Electricity prices must be transparent, removing all barriers

Amending the Electricity Law requires fundamental price reform

Mr. Nguyen Tien Thoa - former Director of the Price Management Department (Ministry of Finance) - said that electricity prices have 4 major shortcomings. The first general shortcoming is that electricity prices have not been implemented according to market mechanisms.

"All input costs for electricity production such as coal, gas, oil, exchange rates, etc. have followed the market, but the output price does not reflect the fluctuations of those costs. Sometimes the adjustment takes too long, sometimes the adjustment is not calculated correctly, not fully calculated, and does not ensure compensation for all costs spent on electricity production and business" - Mr. Nguyen Tien Thoa said, adding that this leads to many difficulties in electricity production and business.

According to experts, the latest data for 2022-2023 shows that this management method has caused a loss of about 47,500 billion VND for the electricity industry. This is a major difficulty in improving the electricity industry's cash flow to invest in and develop power sources and grids.

He cited that electricity prices not only cross-subsidize among groups of household electricity consumers - high levels subsidize low levels, cross-subsidize between household electricity prices and production, but also cross-subsidize among regions. "Electricity prices in island communes and districts are usually 7,000-9,000 VND/kWh, but we still sell at 1,000-2,000 VND/kWh, meaning we use low areas to compensate for high areas..." - Mr. Thoa cited.

According to him, it must be calculated correctly and fully according to market principles, but especially it must be transparent. This is also required by the Politburo, the Government, and the National Assembly. Electricity prices must be transparent, all barriers must be removed. Of course, it is not a floating market, the market must be regulated by the State, there must still be a State monopoly, the private sector cannot participate 100%. Here, the first concern of consumers is having enough electricity to use. He agreed that the Electricity Law must be amended and that there must be fundamental price reform.

"It needs to increase by 10%, but each increase is only 1-2%, so even if it increases 5 times, it will still be a loss. This feeling is leading public opinion. Therefore, issues related to price structure and price management mechanism should be legalized at a higher level" - the expert suggested.

Promote marketability, increase competition

Associate Professor, Dr. Bui Xuan Hoi, Energy Economics expert. Photo: Nhat Bac

Meanwhile, Associate Professor Dr. Bui Xuan Hoi - an energy economist - said that while Vietnam's electricity prices still implement multiple objectives, countries around the world have separated them quite clearly. Normally, the price structure has two components: One is the calculation of the capacity cost, which we call the capacity price (subscription price); the other is the cost of electricity, after the subscription is complete, you pay as much as you use. This is usually the approach of countries around the world.

Looking back at Vietnam's price system, the current method of calculating the average retail electricity price, he said, has limitations, but is not the core of the current difficulties of the electricity industry. The most important thing is still the story of price management. "If it is not possible to manage electricity prices according to the market mechanism immediately, all aspects of regulation must gradually move towards the market" - the expert noted.

National Assembly Delegate Phan Duc Hieu, Standing Member of the National Assembly's Economic Committee. Photo: Nhat Bac

According to National Assembly delegate Phan Duc Hieu - Standing member of the National Assembly's Economic Committee - we want to promote market nature, increase competition in all activities, all stages of electricity. In selling electricity and calculating prices, we must increase competition and market nature. Market nature here has many factors such as when input prices fluctuate, output prices are adjusted. If there are fluctuations that we cannot control, leaving it open for 6 months and 1 year to operate, that is not the market. We must be more market-oriented in the way we operate.

Source: https://laodong.vn/kinh-doanh/gia-dien-phai-minh-bach-thao-go-tat-ca-cac-rao-can-1382555.ldo