months now. Overall, I’ve gotten a savings of 7% so far. This month, I’m starting to cut down my usage of airconditioning, replacing its use with electric fans. From this, I should see a further 15% reduction in my electrical bills.

And, this is not because I cannot afford my bills.

But rather, I feel people should starting thinking about how they are spending their money. If you look at the economics of this situation, not curbing your usage will send the signal to our commercial power producers that their product is price inelastic, meaning, they can still increase prices without an impact on revenues, and hence profits. Remember, unlike our public transport whose rates are regulated by the PTC, our now-commercial power sector does not have such controls or transparencies.

Normally, if these companies are losing their pants selling subsidised power to me, I would just shut up and pay up. But the fact is that these power companies are reaping more profits than ever (I’m only up to 2005 with their annual reports). So, in spite of how it is preached to me that “fuel cost make up 55% of the cost of electricity”, it is financially straightforward to see how these tariff hikes will ultimately improve profits.

All’s fair and square in economics.

If you feel this continued trend of tariff hikes is ‘ok’, go on and continue to pay your bills.

If you don’t like it, start conserving. Imagine, if we’re all to switch off our standby-mode appliances alone, power producers will see a 7% drop in their retail revenues. This will send a strong signal to them that electricity tariffs is not that inelastic afterall. And, they will think harder about pricing when the next quarter comes.

Besides, it’s good for the environment ;)