Price responsiveness in the new electricity market: a Singapore experience

When electricity prices are allowed to fluctuate freely the price could transmit valuable market information and send the right signal to rate-payers for consumption and to generation companies for production and investment. This study briefly discusses the deregulation of the Singapore electricity sector before employing a log-linear form for estimating the coefficient of price-quantity relationships in the electricity demand. Two-stage least squares regression method is used and the estimation would yield the elasticity of demand. The more elastic is the demand, the more consumption efficient is the new electricity market. This is because consumers who are allowed to choose their retailers or purchase electricity on their own behalf will be able to choose the best package and also to make more efforts to respond to price fluctuations. The analysis reveals that the market would bring about some consumption-efficiency gains. However, more research needs to be done to quantify the extent of the gains.