A Shocking October Electricity Bill for SP Wholesale Customers

" My October electricity bill was 3 times the August one! I'm getting out of it!"

There were many feedback among friends and people in forums who were under the SP Wholesale plan that they were facing astronomical bills and a rush to get out of the wholesale plan. 

This feedback was timely as my Geneco plan is expiring on Feb/March 2022 next year and i have been penning down my thoughts as a way to reflect on the decision on whether to join the 1% of consumers on the wholesale plan.

SP Wholesale Plan - Going for it! - 10 November

Which electricity plan to choose - 31 October

I would have to probably reconsider switching to the SP Wholesale Plan given how the prices played out in October.

I have been tracking the average SP wholesale electricity plan against both the SP regulated tariff and electricity retailer since Jan 2020 on this page.

October 2021 is indeed the ONLY month where the SP electricity plan exceeded the SP regulated tariffs and not only by a small margin but more than twice!

October 2021

Looking at the charts in October 2021, on an average basis, only if one used electricity from 1 am to 6 am in October will one have an  electricity rate lower than the Wholesale electricity rate.

Hopefully, the situation will be clearer near contract expiry!

A Quick Comment on Alibaba

Alibaba recently released their results which apparently disappointed the market and caused an immediate plunge of 10%.

I am sure by now that everyone knows the market is irrational and no one can forecast what the price can be in 1 months , 3 months or even 1 year's time.

Even the guru's or big boys' actions are conflicting. 

Temasek trimmed their position but Charlie Munger, co -partner of Warren Buffet in Berkshire Hathaway actually loaded more quite recently.

So who's right , who's wrong? 

If one were to read all the opinions in forums, one would be seriously confused.

Data from www.wsj.com/market-data/quotes/BABA/financials

In 2017, Alibaba had a share price of US$140. 

Now, Alibaba has a share price of around US$140 again.

But Alibaba is a much more valuable company now than it was in 2017, at least 3 times. Theoretically, its share price should be at least 3 times of US$140 in 2017 making it US$420 today if we were to go along this line of logic. Of course, one can look at it in another way and say that since the current price is US$140, the price in 2017 should have been US$47 and US$140 was too overvalued in 2017. This is perfectly reasonable too.

I think what is happening now is just investor sentiment based on the regulatory clampdowns and also the market focus on the slower growth which based on maths, the larger a company is, the base is larger hence the growth has to slow also.

I am of the opinion that once the regulatory situation dies down, Alibaba share price should do better.

In 2017, there was Xi Jinping. In 2021 Xi Jinping is still the president, just that now, people know what he can and will do and it is more clear.

An optimist can say with so much regulations compressed into these past 6 months, the only way is lesser regulations going forward.

Besides, Alibaba isn't a dinosaur company with no growth catalyst. Last i checked, it has two growth engines which is international  ecommerce and cloud computing.

So many arguments for and against. 

One's head can really spin if we can't think for ourselves.

What is the actual inflation rate one should use for FIRE?

My son. perspiring profusely, came back empty handed after walking 400m in the sweltering heat. 

"Dad, your $1.50 is not enough! My milo peng cost $1.80 now. "

A teachable moment. 

I hoped he learnt two things from this ordeal. 

Inflation and the need to plan for things going wrong a.k.a margin of safety and ask for some additional coins in future.

"Here is 30 cents! Go, my young padawan and bring back the elusive milo peng to quench your thirst. Get me the delectable bak chor mee, less chilli. Take another $3.50 for the mee. It was $3.50 last month."

He rushed out immediately. Guess he didn't learnt his lesson on the need for a margin of safety and inflation. He will learnt some day..for he must learn.

Weightage of basket (Figure 1) 

Source : Department of Statistics Singapore

Breakdown on Basket (Figure 2)

Source: Department of Statistics Singapore

Annual inflation rates from 1960 to 2020 (Figure 3)

Source: Data.gov.sg

The latest annual inflation rate (released in Sep 2021) is 2.5%. This is the short term data based on the previous year and is according to the CPI weighting pattern in figure 1. If one looks at the weightage of the basket of goods used to measure this inflation rate, i can't say it reflects well the inflation experienced by the residents of Singapore. Look at the lower weightage of Healthcare (6.6%) and Education ( 6.6%) compared to Recreation and Culture (7.9%).....I don't think i spend much on Recreation and Culture as compared to Healthcare and Education.  

For a more accurate inflation figure to use, I think one should look at one's personal spending habits to determine one's estimated inflation rate. 

A 50 year old single would not need to care about the inflation for Education but a 25 year old dad with a new born would be really concerned about education inflation. 

Based on data from 1960 - 2020, the various long term inflation for the different baskets are shown in Figure 3. Highlighted in yellow are the ones which are important to me and i think to the majority of others. The rest are really non-essential, good to have items( apart from Housing and Utilities which is essential but my housing is settled).

As a matter of prudence, my personal estimated inflation would be 3.22%pa  which corresponds to the inflation rate of education.

So what have i been doing to beat this inflation.

Endowus

Endowus opened last year(2020)

My Endowus funds have been doing well at 17.62% returns since i started late last year. I have chosen the customised 60% equity/40% bonds and 100% equity funds and used my SRS funds only, saving on my marginal tax rate yearly on this funds. Do not make the mistake of attributing the performance of funds to Endowus as they are simply a platform to sell funds. You make the choice of funds to buy. ( ok for the customised only funds, they chose the allocation so they had a hand in this).

The use of SRS funds is highly restrictive and i believe placing them with Endowus is the best choice.

Use my Endowus referral code to get $20 in access fee credit. 

IBKR

My cash has been placed with InteractiveBrokers due to it's very very low commission charges for both shares, etfs, options and forex transactions and its ability to invest in many differerent countries. What really hits me in the right spot is the ultra low financing fees of between 1.58%pa to 0.75%pa (for USD) depending on amount borrowed which allows me to leverage .

Forex , stock and etfs transaction fees are only around $2-3 per transaction regardless of amount. That's insane. Downside is that some exchange prices like from the US are delayed and one has to pay for live subscriptions which cheapskate me obviously don't. This problem is easily solved by the two brokers below which give free live US prices. I toggle between the apps to look at prices and transact.

Use my IBKR referral code to get free IBKR shares.

Tiger Brokers

Use my Tiger referral code to get free apple shares.

Moomoo

Use my Moomoo referral code to get SGD200 Stock Cash Coupon

My son came back without the Bak Chor mee as it has inflated in price. Hope my son has learnt some lessons. 

I have been putting money in the markets. Here is why.

Still building one's war chest waiting to shoot with an elephant gun when a major crash happens?

Covid seemed like an Armageddon-like event that could have rivaled or surpassed the Great Financial Crisis of 2009.

I remembered viewing a property in February 2020 and viewing the same property in October 2020. I was quite surprised that the price rose. 

Probably its the debt moratorium, wage support, Fed money printing or whatever but it is important to know what is really happening now.

The equity markets have been roaring and there are still some who are predicting that the market will crash when the rates start to rise.

Maybe they are right, maybe not....i have been in the markets for too long to know that no one knows for certain. No one expected how pervasive Covid would affect our lives  in 2019.

https://www.bea.gov/data/income-saving/personal-saving-rate

Personal Savings as a percentage of disposable personal income

The main media coverage of Covid started in around February/March 2020 and from then on, the savings rate of Americans has increased to around twice or more than their prior savings rate of around 7% in January 2020. 

Covid has helped Americans save. 

The savings rate reached their pre-covid state from around September 2021 onwards which mean they are starting to spend more like last time.

https://www.federalreserve.gov/releases/housedebt/default.htm

Household Debt Service Ratio

The Household Debt Service Ratio is the ratio of total required household debt payments to total disposable income.

From a debt serving ratio (%) perspective, their debt has reduced drastically post-Covid. 

Americans have historically high debt servicing ratios but it has been improving.

Before 2009 GFC, the ratio was between 11% to 13% . 

After 2009 GFC to 2019, the ratio was around 10%.

In 2021, the ratio is now below 9%.

 

https://www.bea.gov/data/income-saving/corporate-profits

US Corporate Profits

US corporate profits have been on a uptrend, higher than it was pre-covid.

More savings, less debt and better corporate profits in the world's largest economy.

What's the probability that a US stock market ( S&P 500) crash is imminent after such a seemingly stretched run-up of prices?

To be clear, a crash is not a correction which is 10% from ATH.

I use the following for my SRS investments.

Use my Endowus referral code to get $20 in access fee credit. 

I use the following for my cash investments:

Use my IBKR referral code to get free IBKR shares.

Use my Tiger referral code to get free apple shares.

Use my Moomoo referral code to get SGD200 Stock Cash Coupon

[I am not a financial advisor]

SP Wholesale Electricity Plan - Going for it!

We know that if Shop A buys a product from Shop B, Shop A will then mark up the price of the product and then sell it to the consumer.  To get a cheaper price, the consumer can go directly to Shop B.

Similarly, if electricity retailers buy at the wholesale electricity price and then sell it to residential consumers, wouldn't it make sense that residential consumers would get it cheaper if they buy directly at the wholesale electricity price?

The markup in price by the electricity retailers is basically to compensate them for the risk they take. They buy at volatile prices and sell at fixed prices. Residential consumers are therefore paying for price certainty a.k.a peace of mind. But is this peace of mind really worth it? 

Below is the comparison of the 3 different electricity plans without GST.

This SP Wholesale Electricity Plan is the most complicated of the 3 as it comprises of additional charges on top of the wholesale electricity price (WEP). These additional charges are as follows:

Updated 3 november 2021

Only the Vesting Contract Debit/Credit is variable but it is usually a few cents per month and sometimes $0. The rest of the charges are available online and known beforehand. Peak period is between 7am to 11pm. For simplicity, i took the average of the peak and off peak rates. These additional charges are under the column "charges" which is added to WEP.

Comparison

This table can also be found here which is updated monthly.

No wonder so many electricity retailers have chosen to throw in the towel recently! 

From Jan 2020 to June 2021, there is a significant price difference between the WEP prices ( blue column) and electricity retailer prices( green column), with the WEP prices always being lower. It is only in July 2021 onwards where the price differences is very low with July 2021 being the only month where the WEP price exceeded the electricity retailer price.

It seems that a switch to the SP wholesale electricity plan is a no-brainer...or is it really? 

It depends.

The table above shows average prices and so neglects the volatility of prices of the WEP prices. It depends on one's usage of electricity at home. To be more specific, it depends on when we usually turn on the big guzzlers of electricity like the air conditioners, the water heaters and the washing machines. With WFH, our routines can be quite messed up unlike the Pre-covid times when most of us are in the office between 9am to 6pm.

So when are electricity prices usually more expensive?

I have charted the average WEP and Maximum WEP against the period of the day for the months of July, August and September 2021. The SP regulated tariff and electricity retailer prices are shown in red and green

September 2021

August 2021

July 2021

I would focus more on the Max WEP charts on the right as avoiding these periods of the day where the maximum electricity prices occur would most certainly result in lowering the average wholesale electricity prices even further as seen in the comparison table above. These are generally periods 19 to 45. ( 9.30 am to 10.30 pm) which corresponds well to most workers during pre-covid times as they will not be at home for a majority of this period. So, it really depends on one's routines. 

So in general, if one is out of home or do not have to use energy guzzlers during 9.30 am to 10.30pm, one should prefer the SP wholesale plan?

To illustrate how volatile prices can be, the chart below shows the WEP for a single day on a Saturday, 16 October 2021. One would rationalize that periods when prices are high are when factories, schools and offices are running which falls on during weekdays. However, on this fateful Saturday, the prices were amazingly high even at night when people are sleeping from 11 pm to 1am( periods 46- 48 and periods 0 to 2). Prices average $1.3/kWh during the day, with Max price at $2/kWh at 11.30 am and Min price at $0.27/kWh at 5 am. Even at 1am when most people are asleep, the price hit $1.97/kWh! Remember that additional charges of $0.061/kWh will still have to be added to these prices to get the final price we pay.

Now, which plan would you now choose? 

Previous post

Which electricity plan to choose?

How much should our networth be?

In the book The Millionaire Next Door: The Surprising Secrets of America's Wealthy, there is a formula which determines whether we are Prodigious Accumulators of Wealth (PAW) or Under Accumulators of Wealth (UAW). This formula first multiplies your age with your current gross annual income, followed by dividing by 10 to get the expected networth. If my current networth is more than two times the expected networth, i am a PAW. However, if my current networth is less than half the expected networth, i am a UAW. 

Example

Thommy is 50 years old now, currently earning $84,000 gross income per annum. His expected networth now should be $420,000. If his current networth is higher than $840,000, he is a PAW. On the other hand, if his expected networth is less than $210,000, he is a UAW.

I am sure many questions are forming in your heads now. Using this formula to see how we are doing financially now, ignores our future spending needs which is different for everyone. I can survive on cai peng everyday but not another person. I can be very able riding a bicycle as a means of transport but not another less able person. Many more questions! But as with all models, take it with a pinch of salt.  Imagine a fresh grad at 25 years old who has worked 1 year in investment banking and earning $150,000 a year, he would be a UAW! 

The PAW/UAW formula didn't fit what i was looking for. I needed to know whether i was on the right track in terms of whether i was having enough now.  To know that, i needed to project

• my estimated expenditure after retirement
• my annual contributions to my retirement fund till i retire
• the inflation rate
• my rate of return of my retirement fund if i had invested them

This retirement fund is to be used fully by the time i passed away.

The retirement age will be 63 ( as per Ministry of Manpower in 2022) and the date of passing away will be projected to be 86 (as per the female life expectancy in 2021 by Singstat). Females generally live longer than males who are expected to pass away at 81 (2021 by Singstat) and using 86 is a matter of prudence as life throws curveballs at us.

Example

Esther is 41 years old. She wonders if she currently have enough money to fund her retirement. She has been spending $4000 a month on her lifestyle and would like to continue her quality of living in retirement. Inflation has been hovering around 2% pa historically and she has been getting 5% pa on her retirement fund investments.

She has been contributing $24,000 a year into her retirement fund with ease and believes she can do this till retirement at age 63. 

Her networth now should be $201,222. 

A lot of things have to go right for Esther to be comfortable with $201,222. She has to be able to contribute $24,000 annually for 22 years to retirement by being gainfully employed, being healthy, not being scammed ,not facing a global financial crisis somewhere along the route to retirement e.t.c. As life do throw curveballs at us sometimes, it would be better to have much more that this networth to be comfortable.

Which electricity plan to choose?

Our Geneco fixed plan contract ends in February 2022. The rate we are enjoying now is $0.1662 kWh ( without GST). The current Geneco fixed plans in the market is $0.2334 kWh ( without GST) . This is a 40% increase in rates. This is a lot! My electricity bills average about $150 per month, a 40% increase is a $60 increase per month.

This is a comparison table on the best fixed plan , best discount off and SP regulated Tariff. 

Updated 31 Oct

A quick summary on the options available to the readers. In Singapore, household residents can choose to buy electricity from three sources.

• Singapore Power under the regulated tariff plan ( regulated by Energy Market Authority)
• Singapore electricity retailers ( Geneco, Keppel electric, Senoko, Pacific light, Tuas power, Sembcorp e.t.c)
• Singapore Power under the wholesale electricity plan

The trades offs between the above are price stability, prices, contracts lock-in and promotions such a credit card discounts or promo codes. 

In my opinion, one should never choose the SP regulated tariffs so i was quite surprised to read on papers that about 50% of households are still on the SP regulated tariffs. Get out of it! Its a low lying sure save money choice.

It was reported in the papers that a very small percentage are on the SP wholesale electricity plan. 

Let us see how wholesale electricity prices compare with the SP regulated tariff and electricity retailer prices in September. 

On the horizontal axis, period refers to the time of the day. 

Period 0 - 0000 to 0030

Period 1 - 0030 to 0100

Period 47 - 2300 to 2330

Period 48 - 2330 to 0000

Chart showing the average whole sale electricity for the Sep 2021

Interesting. More due diligence needed. Expect more future posts on the findings.  Perhaps, i could switch to the SP whole electricity plan when my contract ends. What better period to stress test the SP wholesale electricity plan than now when the natural gas prices are so volatile and expensive, with winter coming!

Click here for updated electricity statistics.

Property Viewings During Covid

My wife has been pestering me to go property viewing with her during these times. A happy wife is a happy life. So i obliged. 

The above table are the latest 1 year transactions based on URA from September 2021 to October 2020 for a particular freehold property. 

As gross yield can be really misleading, I decided to do a simple calculator, taking into account all the fees which we will need to pay.

• Additional buyer stamp duty
• Buyer stamp duty
• Seller stamp duty
• Estimate renovation and furniture
• Commission paid to agent when we sell this property in future
• Commission paid to agent when we rent out this property
• MCST fees
• Interest rates
• Property taxes
• Rental income

We made a few best case assumptions.

• Property never going to be vacant
• No replacement of aircon, lights, fridge , sofa etc for the holding period
• Earned income tax is zero. Meaning only the rental income is included in the income tax.

The calculator used is below and the property used is the one with the smallest size 1000 to1100. sqft.

I used a 10 year holding period for the new property and assumed the property did not appreciate after 10 years. Assuming i took a 30 year loan at 75% loan from the bank with an interest of 1.5%p.a, this is how the series of cashflow is. 

Series of Cashflow

As an investment property, one will have to have the holding power to tahan the first 10 years where the cashflow is negative.

More detailed information on how the above is calculated is found here.

The IRR( returns a year ) is only 0.75%pa.

This is ridiculous to me. I guess the hope would be for the property to appreciate to make the returns. But would interest rates appreciate too to negate the returns?

You can play with the calculator to see the outcomes of different scenarios by adding ABSD based on the number of existing property one has. As of above, the ABSD is $0 based on no existing property holding.

I made my wife an unhappy woman. Unhappy life.