Flexible retail pricing mechanism is needed

At a recent conference gathering experts, managers, and businesses to discuss the implementation of a competitive electricity market, Minister Nguyen Hong Dien admitted that Vietnam’s electricity market remains incomplete, with bottlenecks that hinder investment and delay price negotiations.

The pricing mechanism remains opaque, and cross-subsidies persist between customer groups. Consumers still cannot choose their suppliers. These challenges must be resolved to establish a fair, competitive market that drives energy development.

The stakes are high. Within the next five years, electricity generation capacity must triple from today’s 81,000 MW to between 234,000 MW and 251,000 MW, as outlined in the revised Power Development Plan VIII and Resolution 70 of the Politburo. Without a transparent market, meeting this target will be extremely difficult.

“Resolution 70-NQ/TW of the Politburo is a mandate of reality. There is no room for hesitation. Those unwilling to reform must step aside,” the Minister stressed.

Bui Quoc Hoan, Deputy General Director of Southern Power Corporation (EVNSPC), emphasized that the core of a competitive electricity market is its pricing mechanism. Yet cross-subsidies persist among customer groups and regions.

He proposed a flexible retail pricing system, in which retailers and consumers negotiate electricity prices under market rules. Customers outside the market would continue paying State-regulated uniform rates.

Nguyen Anh Tuan, Vice President of the Vietnam Energy Association, argued that a healthy competitive electricity market requires sufficient “goods” to trade. Currently, only 38% of generation capacity participates in the market. If BOT power plants and renewable projects under the FIT scheme remain excluded, this share will fall further. That means too few “sellers,” preventing supply-demand dynamics from being accurately reflected.

He suggested that all power plants, regardless of size or type, must join the competitive market after their incentive periods end. Only by expanding participation will electricity prices reflect real costs and send the right signals for investment.

The association also supports studying regional or nodal pricing mechanisms to provide clearer investment signals while encouraging large consumers to join the market.

Energy expert Ha Dang Son recommended that the Ministry soon adopt more flexible electricity pricing linked to consumption patterns and new technologies, allowing EVN to adjust retail prices in line with market signals.

Phasing out cross-subsidies is essential

Minister Nguyen Hong Dien stressed that developing a competitive electricity market must adhere to Party and Government guidelines, particularly Resolution 70, while ensuring consistency with the Electricity Law.

Key principles include transparency, fairness, non-discrimination among market participants, and protection of both utilities and consumers. Participants must have the freedom to choose partners and transaction methods appropriate to each market stage.

The electricity sector must also undergo restructuring to balance competition with energy security and social welfare.

“This is a responsibility that perhaps only EVN, as a State-owned corporation, can fulfill. Private companies are unlikely to shoulder national energy security and social welfare obligations,” he noted.

The pricing mechanism and power purchase agreements must be improved to meet market requirements. Infrastructure and human resources need investment.

“Regulations on competitive market operations must be revised in a timely manner for each stage. Above all, price signals must play a central role in attracting investment,” the Minister emphasized.

He added that a roadmap is needed to eliminate cross-subsidization between customer groups and regions, aligned with market development stages. Regulations on distribution service charges must ensure that costs, especially in transmission, are fully and fairly calculated.

In addition, mechanisms must be introduced to regulate the use of primary fuels for power generation, especially gas and mixed gas pricing, to ensure efficiency and energy security.

“The system must be open and remove bottlenecks at every stage of the electricity sector,” the Minister concluded. “Without a fair and transparent competitive market, it will be hard to attract investors, as no one will commit large capital with only slow, uncertain returns.”

Tam An