Việt Nam Electricity (EVN) said that it agreed with the Ministry of Industry and Trade’s proposal of reviewing electricity prices for adjustments every three months instead of six as at present.

Commenting on the draft decision on amending the mechanism for adjusting the average electricity retail price, EVN agreed that when electricity production cost decreased by 1 per cent or more, the average electricity retail price would be reduced at the corresponding rates.

When the increase in production cost was 3 per cent or more, the average electricity retail price would be increased. An increase from 3 per cent to 5 per cent would be decided by EVN, from 5 per cent to 10 per cent by the Ministry of Industry and Trade, and from 10 per cent or more would be by the Prime Minister.

The minimum time for adjusting electricity prices from the last increase would be three months, it’s reasonable, EVN said.

EVN also proposed methods to calculate the average electricity price to be amended.

Under the ministry’s proposal, the average electricity price was calculated based on the cost of generation, transmission, distribution, operation, and norm profit of EVN.

However, EVN said that the cost of transmission should also include the cost of related services. The costs of system dispatching and management of transactions on the electricity market should be added.

It was necessary to adjust the electricity tariff, which had been kept unchanged during the past 7 years, to reflect the cost and ensure the appropriateness to the electricity market development, Bùi Xuân Hồi, Principal of the North Electric Power Collage, said.

The pricing mechanism should be more market-based, which was critical for the development of a competitive electricity retail market, he said.

Another new point in the draft was the Ministry of Industry and Trade could invite an independent consultant to evaluate electricity prices to ensure transparency.

Đào Nhật Đình, an expert in energy, said that while adjusting electricity prices every three months was acceptable, which was common among ASEAN countries, the most important factor was to ensure transparency in pricing.

He added that Việt Nam should establish an independent energy council, not related to EVN, to evaluate electricity production cost.

Economist Đinh Trọng Thịnh from the Academy of Finance, said that as the electricity pricing still lacked transparency and EVN still held the monopoly in Việt Nam's electricity market, careful consideration must be given on whether electricity prices should be reviewed for adjustment every three months. The development of a competitive power market was critical, he stressed.

The current average retail electricity price is VNĐ1,920.37 per kWh, after an increase of 3 per cent on May 4.

Earlier this month, EVN proposed to the Government to increase retail electricity prices to ensure a balance in its production and business operations, just three months after the increase of 3 per cent in May.

A report of EVN in June showed the firm lost VNĐ36.3 trillion from electricity production in the first five months of this year. — VNS