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MoIT: No plan in place to raise electricity prices

Released at: 14:26, 05/06/2017

MoIT: No plan in place to raise electricity prices

Photo: VGP

Prices to remain at current levels for time being, Deputy Minister of Industry and Trade tells press conference.

by Duy Anh

The latest comments from the Ministry of Industry and Trade (MoIT) suggest there are no plans to increase electricity prices despite power consumption growing at 12 to 13 per cent each year.

Together with petroleum, electricity is an important commodity and input in the manufacturing of many products. A rise in electricity prices would therefore have a significant impact on manufacturers, businesses, and consumers, Deputy Minister of Industry and Trade Do Thang Hai told a press conference on the sidelines of the monthly government meeting on June 3.

“There is no plan in place to raise electricity prices,” Deputy Minister Hai confirmed, adding that the Prime Minister has recently directed that current prices be maintained.

If Electricity of Vietnam (EVN), the country’s only power supplier, were to propose an adjustment to retail prices, the Deputy Minister went on, they must be considered thoroughly and based on the estimated impact on other commodities, GDP growth, and the consumer price index (CPI).

Though retail electricity prices in Vietnam are among the lowest in Southeast Asia, the government has been reluctant to allow increases.

Retail prices have remained at VND2,141 ($0.1) per kWh since March 2015, while electricity wholesale prices increased by 2 to 5 per cent last year, with the highest reaching VND1,562 ($0.07) per kWh and the lowest VND1,107 ($0.05) per kWh.

There is a trade-off in electricity markets over time between low prices and the reliability of electricity supply. Low electricity prices, while beneficial for consumers, tend to undermine incentives for additional investment in generation capacity while weakening the ability, from a cash flow perspective, of national utilities to make timely investments.

When power prices are low, there is also no incentive to use energy more efficiently. Vietnam’s energy intensity (the amount of energy needed to produce a dollar’s worth of goods and services) is already among the highest in the world.

Higher prices, conversely, are likely to promote timely investments.

According to the roadmap set out by the government, a competitive electricity market in Vietnam will be formed and developed in three levels. During Level 1 (2005 - 2014), the Vietnam Competitive Generation Market (VCGM) was introduced, with power generators permitted to enter the market and sell electricity to EVN at competitive prices. Level 2 (2015 - 2022), involves the creation of the Vietnam Wholesale Electricity Market (VWEM), in which power generators and wholesale power distributors enter the market, with the latter joining EVN.

In Level 3, after 2022, power generators, wholesale distributors, and retail consumers will all enter the market.

As at the end of 2016, Vietnam’s competitive electricity market was still at Level 1; far behind the schedule set out by the government.

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