SP Group Statement on Centralised Cooling System at Tengah

1. SP Group is aware of feedback from some residents in Tengah in relation to the Centralised Cooling System (CCS) and has been working closely with them to address their feedback. Recently, some claims and figures on the contractual terms and cost savings of the CCS have been raised, which may have caused some confusion and anxiety among Tengah residents who have subscribed to the CCS. We would like to take this opportunity to clarify and set out the facts on some of the key issues that have been raised.

(A) Overview of CCS at Tengah

2. Residents who have signed up for SP’s CCS have their air-conditioning provided through a comprehensive piping and cabling network where chilled water is centrally produced from interconnected chiller plants built on rooftops, thus eliminating the need for a condenser for individual residential units. Our partner Daikin delivers and installs the Fan Coil Units (FCU), piping and cabling in the homes, and connects it to the CCS network.

(B) CCS defects rectification status

3. Following the completion of the first blocks at Tengah, the first Tengah CCS subscribers have collected their keys and tried out their FCUs. Some had reported workmanship issues with their FCUs. These largely stemmed from construction constraints caused by the Covid-19 pandemic, leading to HDB’s accelerated construction timeline to hand over the blocks to residents. As a result, there was insufficient time for SP to conduct checks to ensure the smooth running of the CCS, before residents took possession of the earlier batches of flats delivered from August to October.

4. SP is committed to rectifying the issues, and we have in place a systematic and convenient issues reporting and rectification process for residents. Issues reported are typically attended to by the next business day, and we aim to resolve these issues within 10 business days. As at 27 October 2023, 470 out of a total of 536 reported defects have been resolved. This is 88 per cent of all reported defects. SP is working to rectify the remaining 66 reported defects as soon as possible, and we are in close contact with these residents who come from 48 households.

(C) 12-month warranty period and quality assurance check

5. All CCS installed are covered by a 12-month warranty period. During this period, all costs for rectification or repair works, if any, will be borne by SP. In addition, given the teething installation and testing issues arising from the tight scheduling of works, SP will also perform an added CCS quality assurance service check for all customers who have collected or will be collecting their keys on or before 31 December 2023. SP will also waive usage charges for 4 weeks for these customers while the checks are being scheduled. The quality assurance process is underway for 330 households, with 43 per cent having completed the process as at this date. Through this additional quality assurance check, we seek to provide greater convenience and peace of mind for our CCS customers in Tengah.

6. Moving forward, SP has worked closely with HDB to enable our installation teams to conduct checks of the CCS system as flats are completed, before owners get the keys to their flats. With this arrangement, we have seen a reduction in the feedback rate on the CCS for flats handed over in October 2023, as compared to blocks handed over in the previous two months. With the defects situation stabilising, SP expects the workmanship issues to be mitigated by the end of this year.

7. Nonetheless, SP understands that CCS for cooling residential homes is new in Singapore, and some time may be needed for the initial batches of HDB flat owners to get used to CCS operations. Hence, as an additional goodwill gesture, SP will waive all CCS usage charges for Tengah customers during this interim period from now to 31 December 2023.

(D) Contractual agreements with customers

8. Customers who sign up with SP for CCS will enter two separate contracts with SP. The first is the Installation Agreement to install FCUs, last mile piping and cabling in the residential units, which most customers sign while their flats are under construction. The second is the Supply Agreement for the supply of chilled water services, which customers enter into later when they set up their utilities accounts with SP Group on or before the key collection date for their flats.

9. SP provides a 30-day cooling off period when customers sign the Installation Agreement. During this cooling off period, customers can decide to terminate the Installation Agreement by giving one week’s written notice, and they will not incur any charges for the termination. However, if the customer chooses not to proceed with the CCS after the cooling off period, but before the installation of the FCUs, piping and cabling, SP will collect 35 per cent of the installation charge from the customer. This is because cost and resources would have been incurred to secure supply and contracts for CCS installation.

10. When the flat is ready, SP will install the FCUs, piping and cabling within the flat. Once these are installed, customers will have to pay the full Installation charge if they choose not to proceed with the CCS. This is to cover the cost of the CCS equipment and installation.

11. Nonetheless, taking into account feedback from this early batch of customers and the initial issues encountered, as a further gesture of goodwill, SP will reduce the payment to be collected by 50 per cent in the event of cancellation. Table 1 below presents an illustration of the estimated amounts which customers will have to pay based on the number of FCUs installed at the prevailing prices:

Table 1:

No. of Indoor FCUs	35% Installation Charge (excl. GST) (S$)	After 50% Reduction (S$)	Full Installation Charge (excl. GST) (S$)	After 50% Reduction (S$)
1	353	176	1,008	504
2	699	349	1,996	998
3	1,048	524	2,994	1,497
4	1,397	699	3,992	1,996
5	1,729	865	4,940	2,470
6	2,075	1,037	5,928	2,964

(E) CCS-related costs

Monthly usage charges

12. The CCS usage charge covers the capital costs for the chiller plant and network pipes, operations and maintenance, prevailing electricity and water costs, and projected cooling energy consumption. The monthly CCS usage charge to the customer is derived from: the metered quantity of chilled water supply during the billing period (kWrh) x prevailing usage charge rate ($/kWrh). Some customers have claimed that SP had earlier communicated the CCS usage charge rate to be 7.2 cents/kWrh. This appears to have been derived from an assumed cooling energy consumption of 10,200 kWrh.

13. The CCS usage charge rate is reviewed and adjusted quarterly, similar to electricity and gas tariffs. It was estimated at 9 cents/kWrh in 2020, based on then prevailing electricity tariff, planned project costs and cooling energy consumption. As a result of the increase in electricity cost from 19.6 cents/kWh in 2020 to 28.7 cents/kWh today (or almost 50%) and project cost increase of 20 per cent due to Covid-19 over the last 3 years, as well as an estimated lower cooling energy consumption, the expected CCS usage charge rate was increased to 20.38 cents/kWrh on 1 October 2023. The increase in the CCS usage charge rate from 9 cents/kWrh to 20.38 cents/kWrh will have some impact on the initial estimate of up to 30 per cent savings of the CCS.

14. Although the 20.38 cents/kWrh usage charge rate has been published on the website www.mytengah.sg, Tengah customers have not been billed on this rate, as SP is performing an added CCS quality assurance service check on all flats for customers who collect their keys on or before 31 December 2023. In the meantime, as mentioned in para 7, customers will not be charged for CCS usage till 31 December 2023.

15. With some initial usage data from Tengah households, we have updated our assumptions and completed a review of the usage charge rate. With effect from 1 January 2024, SP will adjust the CCS usage charge rate to 13.2 cents/kWrh (before GST).

Life cycle costs

16. Meaningful cost comparisons need to be done on a like-for-like basis, as the CCS system and operations, using chilled water cooled by centralised chillers outside homes, differs from the conventional air-conditioning system. In the case of CCS, the system's life cycle costs are calculated based on the costs for hardware, equipment replacement and maintenance, and monthly CCS usage, over a 20-year period.

17. With the adjustment of the CCS usage rate to 13.2 cents/kWrh effective 1 January 2024, customers will be able to enjoy life cycle savings of up to 30 per cent savings versus a conventional split unit air-conditioning over a 20-year period.

18. Nonetheless, we understand some customers may not stay in their homes for 20 years. For completeness we have worked a simplified illustration of the estimated life cycle costs over a shorter period of 7 years, which is the life span of a condenser unit of a conventional air-con system. See Table 2 for an estimation of the annual cost savings for a 4-room flat.

Table 2 – Annual life-cycle cost savings over 7 years⁰

Cost Composition	Conventional Multi-Split System	Cost Composition	CCS
Annual Energy Consumption1 (kWh)	4,367	Annual Cooling Energy Consumption2 (kWrh)	8,520
Electricity Tariff Rate (S$/kWh)	0.31	CCS Usage Rate (S$/kWrh)	0.143
Annual Energy Cost (S$)	1,354	Annual CCS Cost (S$) **	1,218
Air-con Condenser Cost (S$) *	270	Air-con Condenser Cost (S$)	Nil
Annual Aircon Gas Top-up Cost (S$)	118	Annual Aircon Gas Top-up Cost (S$)	Nil
Total annual Cost (S$)	1,742	Total annual Cost (S$)	1,218
		(savings of about $524, or about 30%)

• [0] This is for illustration purpose only, as assumptions may change over time and with different households, e.g. individual household consumption pattern, tariff/usage rates etc.
• [1] Annual energy consumption based on BCA published data of 0.94 kWe/RT for multi-split unit system
• [2] Annual cooling energy consumption based on independent report of 710 kWrh/dwelling unit per month
• * Based on 1 unit of Condenser Cost of S$1,890 over 7 years (typical lifespan of a condenser unit)
• ** CCS is based on centralised chilled water system (no condenser and gas top-up costs)
• All figures include GST of 8% and are based on prevailing rates

(F) Engagement with residents and SP’s Service Commitment

19. In last 12 months, we have engaged with residents from more than 2,000 households through various platforms. We have made available various channels for residents to reach us. Besides the Tengah website and app, we have held 18 events for residents to provide updates on their upcoming CCS activation and address their queries in person.

20. CCS is a new concept in the residential space. We will continue with efforts to build more awareness among residents about the CCS, even as we work hard to address the teething installation and testing issues for the first few batches of Tengah CCS residents. We apologise that our service delivery and communications with customers have fallen short of expectations. We will endeavour to improve our customers’ experience with CCS. We thank our customers for their support, patience and understanding.

For more information or questions on CCS, please refer to the list of Frequently Asked Questions.