More frequent adjustments should be made, he said. A proposal on pricing is under consideration that would take into account EVN’s (Electricity of Vietnam) deficit of VND44 trillion, 

Trinh Quoc Trung, Deputy Director of the Electricity Regulatory Authority (Ministry of Industry and Trade), said that, under current electricity pricing regulations, EVN’s legitimate and reasonable input costs are factored into the average retail electricity price for adjustment.

However, as the country had just emerged from the Covid-19 pandemic and the economy and various sectors needed stability for recovery, no electricity price increases were implemented in 2022. In 2023, there were two adjustments, but small and incremental.

“By the end of 2023, EVN had faced a deficit due to costs, commonly referred to as accumulated losses, of VND50,000 billion,” Trung said. 

This excludes an additional VND21,800 billion in exchange rate differences that EVN must pay to power generation units under power purchase agreements. 

These differences arise from currency fluctuations between VND and foreign currencies, as generation units borrow from foreign financial institutions to invest in power generation projects, and EVN is responsible for covering these under contracts.

This results in a deficit when revenue falls short of the total cost of electricity production. According to Trung, sooner or later, these costs must be fully taken into account when calculating electricity prices, as EVN cannot bear the burden indefinitely.

Trung stressed that EVN is a state-owned enterprise producing and distributing electricity, regulated and supervised by state agencies, and it doesn’t hold a monopoly. Facing deficits in recent years, EVN has had to “tighten its belt.”

Electricity is unlike other commodities

Thoa said the nature and cause of this deficit must be clarified. Without transparency, gaining public consensus is challenging. People question why profits are not discussed, but losses are passed on to consumers.

Regarding EVN’s reported accumulated deficit of over VND44,000 billion, Thoa advised against using the term “loss.” In principle, a business loss occurs when total revenue is less than total costs, often due to selling prices being lower than production costs.

For ordinary goods, market-driven businesses operate on a “you gain, you keep; you lose, you bear” basis. Poor management or high production costs lead to losses. If EVN operated this way, there would be no debate, Thoa said.

However, electricity is not an ordinary commodity. It serves multiple objectives, adjusted based on economic and social conditions.

Thus, electricity prices are clearly not market-driven but state-determined. The state carefully considers the impact, extent, and rationale for price adjustments to minimize adverse effects.

In 2022-2023, for various reasons, retail electricity prices were set VND135-149 per kWh below production costs. This was not a ‘loss’ but a negative cash flow due to prioritizing broader national goals. The electricity sector temporarily excluded cost components allowed under the Electricity Law, which mandates full and accurate cost inclusion.

According to Thoa, even if there is public consensus on addressing EVN’s VND44 trillion deficit, the treatment must still be calculated carefully to ensure fairness.

EVN must check all items contributing to the negative cash flow. What is legally allowed in pricing should be taken into account, and what is not must be excluded. 

A reasonable roadmap must also be developed to gradually allocate these costs to avoid shocking the public with sudden price hikes.

On electricity pricing, Thoa recommended strictly following the PM’s decision, implementing the correct pricing mechanism, method of calculation, and adjustment timeline.

“We should adjust electricity prices every three months. Adjusting only once a year causes costs to pile up, and when released, the surge has a massive impact,” he suggested, citing fuel price management experience, where timely adjustments prevent shocks.

“In a market, continuously buying high and selling low is unsustainable. The state cannot subsidize, and the budget cannot cover it. There’s no other way but to follow this path,” he added.

Nguyen Le