With the new proposed retail price, households using less than 700 kWh a month will benefit, while those using more than this amount will have to pay more for electricity than under the current calculation.
The Ministry of Industry and Trade is seeking opinions on revising the retail electricity price list, with the expected household price having 5 levels instead of 6 as currently. Accordingly, the electricity price is calculated progressively in steps, with the lowest level (level 1) being about 1,728 VND per kWh and the highest (level 5) being 3,457 VND. This price does not include VAT.
Mr. Hoan (Ha Dong, Hanoi) said that in July, his family consumed 465 kWh and paid VND1,222,749 (including 8% VAT). This amount is calculated according to the current 6-step progressive price list. He estimated that if he switched to the 5-step plan according to the new proposal, with the above electricity usage level, the amount to be paid would be about VND1,193,200 (including tax), a decrease of nearly VND30,000 compared to the 6-step progressive price list.
Mr. Hoan's family is among more than 97.8% of households with a usage level of less than 700 kWh per month. According to calculations by the Ministry of Industry and Trade, their monthly electricity bill will not increase or decrease if the 5-level calculation is applied. On the contrary, the electricity bill of 0.6 million households using 701 kWh or more (accounting for 2.2% of households using electricity nationwide) will increase to compensate for the decrease of households using less electricity. Currently, 2.2% of households using more than 700 kWh per month are consuming more than 13% of the country's electricity output.
Accordingly, for example, a household uses 785 kWh of electricity per month, if calculated according to the 5-step plan, the amount to be paid is more than 2.3 million VND. This level increases by about 35,000 VND compared to the current 6-step price list.
| Level | Current price list | 5-step plan | ||
| Usage level | Price (*) | Usage level | Price | |
| 1 | 0-50 kWh | 1,728 | 0-100 kWh | 1,728 |
| 2 | 51-100 kWh | 1,786 | 101-200 kWh | 2,074 |
| 3 | 101-200 kWh | 2,074 | 201-400 kWh | 2,612 |
| 4 | 201-300 kWh | 2,612 | 401-700 kWh | 3.111 |
| 5 | 301-400 kWh | 2,919 | 701 kWh or more | 3,457 |
| 6 | 401 kWh or more | 3.015 | ||
(*) Price does not include VAT
Professor Tran Dinh Long, Head of the Science and Technology Department (Vietnam Electricity Association) commented that reducing the number of steps in the retail electricity price list for households is appropriate. The highest step (from 701 kWh and up) costs about 3,457 VND per kWh, twice as high as the first step (1,728 VND per kWh), which is reasonable according to Mr. Long, because households using more than 700 kWh per month are usually households with a fairly good income and are able to pay.
"This plan has made a clearer distinction between the group of customers using average and high electricity consumption, with the principle of 'using a lot must pay a high price' because this is a special item, cannot be stockpiled, and needs to be used economically," said Mr. Long.
Some countries also use a progressive household electricity tariff, with a 2-3 times difference between the first and last tiers. For example, in Thailand, the price of electricity at the last tier is 1.65 times higher than the first tier; in South Korea, it is 3 times, in Laos, it is 2.88 times, and in Southern California (USA), it is 2.2 times.
According to the 5-tier plan proposed by the Ministry of Industry and Trade, the first tier of electricity price (0-100 kWh) will remain the same as the current price of 1,728 VND per kWh. This level is intended to support poor households and social policy households with low electricity usage, accounting for nearly 33.5% of households using electricity nationwide.
Similarly, the electricity price of 101-200 kWh and 201-400 kWh will remain the same, equivalent to the current price of levels 3 and 4, which is 2,074 - 2,612 VND per kWh. The higher levels, 401-700 kWh and from 701 kWh and above, are designed to be higher to offset the revenue for the lower levels.
Mr. Vu Ngoc Duong, Head of the Electricity Market Department (Electricity Regulatory Authority, Ministry of Industry and Trade) said that the 5-level household price structure is implemented on the basis of revenue compensation, meaning that the shortfall of one level will be compensated by another level, so it does not change the average retail price of electricity for household use (at 1,920.37 VND per kWh).
However, due to changes in the price structure, there will be a direct impact on customer groups. Some groups will have their electricity bills reduced, while others will have to pay different levels of increases.
Workers of Hanoi Electricity Corporation work at Lang Ha transformer station, December 2022. Photo: Ngoc Thanh
In the draft for comments, the production and business sector is still calculated based on voltage level, time frame (off-peak, normal, peak) and a component electricity price for consumed electricity . Experts say that this calculation method has not reduced the current cross-subsidy between household and production electricity prices.
In fact, the principle of reflecting supply costs and less cross-subsidy has been implemented by many countries, according to a two-component electricity price structure, including capacity price and electricity consumption. "As long as this problem exists, the situation of high electricity bills during the hot season will not be solved," an energy expert said.
A representative of the Electricity Regulatory Authority said that the two-component electricity price (capacity and electricity) will only be considered for testing, applied when technical conditions allow and are suitable for each stage of economic recovery.
In addition, the electricity price for business and administrative services is kept unchanged and the retail electricity price for customers of electric vehicle charging stations and poles is supplemented according to the principle of accurately and fully reflecting the production and business costs of the electricity industry.
While maintaining the progressive price schedule, Professor Tran Dinh Long further noted that electricity prices need to be adjusted every 6 months, changing seasonally, because when the input changes, the output must also adapt, while the current electricity price does not comply even though Decision 24/2017 sets out this rule.
"Every six months, the State should review whether the electricity price list is reasonable or not, and should amend it to keep up with market fluctuations and input fuel prices for electricity production," he suggested.
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