Key players accept energy price adjustment

HANOI: Vietnam Electricity (EVN) says it agrees with the Industry and Trade Ministry’s proposal to review electricity prices for adjustments every three months instead of six as at present.

According to EVN, when electricity production costs decreased by 1% or more, the average retail price of electricity would be reduced correspondingly.

When production costs increase by 3% or more, the average retail price of electricity would also increase.

For cost increases from 3% to 5%, the retail price is decided by EVN, from 5% to 10% by the Industry and Trade Ministry, and from 10% or more by the Prime Minister.

The minimum time for adjusting electricity prices from one increase to another will be three months, EVN said, adding that “it’s reasonable”. EVN also proposed methods to calculate the average electricity price to be amended.

Under the ministry’s proposal, the average price was calculated based on the cost of generation, transmission, distribution, operation, and the normative profit of EVN.

However, EVN said that the cost of transmission should also include the cost of related services.

The costs of system dispatching and management of transactions on the market should be added in, it said.

“It was necessary to adjust the electricity tariff, which has been unchanged over the past seven years, to reflect the cost and ensure electricity market development,” said Bui Xuan Hoi, principal of the North Electric Power Collage.

He said the pricing mechanism should be more market-based, which is critical to the development of a competitive electricity retail market.

Another point raised in the draft was that the Industry and Trade Ministry could invite an independent consultant to evaluate prices to ensure transparency.

Dao Nhat Dinh, an expert in energy, said that while adjusting prices every three months was acceptable – a common practice among Asean countries – the most important factor was to ensure transparency in pricing.

He added that Vietnam should establish an independent energy council, not related to EVN, to evaluate production costs.

Economist Dinh Trong Thinh of the Academy of Finance said that as the pricing still lacked transparency and EVN still held the monopoly in Vietnam, careful consideration should be given to whether prices should be reviewed every three months.

He stressed that the development of a competitive power market was critical.

The current average retail electricity price is 1,920.37 dong per kilowatt-hour, after an increase of 3% on May 4.

This month, EVN proposed to increase retail electricity prices to ensure a balance in its production and business operations, just three months after the increase of 3% in May. — Viet Nam News/ANN