Doubt hangs over a Government plan to form a competitive electricity market as Vietnam Electricity Group (EVN), the nation’s power monopoly, seems to be doing all it can to undo the plan.

EVN has for years claimed losses in a bid to ask for price hikes. Whenever it asks the Government for approval of power tariff rises. Together with some other State-run conglomerates, EVN sought support a fortnight ago to deal with losses triggered by the central bank’s local currency depreciation. The move has stirred a public uproar. That’s not all, though.

EVN is working on plans to change power pricing, which is feared to hit consumers, especially poor ones. EVN is seeking public comments on its plan to change the current progressive pricing system which it says is complicated.

The power utility has come up with three different ways to charge power consumers. The first is to keep the current six-level system, in which rates range from VND1,484 to VND2,587 per kWh, is kept unchanged. The second is to apply a flat rate, at VND1,747 a kWh, which is the average of the six levels in the progressive pricing system. The last is to keep progressive pricing in place but with fewer levels.

As for the third proposed pricing mechanism, there could be either three or four levels. EVN has five different scenarios for this mechanism in which the price of electricity is determined by the amount of electricity consumed and at a given level of consumption is an associated price per kWh. 

Level 1 would be VND1,501 per kWh for basic consumption of less than 100 kWh a month, while levels 2 and 3 would be VND1,907 per kWh for consumption of less than 200 kWh a month, and VND2,557 per kWh for less than 300kWh a month.

EVN describes the progressive pricing mechanism as complicated, in which the more power people consume, the higher the rates are. The flat rate of VND1,747 a kWh, however, would upset consumers who use fewer than 240 kWh a month, as they could no longer enjoy the low rate of VND1,484 and VND1,533 a kWh. Such pricing would benefit large electricity consumers but hurt low-income earners, according to EVN.

The plan has come under fire. Many people have cast doubt as EVN, with its monopolistic power, never think about the interests of poor consumers. Economic experts, meanwhile, have also strongly protested against the plan because of a lack of transparency.

Experts in pricing and economics at a conference on Wednesday said they preferred the current progressive pricing mechanism to a flat pricing one proposed by EVN.

An official from the Ministry of Industry and Trade is quoted by Tuoi Tre newspaper that EVN should ensure that it would adopt a pricing system that does not affect needy and low-income consumers, while encouraging people to save energy. But the three proposed methods show that EVN wants people use more but pay less.

A calculation by the newspaper shows that those using more than 300 kWh a month would pay less than they do currently if the flat rate or three-level pricing scheme is applied, whereas those with consumption of 0 to 300 kWh would pay more.

“The flat rate would hurt low-income earners and would not encourage energy saving as the price is the same for both small and large power consumers,” the trade ministry official says. Users would not have to care about how much power they use, which would lead to rising electricity demand, he adds.

Ngo Tri Long, former president of the price management institute under the Ministry of Finance, disapproves of the three options proposed by EVN. The first

would keep the current pricing method in place, which has been objected by the public while

the Ministry of Finance has urged change. The same-rate mechanism seems unworkable as the poor would be forced to share electricity bills with the rich

as in the second option. The third option, meanwhile, still sticks to the average price of VND1,747 a kWh, above the current VND1,622.

Vice chairman of the National Assembly’s Economic Committee Nguyen Duc Kien says on baodatviet.vn that any options should be in the interests of the majority. Consumers who used over 400 kWh per month account for less than 5% of the total while those consuming less than 100 kW are usually low-income earners.

Nguyen Dinh Cung, president of the Central Institute for Economic Management (CIEM), stresses that EVN is a business, not an authority, so it could not fix prices for the industry. The issue must be clarified because people may misunderstand that EVN is a State agency responsible for power pricing.

SGT