The price will go up or down if it meets required conditions following the competitive electricity market mechanism, said Dang Huy Cuong, director of Electricity Regulatory Department under the Ministry of Industry and Trade at a recent press conference.
"The adjustment of electricity prices by the Electricity of Vietnam Group (EVN) is in full compliance with the ministry’s Decision No.24 and Circular No.31, giving detailed guidance on operating the local electricity market," he said.
On July 1, EVN increased the average electricity price by 5 percent , or some VND65 per kWh, from VND1,304 to VND1,369 per kWh.
EVN said the input parameters used as the basis for the increase include the rise in prices of coal for electricity production, gas for the Ca Mau power plant, world oil prices, and the exchange rate between the Vietnam dong and US dollar.
With the rising price of electricity, EVN's electricity sales are forecast to increase VND3.71 trillion. The amount will be used to offset the increased price of coal and a portion of the electricity generation costs of the previous year.
Deputy Minister of Industry and Trade Nguyen Nam Hai told Thoi Bao Kinh Te Sai Gon newspaper that the future increase in electricity prices will be decided by both the Ministry of Trade and Industry and EVN in a careful manner.
It is likely that electricity prices will also be reduced, and not necessarily just go up quarterly, he said.
“Although the 5 percent price increase is within the law, EVN did not necessarily do a good job of explaining it to the public,” said Vu Duc Dam, chair of the Government Office in a recent government working session in Hanoi.
The latest power price hike was assessed as being a responsible decision by EVN, despite the fact they had claimed they would not raise power prices in the near future.
Under the government’s new guidelines, commodities such as petroleum, electricity and other essential goods will be established by the market mechanism, so as to encourage economic development.
EVN said the power price hike was carefully considered to avoid affecting small businesses, but admitted that a 5 percent price hike will have a knock-on effect on the market.
The price hike has generated uncertainty among the public, and is putting additional burden on small businesses.
Small businesses are trying to save as much as possible to mitigate the effect of the 5 percent price hike.
Business owners will also face more difficulties as they cannot raise rise sale prices to offset rising production costs in the face of rising unsold stocks.
According to EVN, after a one-year pilot operation, the competitive electricity market has officially been in operation since July 1 , marking the initial transition from the current mechanism to market operation mechanism.
In the first half of this year, EVN’s electricity production and purchase was estimated at 56.475 billion kWh, rising 10.98 percent from the same period last year, including the group’s power production of 24.777 billion kWh, accounting for 43.9 percent.
Local commercial electricity sales increased 11.83 percent from the same period last year, of which, electricity for industry and construction saw a rise of 10.98 percent year-on-year, trade-service a rise of 17.98 percent and management and consumption of people was up 12.06 percent on year.
The group also said that from Jan-Jun, it completed 16,220 500kV power grid projects, 43 110kV projects, and kicked off construction on 15,500 220kV power grid projects.