Full-fledged competitive power market will take years

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SaigonTimes English - 35 month(s) ago 6 readings

HANOI – The competitive power market will officially start operation this year’s end, but not until 2020 will the retail prices be driven by the market forces due to the costly investment in the power sector, experts said at a seminar on Wednesday.

Full-fledged competitive power market will take years

By Ngoc Lan - The Saigon Times Daily

HANOI – The competitive power market will officially start operation this year’s end, but not until 2020 will the retail prices be driven by the market forces due to the costly investment in the power sector, experts said at a seminar on Wednesday.

The competitive market will start in end-2012, but limited to power generators selling power to Electricity of Vietnam Group only, said Dang Huy Cuong, director of the Electricity Regulatory Authority of Vietnam (ERAV) under the Ministry of Industry and Trade.

He stressed that a competitive retail power market would not take shape until 2020 as planned since power prices will still not be driven by market forces in a couple of years to come. The disparity between the retail price and the investment costs will remain, he said

“The investment cost for one megawatt of electricity is US$1.5 million. A 1,000-megawatt power plant will require over US$1 billion,” Cuong said at the seminar on managing power prices in the market-oriented economy in Hanoi.

Power selling prices currently average out at five U.S. cents, or VND1,064, per kWh, while the production expense stand at VND700-900 each kWh. For this reason, it is not easy to lure investment into the power sector, and the equitization of power plants also encounters problems.

Therefore, it will take time to gradually put electricity retail prices under the market-driven mechanism, Cuong stated.

The scheme on flexible power prices driven by the market in a bid to restructure the power sector has received positive feedbacks from consumers. However, the gradual price adjustment is still in hesitation, thus power prices have yet to be calculated accurately and sufficiently, said the Price Management Department of the Ministry of Finance

For example, the production costs of 2010 have not been fully factored into power prices, or the losses on forex rate difference of VND15 trillion since 2010 have yet to be audited, said the price department.

Vu Xuan Thuyen, a senior expert of the Ministry of Planning and Investment, said: “Consumers expect power prices and quality will be more beneficial to them via competition.” Complete market design and the absence of supply monopoly are necessary and sufficient conditions to apply market-driven electricity prices, he said.

Therefore, public opinion demands transparency and disclosure of power price factors when restructuring Electricity of Vietnam (EVN).

Tran Hoang Hau, deputy director of the Academy of Finance, the seminar organizer, emphasized that reforming the power sector and developing the power market will create foundations to restructure the industry and put electricity prices under the market-driven mechanism. The key is to set up mechanisms to ensure fairness for all industry players, regardless of ownership patterns.

Speaking at the event, Cuong of ERAV said EVN now only holds a 50% of the total power output, not 70% like before, excluding the supply of the enterprises where the State-run group holds stakes.

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