Ministry of Industry and Trade: Allowing EVN to recover losses through electricity prices is legal

The Ministry of Industry and Trade affirmed that allowing EVN to recover production and business losses in calculating electricity prices is based on legal regulations, reality and opinions of ministries and branches.

This view was given by a representative of the Electricity Regulatory Authority (Ministry of Industry and Trade) today in response to conflicting opinions on the draft amendment to Decision 24 on the mechanism for adjusting average retail electricity prices, which will include EVN's losses and exchange rate differences.

This agency said the average annual retail electricity price structure includes costs of stages in the electricity production and supply chain (generation, transmission, distribution - retail electricity, system dispatch, market transaction management, ancillary service costs, general management of EVN) and other items not included in the electricity price to ensure that it reflects the correct cost, and then has appropriate profits.

The loss from exchange rate differences in 4 years (2019-2022) that has not been accounted for by Vietnam Electricity Group (EVN) is about 14,725 billion VND, according to the announcement of the results of the inspection of electricity production costs in 2022 by the Ministry of Industry and Trade.

Before 2017 - the time of issuance of Decision 24, these costs were the largest items that were often suspended and not accounted for in production costs, electricity prices or were only partially allocated depending on the financial situation each year.

Last year, rising global fuel prices pushed up EVN’s electricity purchase costs while retail electricity prices remained stable, causing the group to lose more than VND26,000 billion. This year, fuel prices for electricity production have eased but remain high, affecting EVN’s financial balance.

The average electricity price increase of 3% from May 4 - the lowest level according to Decision 24 and the results of calculating the cost of electricity production and business in 2022 (9.37%), partly solved the cash flow difficulty, but EVN still had difficulties due to the accumulated costs in 2023.

"Therefore, the input costs of the past two years, according to Decision 24, will be recovered through subsequent price adjustments. On the other hand, according to the 2023 Price Law, electricity prices need to fully compensate for reasonable actual costs and provide appropriate profits for EVN," said a representative of the electricity management agency.

Ho Chi Minh City Electricity workers repair electricity during the hot season of 2023. Photo: EVN — Ho Chi Minh City Electricity workers repair electricity during the hot season of 2023. Photo: *EVN*

In its previous comments, the Ministry of Finance requested the Ministry of Industry and Trade to review which costs are allowed to be included in the retail electricity price. EVN is responsible for calculating and determining these costs, reporting to the Ministry of Industry and Trade for consideration, and calculating them into the retail electricity price. Every year, the Ministry of Industry and Trade is responsible for checking the cost price and approving these costs.

The Ministry of Finance believes that according to the Law on Management and Use of State Capital Invested in Production and Business at Enterprises, the guiding documents do not stipulate a plan for allocating production and business losses and other costs not included in electricity prices and the Prime Minister has the authority to decide on this content. Therefore, the Ministry proposes to remove this provision in the draft decision amending Decision 24.

However, the Ministry of Industry and Trade said that if there are no specific regulations on considering the recovery of EVN's electricity production and business losses, it could affect the development and preservation of state capital because electricity prices at some point must be adjusted according to the roadmap and macroeconomic conditions.

The draft decision replacing Decision 24 stipulates that other expenses not allocated to electricity prices must be determined according to audited financial reports, that is, according to actual costs and subject to inspection and supervision by inter-ministerial and sectoral agencies.

This agency affirmed that it will coordinate with the Ministry of Finance and the State Capital Management Committee at Enterprises to review the plan for allocating expenses not included in the electricity price proposed by EVN to report to the Prime Minister for consideration. This is to ensure compliance with legal regulations.

Meanwhile, energy experts say that it is reasonable to calculate EVN's losses and exchange rate differences in electricity prices, but it needs to be allocated on a roadmap to avoid shocking price increases.

Hoai Thu

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