‘Real pain’ to set in: Businesses brace for impact as EMA warns of potentially sharper rise in power tariffs

[SINGAPORE] Singapore businesses, especially those in sectors more reliant on energy, are bracing themselves for higher costs after the Energy Market Authority (EMA) warned on Tuesday (Mar 31) that Singapore should prepare for further increases in electricity and town gas tariffs.

Some are looking at a range of strategies to cope, while economists say that companies will have to diversify their supply sources or even hold supplies of some commodities, among other ways.

Utility companies SP Group and City Energy on Tuesday announced price hikes for the second quarter of 2026, citing a rise in global energy costs due to the Gulf conflict. 

EMA said in a statement that fuel prices are expected to “remain elevated in the foreseeable future”, due to extensive disruptions to oil and natural gas production in the Middle East.

“Consequently, we are likely to see further and potentially sharper increases in the electricity and town gas tariffs in subsequent quarters,” said the statutory board. 

Consumers on electricity retail contracts are likely to also see an increase in prices when renewing their contracts, it added.

SP Group said household electricity tariffs in Singapore will rise by 2.1 per cent. For the period from Apr 1 to Jun 30, the electricity tariff before goods and services tax will increase by S$0.0056 per kilowatt-hour (kWh), from S$0.2671 to S$0.2727.

For a family living in a four-room Housing & Development Board (HDB) flat, this will translate to an average increase of about S$1.80 in their monthly electricity bill before GST. Including GST, the tariff will stand at S$0.2972 per kWh.

Meanwhile, City Energy said the town gas tariff for households will increase by S$0.0024 per kWh before GST, from S$0.2168 per kWh to S$0.2192 per kWh.

“Highly dependent” on energy imports

EMA noted that as a small city-state, Singapore is “highly dependent” on energy imports, with about 95 per cent of the Republic’s electricity produced from imported natural gas – also the main feedstock for the production of town gas.

The Gulf conflict has led to significant increases in the prices of oil and natural gas.

“An increase in the cost of natural gas would therefore lead to an increase in prices of electricity and town gas for all consumers in Singapore,” said EMA.

It noted that because prices of natural gas started to climb only after Feb 28, the regulated tariffs for electricity and town gas in Q2 2026 were only partially affected.

EMA said it was working closely with the industry to ensure supply security. 

“We cannot predict how long the conflict in the Middle East will last,” it said. “Household and business consumers must therefore be prepared for higher and more volatile energy costs.”

Minister-in-charge of Energy and Science and Technology Tan See Leng previously warned in a Facebook post on Mar 12 that Singapore households need to expect electricity prices to go up in the coming months.

Prime Minister Lawrence Wong told the media on Friday that the government will be providing updates at the next parliamentary sitting on Apr 7 on how it is preparing for “all possible contingencies” relating to the Iran war.

It will also address the impact on the economy, and include ways to strengthen Singapore’s energy and supply chain resilience, he said.

Business impact

Industry players and economists told The Business Times that companies with high reliance on electricity and gas for their operations will feel the immediate impact of rising energy prices. 

Bita Seow, chief executive officer of the Singapore International Chamber of Commerce (SICC), said the chamber’s members were “already feeling the impact”, with cost pressures becoming embedded across value chains.

Energy-intensive businesses have seen immediate cost pressures, while others are experiencing second-order effects through higher logistics, materials and supplier costs, said Seow. 

In addition, trade-dependent sectors will be affected through increased freight and supply chain costs. Small and medium-sized enterprises (SMEs) in these sectors are “especially vulnerable”, as they have less pricing power and thinner buffers, she added.

Other sectors that could see an immediate compression in margins are those in the semiconductor and precision manufacturing, petrochemicals and refining sectors, given their high electricity and gas usage, said industry observers.

Ang Yuit, president of the Association of Small & Medium Enterprises (Asme), said businesses that rely on diesel – particularly in the logistics and construction sectors – will feel the impact of rising energy prices almost immediately.

Over the longer term, firms in sectors such as manufacturing, food and beverage, and IT could also face higher costs if energy prices remain volatile, he added.

Businesses reliant on global shipping and just-in-time supply chains are likely to experience the negative impact on higher energy prices in the near term, said Kok Ping Soon, CEO of the Singapore Business Federation (SBF).

For example, they will likely face longer delivery times, higher freight and insurance costs, and pressures on working capital, he said. 

Businesses across all sectors, especially SMEs, are also likely to see their margins affected due to higher costs in transport, utilities and input as a result of volatile oil prices, he added.

How businesses can cope

Asme’s Ang said businesses are adopting a range of strategies to cope. Some are optimising delivery routes to cut diesel use, while others in more severe situations are considering invoking force majeure.

Chua Hak Bin, an economist at Maybank, said that companies will have to diversify their supply sources, hold larger inventories of critical commodities, and reduce their energy usage without impacting their business. 

This is by no means an easy feat, however, said Song Seng Wun, economic adviser at SDAX, amid constraints businesses are set to face. “Businesses may want to absorb costs, but they won’t be able to do so entirely, as they still will have to pay their workers and shareholders (to keep afloat).” 

Strategies involving price adjustments, hedging and procurement, or aiming for operating efficiency are not all which could help businesses in Singapore during this time, said Selena Ling, chief economist at OCBC. 

“Businesses can also look into smart systems, or tap on grants or incentives for energy efficiency and sustainability upgrades,” she said.

Ang of Asme suggested that SMEs reduce their reliance on electricity and gas. “Look at alternatives – parallel products or work that uses less of these input costs.”

However, Song warned that it was still early days. The impact of higher global energy costs on Singapore’s electricity tariffs will be felt most in the second half of 2026, particularly in the event of a long-drawn war, he said. 

“For both home or industrial users – the real pain hasn’t set in yet,” he said. “If prices stay at this level, however, we will definitely feel the heat by the third quarter of this year.”

Additional reporting by Shikhar Gupta