Electricity price increase in May not enough to recover input costs
The representative of the Electricity Regulatory Authority - Ministry of Industry and Trade said that the basis for proposing regulations to recover EVN's electricity production and business losses in calculating electricity prices in the draft decision replacing Decision No. 24/2017/QD-TTg on the mechanism for adjusting average retail electricity prices (Decision 24) is considered based on legal regulations and actual situations as well as opinions of ministries and branches...
Accordingly, Article 4 of Decision 24 stipulates that the components that make up the average annual retail electricity price include the costs of the stages in the electricity production and supply chain (power generation, power transmission, power distribution and retail, power system dispatch and electricity market transaction management, power system ancillary service costs, general management costs of EVN) and other costs not included in the electricity price.
According to the provisions of Decision 24, other expenses not included in the electricity price, including the unallocated revaluation exchange rate difference, are included in the electricity production and business cost of year N (price calculation year) and are reviewed and decided annually by the Ministry of Industry and Trade and the Ministry of Finance.
Decision 24 stipulates that expenses incurred but not included in the electricity price in previous adjustments will be considered for calculation and allocation to the electricity price of the period being calculated.
According to the Electricity Regulatory Authority, before the issuance of Decision 24, exchange rate differences were the largest expense that was often suspended and not accounted for in the cost of electricity production and business as well as electricity prices, or only partially accounted for and allocated depending on the financial situation of each year.
Referring to the loss of more than VND 26 trillion of Vietnam Electricity Group in 2022, the Electricity Regulatory Authority said: Although fuel prices in 2023 have been less stressful than in 2022, they are still high compared to the period before 2022, greatly affecting EVN's financial balance.
The adjustment of the average retail electricity price in 2023 by 3% from May 4, according to the Electricity Regulatory Authority, has partly resolved the difficulties in EVN's financial situation and cash flow. However, costs in 2023 continue to accumulate because the electricity price adjustment is not enough to recover the input costs that form the price (mainly the cost of purchasing electricity, accounting for more than 80% of EVN's total electricity production and business costs).
"Thus, in reality, in 2022 and 2023, the loss in electricity production and business activities is due to the fact that revenue from electricity production and business activities is not enough to cover the costs incurred to serve electricity production and business activities (ie the retail price of electricity is not enough to cover the cost of electricity production and business)", the Electricity Regulatory Authority affirmed.
According to audited financial reports and inter-ministerial inspection
Therefore, the input costs of 2022 and 2023 as prescribed in Decision 24 are recovered through electricity prices that have not been recovered (no increase in electricity prices in 2022) or have not been fully recovered (only an increase of 3% in 2023) to ensure social security and general development, and need to be considered for recovery in subsequent electricity price adjustments.
Based on the current regulations in the Law on Prices, the Electricity Regulatory Authority believes that: Electricity prices need to ensure adequate compensation for reasonable actual costs and have appropriate profits. Decision 24 has provisions on allowing the allocation of other costs not included in the electricity price in the annual electricity price calculation to ensure that the electricity price reflects the correct cost (and then has appropriate profits).
Therefore, the draft decision replacing Decision 24 needs to have a mechanism to ensure that costs that have not been fully recovered in previous electricity price adjustments will be considered for recovery in subsequent adjustments.
In addition to ensuring the recovery of electricity costs for the planning period, the planned electricity price also needs to ensure the recovery of actual electricity costs that have arisen reasonably and legally in the past but have not been fully recovered, leading to past losses in the business's production and business activities.
There are no specific regulations on considering the recovery of past electricity production and business losses, which may affect EVN's ability to develop and preserve State capital if production and business losses persist, in the context that electricity prices at some point will have to be adjusted according to a roadmap, in accordance with macroeconomic conditions in each period, the Electricity Regulatory Authority noted.
The draft decision replacing Decision 24 also 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 according to the annual electricity production and business cost inspection program prescribed in Decision 24 (this inspection continues to be prescribed in the draft decision replacing Decision 24).
The Ministry of Industry and Trade will preside over and 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 and comments, ensuring consistency in macroeconomic management and operation, of which electricity price is a factor. The Ministry of Industry and Trade has completed the draft decision to replace Decision 24 and submitted it to the Prime Minister for consideration after consulting with ministries, branches, businesses and people. |
Source
Comment (0)