Review of vesting contract regime in Singapore completed
The EMA implemented the vesting contract (“VC”) regime on 1 January 2004. The objective of the VC regime is to mitigate the exercise of market power by the generation companies. Frontier Economics (Asia-Pacific) was engaged to undertake the review on behalf of the EMA.
The review examined the mechanisms used to mitigate market power in the Singapore Wholesale Electricity Market (SWEM), including:
- Reviewing the vesting contract level for 2017 and 2018
- Reviewing the existing vesting contracts regime
- Reviewing the international experience in market power mitigation
- Developing new mechanisms to mitigate market power in the SWEM.
Frontier’s draft report Review of the Vesting Contracts Regime (the draft report) was released on May 16, 2016. EMA received submissions commenting on the draft report from a range of interested parties. The revised report was released on August 31, 2016 in conjunction with the EMA’s draft determination. A second round of submissions were made in response to the revised report.
The final report discusses the comments raised in both rounds of submissions and Frontier’s response to the comments. Frontier’s recommendation to phase out vesting contracts in several stages was adopted by EMA.
Frontier regularly advises clients, including regulators, on market modelling and market arrangements in the electricity sector across the Asia-Pacific.