VietNamNet Bridge – Investors of small-sized hydropower plants are up in arms after learning about the Ministry of Industry and Trade’s proposal to keep wholesale electricity prices unchanged for 20 years.

MOIT is drafting a draft circular on power purchase contract forms and avoidable costs to be applied to small hydropower plants using renewable energy.

The “small hydropower plants” are understood as ones with the capacity of less than 30 MW.

“Avoidable costs” means production costs to churn out 1 kwh of electricity at the power generation unit, which have the highest costs in the national electricity system.

This can be avoided if the buyers buy 1 kwh of electricity from a small power plant using renewable energy instead.

The draft circular says that the contracts between the small power plants (the sellers) and power corporations (the buyers) will be valid for 20 years. This means that the small power plants will have to keep wholesale prices unchanged for at least 20 years.

Bui Van Hung, Chair of Tam Long Hydropower JSC in Dak Lak province, said the regulation, if applied, would push small hydropower investors against the wall.

According to Hung, from 2009 to 2013, the Electricity of Vietnam’s retail turnover to electricity consumers soared by 59 percent, from VND948 per kwh to VND1,508 per kwh.

Meanwhile, avoidable costs for small hydropower plants increased by 24 percent only during the same time, from VND760 to VND983 per kwh.

EVN is the only customer of all power plants in Vietnam, which buys electricity from the plants to retail to consumers.

Small and medium hydropower plants have been told not to raise wholesale prices in 2014.

Huynh Kim Lap, Chair of Thien Tan Group, which is running the Ha Nang in Quang Ngai province, said he cannot understand why MOIT is trying to maintain electricity prices for 20 years.

“This is contrary to the main principles of the power market and to the government’s policy on encouraging renewable energy development,” he said.

In the past, many small hydropower plants became bankrupt as they could not negotiate with EVN about wholesale prices.

Only after MOIT issued Decision No 18 in 2008, allowing hydropower plants to adjust the electricity price annually, have the hydropower plants been able to exist and develop.

An analyst commented that it is unreasonable for MOIT to force small hydropower plants to keep the selling prices unchanged for a long time, while the input costs, including the labor costs and bank loan interest, increase regularly.

“The bank loan interest rates have been fluctuating regularly, sometimes reaching 21 percent per annum. I am sure power plants would incur heavy losses, if they cannot adjust the selling prices for 20 years,” Lap said.

Nguyen Van Khanh, director of the Song Bung 6 hydropower plant in Quang Nam province, said his plant took a loss of VND4 billion last year due to the dry weather and low selling prices. He anticipated that the business performance would be in even worse distress if the plant cannot raise selling prices.

VNE