The current retail electricity price mechanism does not promptly reflect fuel costs, supply and demand shortages, and pricing policies still reveal shortcomings, according to the National Assembly's inspection agency.
This content is mentioned in the inspection report of the National Assembly Committees on the implementation of the resolution from the beginning of the term.
Electricity prices are currently adjusted according to Decision 24/2017, with two mechanisms: annual and intra-year. The annual mechanism adjusts according to objective fluctuations in input parameters of all stages (generation, transmission, distribution - retail electricity, operation, industry management and ancillary services of the power system) and intra-year when there are fluctuations in input parameters in the generation stage.
When the input parameters cause the average retail electricity price to increase by 3% or more compared to the current price, it will be considered for an increase (or decrease) every 6 months. All decisions to adjust electricity prices are reported to the Prime Minister for consideration and comments, according to Decision 24.
The price of this commodity has been kept stable by the authorities during the Covid-19 period (2020-2022). The most recent increase was 3% from May 4, 2023, the lowest level according to Decision 24, to VND1,920.37 per kWh, to reduce the impact on the economy and partly solve EVN's financial and cash flow difficulties. Last year, the group recorded a loss of more than VND26,200 billion due to increased fuel prices, which increased the group's electricity purchase costs. And in the first half of this year, EVN lost more than VND35,400 billion, according to a report by the Ministry of Planning and Investment.
During the review, the National Assembly Committees commented that the current retail electricity price mechanism is not in sync with the reality of market development. "The price of this item also does not promptly reflect input fuel costs as well as the scarcity of electricity supply and demand, and has not been formed according to each geographical area," the report stated.
Specifically, the legal framework for participating in the competitive wholesale electricity market (VWEM) is still incomplete. And renewable power plants built according to the "FIT price" mindset face many risks when bidding in the competitive electricity market.
In addition, the electricity price policy is still inadequate. For example, there is currently no regulation on whether the electricity distribution price will be regulated by the State similar to the transmission price or not; the issue of correct, sufficient calculation and reasonable profit of electricity units. Also according to the inspection agencies, the authority to issue the mechanism to adjust the retail electricity price and the issue of operation are also unreasonable.
Hanoi Electricity workers repair a problem in Long Bien district, 2020. Photo: Ngoc Thanh
In addition, the Economic Committee proposed to perfect the mechanism for adjusting electricity prices in accordance with reality. Price adjustment must ensure transparent management, without causing large, sudden and negative impacts on production and people's lives.
The Government said that the Ministry of Industry and Trade is studying to amend Decision 24 on the mechanism for adjusting electricity prices, which may include additional production and business losses and exchange rate differences that have not been accounted for in electricity prices.
At the Vietnam Economic Forum 2023, Mr. Nguyen Xuan Thanh, Lecturer at the Fulbright School of Public Policy and Management Vietnam, said that electricity prices need to fully account for production costs if we want a green economic transition and increase renewable energy. According to him, price increases could lead to negative reactions in society, but "it is impossible to develop renewable energy without a roadmap to increase electricity prices at a level that is attractive enough for investment."
Regarding solutions to ensure electricity supply , the Standing Committee of the Economic Committee noted that it is necessary to accelerate the implementation of necessary solutions to ensure electricity supply in the dry season at the end of 2023; speed up the progress of ongoing power source and grid projects to put them into operation in time. The Government needs to soon introduce a mechanism to encourage the development of rooftop solar power installed in homes, offices, and business headquarters.
In July, the Prime Minister approved the National Power Development Plan to 2030, with a vision to 2050 (Power Plan VIII), but the plan to implement this plan has not yet been issued.
According to the auditing agencies, the VIII Power Plan was issued 2 years later than required in Resolution 134. This has affected the 10-year socio-economic development strategic goals (2021-2030), and the 5-year socio-economic development plan (2021-2025). The National Assembly agencies "urged" the Government to soon issue a plan to implement the VIII Power Plan, which specifies the capacity scale, progress of projects in each locality... to serve as a basis for implementing the plan.
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