VietNamNet Bridge – Dinh Quang Tri, Deputy General Director of the Electricity of Vietnam (EVN), said EVN won’t reduce the retail electricity price, though it is allowed to do that: the lowest level in the price frame approved by the government is 4.7 percent lower than the current price.

Electricity price won’t decrease

The electricity price frame for 2013-2015 has been set by the Prime Minister, under which the lowest level is VND1,437 per kwh, or 4.7 percent lower than the current price, while the highest level is VND1,835 per kwh, or 21.6 percent higher than the current price.

This means that in principle, the electricity price may increase or decrease in comparison with the current price. However, analysts believe that the price decrease won’t occur, even though EVN expects the post tax profit of VND120 billion this year.

Tri, while saying that things have been going very smoothly in the last two years thanks to the high rainfall (the production cost of hydropower plants is lower than thermopower plants), confirmed that the prices would go upward.

According to Tri, the input fuel prices have been increasing sharply. The coal price, for example, has increased by up to 50 percent. The price of gas sold to power plants remains low, it has been moving up in accordance with a plan approved by the government.

EVN has to follow the Prime Minister’s Decision No. 24 when setting up electricity prices. Under the decision, the pricing policy would be laid out based on the three basic factors, including the input fuel prices, the exchange rate and the electricity output structure (the electricity put out by hydropower plants has the lowest production costs).

If all the three factors are favorable, i.e. the input fuel price decreases, the foreign currencies depreciate and EVN can mobilize more electricity from the low-cost hydropower, it would be able to cut down the electricity prices.

The exchange rate fluctuation can also have big impacts on EVN’s business performance. In 2011, EVN made a profit of VND4 trillion thanks to the yen depreciation. However, as the other foreign currencies appreciated, EVN still took loss in that year.

“Nevertheless, all the predictions show that EVN won’t have the opportunity to apply the lowest price level in the price frame set by the government,” Tri said.

EVN makes profit, but it keeps complaining

Experts believe that except during the two years 2010 and 2011, EVN has been making profit every year. In those two years, EVN took a loss of VND12 trillion because of the prolonged drought.

Hydropower makes up 60 percent of the total electricity output, while other sources provide 40 percent. This explains why the electricity shortage regularly occurs in dry season. The electricity from thermopower plants cannot be transmitted to the south because of the limited capacity of the 500KV line.

In the period from 1994 to 2010, EVN made a profit of VND4 trillion a year on average. In 2012, the profit reached VND6 trillion.

However, the high profits prove to make nothing if compared with the demanded investment capital and the huge debts being incurred by EVN.

Therefore, economists believe that EVN would still raise the electricity price even though it can make profit.

In principle, EVN has to ask for the permission from the Ministry of Industry and Trade, the Ministry of Finance and the government, if it plans to raise the electricity price by more than five percent.

Pham Huyen