Deputy Prime Minister Le Minh Khai has signed Decision 02/2023 on average electricity retail prices, applied on February 3. 

The minimum average electricity retail price is VND1,826.22 per kwh, while the maximum average electricity retail price is VND2,444.09.

The new minimum price is VND220 per kwh and the new maximum price is VND538 higher than the old price.

Tran Viet Hoa, director of the Electricity Regulatory Authority of Vietnam, said the old retail prices were no longer suitable to the new circumstances and did not truly reflect the impact of the changes in input factors on electricity production and business costs, especially fuel price fluctuations. 

The Ministry of Industry and Trade (MOIT) therefore found it necessary to replace Decision 34/2017.

The prices of imported coal provided to power plants began increasing in late 2021. From $54 per ton in 2020, coal prices in some periods in 2022 rose to $359 per ton and have been staying high since then.

As electricity output from coal-fired power plants makes up 40 percent of Vietnam’s total electricity output, power production costs of Electricity of Vietnam (EVN) have increased.

In addition, exchange rate differences in power purchase agreements in 2019, 2020, as well as 2021-2024, estimated at VND21 trillion, also need to be taken into account to recalculate the annual production expenses and set a price framework

“These circumstances have caused changes in the indicators related to electricity purchase expenses (accounting for 80 percent of the EVN’s total annual electricity production and business costs).

EVN predicts a loss of VND93 trillion in 2022 and 2023.

Nguyen Tien Thoa, chair of the Price Appraisal Association, said international coal prices in 2022 increased by six times compared with 2020 and 2.6 times compared with 2021.

The prices of imported coal and mixed coal in 2022 went up by 25 percent compared with 2021, from VND1,635 per kwh to VND2,043.

The oil price for reference to calculate gas prices for gas-fired power plants in 2022 increased by 2.2 times compared with 2020 and 1.3 times compared with 2021. 

The price increases have led to higher average electricity prices of gas turbine power plants, up by 11.31 percent, from VND1,620 per kwh to VND1,803.

“While electricity production costs increase, the average electricity retail prices have remained unchanged since 2019. The selling prices are not high enough to cover the production and business costs, which explains why losses are unavoidable,” Thoa said.

Worry about inflation

In January, the government assigned units to take initiative in building media plans and scenarios to reach society’s agreement; cooperate with EVN to reconsider and adjust the electricity prices in accordance with their jurisdictions. In case the adjustments go beyond jurisdiction, EVN would have to report to the PM and suggest solutions.

Thoa said that the retail prices need to be set at reasonable levels, or EVN will take a loss and won’t have money to pay to electricity generators. But how high the new electricity prices should be is a question. 

“We can raise the retail electricity prices immediately, but we have to take drastic measures to prevent possible impacts of electricity price adjustments on the society,” Thoa said, stressing that there must be comprehensive solutions to stabilize goods prices.

Nguyen Minh Duc, an expert of public policies, analyzed the coal price fluctuation chart in the last 30 years and said that raising electricity prices is a must.

Duc, though admitting that worries about influences of price increases to inflation really exists, affirmed that the influences will be not as high as impacts of the fiscal and monetary policies.

Vietnam’s inflation rate in 2022 was over 3 percent, much lower than the targeted level and this is attributed to the tight fiscal and monetary policies.

The target of curbing the inflation rate at no more than 4.5 percent proves to be acceptable and there is no need to maintain the low rate as seen in 2022.

“The inflation rates are high all over the world. Vietnam tries to avoid high inflation, but if it continues to stay aloof from the trend, it would get more losses than gains,” Thoa said.

Reports show that besides the VND268 trillion of EVN holding company’s debts, EVN’s subsidiaries are also owing money. In 2013-2021, EVN’s profit was modest, just VND13.6 trillion, while the loss in 2022 is estimated at over VND30 trillion.

Luong Bang