Use over 700 kWh, pay nearly 3 times more expensive
According to the proposal of the Ministry of Industry and Trade, the retail price list for household electricity in draft 3 has been improved according to the proposal of Vietnam Electricity Group (EVN) to reduce from 6 levels to 5 levels. Specifically, level 1 from 0 - 100 kWh is 1,806.11 VND/kWh; level 2 from 101 - 200 kWh is 2,167.33 VND/kWh; level 3 from 201 - 400 kWh is 2,729.23 VND/kWh; level 4 from 401 - 700 kWh is 3,250.99 VND/kWh and level 5 for kWh from 701 and above, is 3,612.22 VND/kWh. With this new price list, the retail price of household electricity compared to the current average retail price of electricity (VND 2,006.79/kWh) is equal to 90%, 108%, 136%, 162% and 180% respectively.
Draft decision on retail electricity price structure lowered to 5 levels, highest level over 3,600 VND/kWh
Thus, with this new price list, people using electricity for daily use over 700 kWh/month will have to pay an electricity price nearly 3 times higher than the average retail price (equivalent to 180%). The above prices do not include value added tax. If 8% value added tax is added, for each kWh of electricity, people using 700 kWh or more will have to pay nearly 4,000 VND.
According to the Ministry of Industry and Trade, the design of the retail electricity price list for households with electricity consumption from 0 - 100 kWh is to ensure the stability of electricity prices for poor households and social policy households with low electricity consumption. This number accounts for about 33.48% of households. The difference in electricity revenue reduction is compensated by households with electricity consumption from 401 - 700 kWh. "Electricity prices for levels from 401 - 700 kWh and from 700 kWh and above are designed to offset revenue for low levels," the Ministry of Industry and Trade stated, emphasizing that electricity prices for each level are designed to ensure minimal impact on electricity users.
Energy expert Ngo Duc Lam, former Deputy Director of the Institute of Energy (Ministry of Industry and Trade)
In particular, the draft adds a customer group of "tourist accommodation establishments" with a price equal to the price of electricity for production, because according to the Ministry of Industry and Trade, tourism development will contribute to economic restructuring, bring revenue to the national budget, attract investment capital and export goods on the spot, and have a positive impact on the development of related economic sectors. According to EVN's calculations, the current electricity price for production is lower than the allocated cost. Therefore, the Ministry of Industry and Trade calculates that the revenue shortfall due to the addition of the customer group of "tourist accommodation establishments" can be considered to compensate from the electricity price for off-peak hours of the production customer group from 4 - 8% compared to the current average retail electricity price. Because the off-peak electricity price of this customer group is much lower than the average retail electricity price (from 52 - 56%).
With this change, according to the agency drafting the draft decision, manufacturing businesses will be affected by a price increase of 1.27 - 3.85%. However, in return, tourist accommodation establishments will have their electricity prices reduced from business to production, which will significantly reduce the monthly electricity costs of tourism service businesses.
Reviewing household electricity prices to compensate for production
According to energy expert Ngo Duc Lam, former Deputy Director of the Institute of Energy (Ministry of Industry and Trade), the change in retail electricity price levels and the reduction in retail electricity price for tourism services by electricity price for production shows that the electricity price structure has not really improved and made it easier for electricity users as described by the drafting agency. That is, households that use a lot of electricity continue to pay for electricity for households that use less. Cross-subsidization in household electricity prices and cross-subsidization between household electricity prices and electricity for production are not appropriate. In other words, electricity users over 400 kWh have, are and will subsidize electricity for factories, households that use less electricity, and tourism facilities.
"In reality, 400 kWh/month for a household is not a large amount, most households use more than this amount. That means the majority of households have to bear the electricity price for other subjects, which is unfair, even illegal. The State has social security policies, and the budget to support electricity bills for poor households and social policy households is arranged from the budget. Therefore, letting electricity users cross-subsidize other electricity users is at least unreasonable," expert Ngo Duc Lam analyzed.
Energy expert Ha Dang Son, Director of the Center for Energy and Green Growth Research, also said that continuing to give preferential electricity prices to the manufacturing sector needs to be reconsidered. According to the draft and current regulations, the retail price of electricity for production during off-peak hours remains at 52 - 67%, and during normal hours it is only 78 - 90% of the average retail price of electricity. Recently, when the world economy faced a crisis, business orders decreased, many manufacturing enterprises, mainly foreign processing enterprises, laid off thousands to tens of thousands of domestic unskilled workers. The problem is that these large enterprises come to Vietnam to produce, use cheap unskilled labor, and receive tax incentives, land rents, etc. The cost of electricity to produce goods is also given priority and domestic electricity users are "compensating" them. However, when facing difficulties in business, the manufacturer that uses a lot of electricity and is enjoying good prices will fire its own workers, among whom there will be many people who have been paying them back for electricity.
"To be fair and impartial, the electricity price list for the production area needs to be reconsidered," Mr. Ha Dang Son emphasized.
Commenting on the draft decision, the Vietnam Electricity Association stated the following viewpoints: Firstly, it is necessary to clearly and distinctly stipulate that the budget compensates for the difference in costs due to selling electricity in rural, mountainous, border and island areas lower than the electricity production and business cost of the electricity unit. Secondly, the structure of the retail electricity price list must ensure that the price of electricity for daily life is not higher than the price of electricity for production and tourism services, that is, the price of electricity for daily life is not used to compensate for the price of electricity for production and tourism services. Thirdly, it is necessary to boldly include the cost of use (in fact, the cost of using capacity) in the steps of the 5-step retail electricity price list for daily life as applied by Korea.
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