A worker of Vietnam Electricity. (Photo baochinhphu.vn) The Government’s subsidy for electricity is no longer appropriategiven that the country is anticipated to continue facing a power shortage forsocio-economic development.
According to economist Tran Dinh Thien, electricity prices in Vietnamare subsidised by the Government to maintain a low level with the aim ofsupporting the disadvantaged in society, despite rising input costs. Thesubsidised electricity prices have caused a market imbalance, where powerproducers such as Vietnam Electricity suffer heavy losses and the marketexperiences a supply shortage.
"High electricity prices are not as big a problem as powercuts," Thien added, emphasising that market-based pricing should becomedominant and lead the development of the electricity industry.
Thien further noted that electricity prices should be sufficientto cover product costs, while the Government’s subsidy must be separated fromthe pricing. “Electricity prices must ensure a balance between generation andconsumption.”
Nguyen Tien Thoa, former Director of the Department of PriceManagement under the Ministry of Finance, said that electricity prices werereviewed for adjustments every six months under the Prime Minister’s Decision24/2017/QĐ-TTg, in effect from August 15, 2017, on the mechanism for adjustingthe average electricity retail price.
Over the past six years, electricity prices had been adjusted onlythree times, which did not accurately reflect market fluctuations, he stated.
Last year, input costs increased by 9.27%, but electricity priceswere raised by only 3%.
"While low electricity prices are believed to be beneficialfor production and daily life, they pose a significant problem for electricityproducers as they might struggle to secure capital for reinvestment. This alsocreates difficulties in attracting new capital for electricity generation,transmission, and distribution, which could lead to severe powershortages," Thoa explained.
“It’s time to apply a market-based principle to electricitypricing,” Thoa asserted.
Ha Dang Son, an energy expert, mentioned that if electricity pricesremained low, it would be challenging to encourage power saving and promote agreen transition.
Low electricity prices created unfairness between enterprisesstriving to switch to green energy and those using energy-consumingtechnologies, Son pointed out.
According to Thoa, major sources of electricity supply includehydroelectricity, thermoelectricity, and gas-fired power, with hydroelectricityaccounting for around 28 % of output and having the lowest product cost.
He noted that the product cost for oil-fired electricity was 5,000VND per kWh, and 2,500-2,800 VND for coal-fired.
The current average electricity retail price is 1,920.3732 VND perkWh, following an increase of 3% on May 4./.
VNA
