Dr Do Duc Dinh, chairman of the Socio-Economic Research Centre's Scientific Council, talks to Gia dinh&Xa hoi (Family&Society) newspaper about the need to raise power prices while using energy more efficiently.
First of all, I would like to recall some history. Before the Doi moi (renewal) process [in 1986], the price of essential commodities was completely monopol-ised. After renewal, prices gradually became market-oriented. At that time, it was said that if prices kept rising in line with the market, it would be hard to survive. But that was not the case.
Power price mechanism
In accordance with MIT's proposal, the price of power will increase annually, starting on January 1st. In principle, the price will be adjusted in accordance with the market.
Electricity suppliers will adjust the price on a quarterly basis based on fuel prices, foreign exchange rates, and total electricity output. If the input price increases between 1-10 per cent, wholesalers will be allowed to increase the quarter's average price of power as regulated. If the increase is over 10 per cent, the Government will adopt measures to stabilise the price based on the price stabilisation regulations. Finally, if the input price decreases, wholesalers must reduce the quarter's average price as regulated. In short, the price of power will increase or decrease depending on the market.
In regards to the price of electricity, the current price can be seen as a remainder from the State subsidy period. The international price stands between 7-8US cents/ 1kWh, whereas the Vietnamese price is 4-5US cents/1kWh.
Power price mechanism
In accordance with MIT's proposal, the price of power will increase annually, starting on January 1st. In principle, the price will be adjusted in accordance with the market.
Electricity suppliers will adjust the price on a quarterly basis based on fuel prices, foreign exchange rates, and total electricity output. If the input price increases between 1-10 per cent, wholesalers will be allowed to increase the quarter's average price of power as regulated. If the increase is over 10 per cent, the Government will adopt measures to stabilise the price based on the price stabilisation regulations. Finally, if the input price decreases, wholesalers must reduce the quarter's average price as regulated. In short, the price of power will increase or decrease depending on the market.
In Japan, if you leave the room without turning off the lights, you will hear a complaint; however, in Viet Nam, there is a different cultural reaction to using energy. People are not in the habit of saving electricity because it is very cheap.
Clearly, the low cost of power benefits not only Vietnamese people and businesses but also foreigners and foreign enterprises. It is time to encourage electricity saving and raise the price of power to the international standard.
Yes it does. EVN is certainly capable of increasing the price of power on its own. But if they are, in fact, encouraged to do so, they will have leverage to increase the price even more than they might otherwise.
A pricing market is necessary. "Market" means there must be more than one power supplier to avoid a monopoly. Thus, we need many players to ensure the adjustment of the price of power and create an efficient market.
We must be clear about the so-called "monopoly". EVN has a monopoly on pricing electricity. They appeal to foreign investors and then ask that they resell electricity at a fixed price determined by EVN.
Yes, that's right. We are facing an electricity shortage and want to invite foreign power suppliers. The problem is that most of these companies are producing power for 6-7 US cents/1kWh and are then required to sell it for only 4-5 US cents/1kWh. The sale price should really be closer to 7-8 UScents/1kWh.
At the moment, it is fundamental to adjust the price of power in the direction of market changes and we need to eliminate the monopoly. To encourage foreign investment, we cannot request that these companies charge Vietnamese prices. I've spoken with numerous American companies that planned to invest in Viet Nam's electricity sector 10-15 years ago but who eventually failed to do so because of our pricing regulations. — VNS