VietNamNet Bridge - Infrastructure and conditions in Vietnam are still not sufficient to apply the market-based electricity pricing mechanism, experts say.

Minister of Industry and Trade Vu Huy Hoang said at the mid-year Vietnam Business Forum that Vietnam would begin adjusting the electricity prices in accordance with the market supply and demand from early 2016.

Hoang, at an important event with foreign investors, once again reaffirmed the government of Vietnam’s viewpoint on floating the electricity price so as to ensure reasonable profits for investors and create a competitive power distribution market.

Analysts have raised doubts about the feasibility of the plan on forming a competitive power distribution market by 2016, commenting that a competitive market is the goal for Vietnam to strive for, not what Vietnam can obtain right now.

In principle, a competitive market takes shape when service providers all have the right to healthy competition, i.e., that all enterprises, from private, state-owned to foreign invested have the right to sell electricity to the state – the power distributor. If so, the power buy price will be competitive.

However, the sell price is uncompetitive because the state is the only retailer.

“Under the current conditions, the goal of selling electricity on the basis of market supply and demand by 2016 is unfeasible,” commented Dr. Nguyen Minh Phong, a renowned economist.

“To float the electricity price, it is necessary to separate the production and distribution sectors,” Phong said.

Agreeing with Phong, Dr. Pham Quy Tho from the Ministry of Planning and Investment said Vietnam still does not have necessary conditions to float the electricity price.

“The conditions necessary for a market-based pricing mechanism still have not appeared in Vietnam,” he explained.

Tho said the Ministry of Industry and Trade may think of raising the electricity prices but stabilizing the prices.

He said the State may consider the power production costs of hydro and thermal power plants developed by investors from different economic sectors and then set a certain price level which can harmonize the benefits of all the parties.

However, Tho said this is just an assumption, explaining that it is very difficult to set up an average electricity price for
 different electricity production costs from different supply sources. 

Though the electricity selling price cannot be applied to all subjects, the existence of the electricity price for reference will help investors, both domestic and foreign, to estimate their investment rate and consider investment plans.

“The investors in the power sector can be sure that they can maintain the selling prices for certain periods,” Tho said, emphasizing that the average price is set just for reference.

Tien Phong