The Ministry of Industry and Trade has just announced the results of the inspection of the electricity production and business costs in 2023 of Vietnam Electricity Group (EVN). Accordingly, the electricity production and business activities in 2023 and activities related to electricity production and business of EVN lost more than VND 21,821 billion.

Buying high and selling low causes many consequences

At the seminar "Electricity price - Current situation and solutions" organized by the Government Electronic Information Portal on the afternoon of October 10, former Director of the Price Management Department Nguyen Tien Thoa cited published inter-sectoral inspection data showing that electricity prices are higher than the average electricity selling price.

He emphasized that this is a situation of buying high and selling low. Inputs follow the market but outputs are not determined according to the costs that have been calculated correctly, sufficiently, reasonably and validly in the process of electricity production and business. This has created many problems and consequences for electricity production and business, for electricity-using industries and for the whole economy.

The former Director of the Price Management Department said that all barriers must be removed to ensure transparent electricity prices according to market mechanisms. The Government has issued a regulation: Based on how much input changes within a period of 3 months, EVN is allowed to adjust electricity prices within the permitted range.

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The cost of electricity is 6.92% higher than the average selling price. Photo: Hoang Giam

"The ultimate principle of electricity price management is to ensure that reasonable and valid production costs are compensated for, correctly and fully calculated. If this can be done, there will be no loss for the electricity industry, no loss to subsidize the economy," Mr. Thoa affirmed.

He also expressed his opinion that the State regulates electricity prices using market tools such as taxes, fees, funds, etc. to have electricity prices that ensure the harmony of interests of parties participating in the electricity market, but the State does not directly intervene in the price.

“It is necessary to separate social security policies and support policies for the poor from electricity price policies. Instead, solve the problem with other policies such as direct support for poor households. This will ensure that electricity prices will be more transparent,” he suggested.

According to Mr. Ha Dang Son - Director of the Center for Energy and Green Growth Research, if the subsidized and loss-compensated electricity price mechanism continues to be maintained, EVN will not have enough resources to invest in large projects.

Recently, the construction of the 500KV line 3 has seen great efforts from EVN to achieve the fastest progress. However, he raised the question: How much can EVN support with similar projects? In the near future, the challenge is huge for the construction of key power sources to ensure energy security, when the Government has directed that there will be no power shortage under any circumstances. What are EVN's resources in this case if it continues to suffer losses? - Mr. Son raised the question.

According to him, this warning was issued in 2014. If there is no reform of electricity prices, EVN will certainly suffer losses and its financial reputation for borrowing will be ranked low. The Group will have great difficulty in arranging capital and it will not be easy to get preferential interest rates, even having to pay high interest due to high risks.

Not to mention, the current electricity price cannot attract capital from private investors, and even makes it difficult to implement medium- and long-term electricity development planning.

Electricity price reform is required.

Deputy Director of the Electricity Regulatory Authority Nguyen The Huu analyzed that in the context of high electricity demand, if new power sources are not invested in time, it will be difficult to meet production and living needs. This will not only affect people's quality of life but also impact production and the investment environment.

“The problem is that the electricity price has not kept up with the cost of electricity production, causing the electricity industry to have no resources to invest and develop. Putting the problem like that is also the answer. We must find a way to make the electricity price stick to the cost of electricity production,” Mr. Huu said.

To solve this problem, the Ministry of Industry and Trade has submitted to the Government and the Prime Minister to issue Decision No. 05 on the "Mechanism for adjusting average electricity prices". It stipulates the mechanism for adjusting prices up, down, up, down and the adjustment period is 3 months. Thus, creating conditions for adjusting electricity prices to be close to changes in input factors and close to cost fluctuations.

The Ministry of Industry and Trade has also submitted to the Government for submission to the National Assembly the draft Electricity Law (amended), which fundamentally amends the current Electricity Law, has many mechanisms to promote the development of the electricity industry, calls for the participation of many social components, including the private sector to ensure supply and demand.

According to Mr. Ha Dang Son, the roadmap for reforming the entire electricity sector with the orientation towards the goal of Net Zero and sustainable development of Vietnam is clear. To do this, the first thing is to reform electricity prices, from which we can have the basic institutions and foundations to convert and shift energy towards bringing more "clean, green" electricity sources into the electricity production structure.

The role of EVN in this case is to ensure the power supply when there are fluctuating factors or uncontrollable factors, to ensure meeting the most urgent needs and social security. Other factors related to business must be decided by the market, to give private enterprises the opportunity to negotiate and adjust prices.

“We need to look at the long term to find a way to adjust electricity prices to ensure stability but still create opportunities for private enterprises to make profits and have investment incentives,” he noted.

Why did EVN lose more than 21,000 billion VND? EVN lost more than 21,000 billion VND in 2023 due to high power generation costs. In addition, the amounts not yet accounted for in the cost of electricity production and business in 2023 are about 18,032 billion VND.