Ministry of Industry and Trade proposes to change authority to adjust electricity prices

The above viewpoint was presented by the Ministry of Industry and Trade in the Submission to amend the Electricity Law sent to the Prime Minister.

Electricity price adjustment under pressure from public opinion

According to the Ministry of Industry and Trade, the Electricity Law stipulates that the Prime Minister has the authority to prescribe the mechanism for adjusting retail electricity prices .

The current mechanism for adjusting the average retail electricity price issued by the Prime Minister (in Decision No. 24/2017/QD-TTg dated June 30, 2017) has delegated the authority to adjust the retail electricity price to Vietnam Electricity Group (EVN), the Ministry of Industry and Trade and the Prime Minister depending on the level of adjustment of the retail electricity price.

Electricity prices need to be calculated correctly and fully.

In the years from 2013 to present, the Prime Minister has issued decisions regulating the adjustment of retail electricity prices, including decisions on the price framework of average retail electricity prices, the mechanism for adjusting electricity prices and the structure of retail electricity prices.

"The reality shows that the current electricity price management ensures transparency and flexibility in the implementation process. However, because electricity is an essential commodity, adjusting electricity prices is subject to much pressure from public opinion and can greatly affect the macroeconomic situation," the Ministry of Industry and Trade commented.

The management of retail electricity prices and the decision to adjust retail electricity prices need to be considered and evaluated comprehensively in all areas.

The Ministry of Industry and Trade noted: The decision to adjust retail electricity prices needs to have a higher legal status than current regulations to ensure consistency in the Government's macroeconomic management. Based on that theory, in reality, the management of retail electricity prices in recent years has been discussed and decided through meetings of the Government Standing Committee.

Clause 3, Article 8 of the 2015 Law on Government Organization stipulates that the Government has the authority to "decide on specific policies on finance, national currency, wages, and prices".

In addition, Resolution No. 55-NQ/TW states: "Research and legalize the management of electricity prices and some incentives for projects encouraged for investment in the energy sector".

Therefore, to ensure compliance with other legal regulations and ensure consistency in the Government's macroeconomic management, the Ministry of Industry and Trade assesses that it is necessary to consider amending the authority to promulgate the mechanism for adjusting retail electricity prices as stipulated in the current Electricity Law (decentralized to the Prime Minister), ensuring compliance with the orientation in Resolution No. 55-NQ/TW.

Need Decree on retail price mechanism

This change, according to the proposal of the Ministry of Industry and Trade, is for the Government to issue a Decree on the mechanism for adjusting retail electricity prices, which specifically stipulates the authority to adjust electricity prices according to each price adjustment level.

Therefore, the Ministry of Industry and Trade proposes to amend the provisions of the Electricity Law related to the mechanism for adjusting electricity prices in the direction of amending the provisions on the authority to promulgate the mechanism for adjusting the average retail electricity price in the Electricity Law in the direction of assigning the Government to prescribe (in the form of a Government Decree) instead of the Prime Minister prescribing the adjustment mechanism as in the current Electricity Law (Decision of the Prime Minister).

This is to ensure the general principle that the Government plays a role in promulgating legal institutions and policy mechanisms on electricity price adjustment, in accordance with the orientation in Resolution No. 55-NQ/TW, in accordance with the practice of electricity price adjustment in recent times, and in accordance with the Law on Government Organization.

According to the Ministry of Industry and Trade, recently, in order to attract private investment in power generation, projects in the form of IPP, BOT (investors are not EVN) have agreed, negotiated, and signed power purchase contracts with a common financial rate of return (IRR) of 10-12%. This rate is higher than the rate applied to power generation units accounting dependent on EVN (multi-purpose hydropower plants and other stages including power transmission, distribution, and retail of electricity because they are still 100% owned by the State), which is usually 3% or lower.

Therefore, this law amendment will add regulations on electricity price policies to gradually reduce and eventually eliminate cross-subsidies between customer groups, regions, and areas. This agency said that it will work with the Ministry of Finance to develop regulations related to electricity prices and "mechanisms for adjusting retail electricity prices" in accordance with the provisions of the Law on Prices (amended).

The Ministry of Industry and Trade has proposed to buy and sell electricity directly, not through EVN . The Ministry of Industry and Trade has just reported to the Prime Minister on studying and building a mechanism for buying and selling electricity directly between renewable energy generators and large electricity users, including an option that can be through a separate line, not managed by EVN.

Source