However, if tariff structures are improperly designed, many families could face higher electricity bills due to the difficulty of adjusting their daily living routines.

The draft Law Amending and Supplementing a Number of Articles of the Electricity Law includes a proposal to introduce time-of-use retail pricing mechanisms encompassing peak, off-peak, and standard hours.

Dr. Nguyen Huy Hoach from the Scientific Council of the Vietnam Energy Magazine noted that time-of-use power pricing can incentivize energy conservation. Beyond reducing overall consumption, citizens can proactively shift select activities into cheaper time slots.

Nonetheless, the effectiveness of this heavily depends on tariff design and each household's capacity to adjust their electricity usage timing.

Excessively high peak rates will burden households

According to Hoach, under the existing progressive tiered pricing mechanism, unit prices escalate based on total monthly consumption volume. Peak, off-peak, and standard time-of-use pricing creates financial incentives for consumers to shift part of their power demand to off-peak hours.

Households equipped with appliances featuring flexible operating schedules, such as washing machines, insulated water heaters, or electric vehicle charging equipment, can adjust their usage times. This household segment has the ability to respond to price signals and leverage lower rates to cut electricity bills.

Conversely, the vast majority of essential household demand clusters in the evening when adults return from work, children come home from school, and family members prepare meals, bathe, study, and rest. These routines are tied to work, school schedules, and social rhythms, making them difficult to alter solely based on power rates.

If peak-hour electricity rates are set too high, household electricity bills could rise significantly, though families have limited ability to alter their consumption timing. Consequently, the added financial burden may not yield a proportionate load-shifting effect across the grid.

Hoach stressed the need to distinguish between essential, fixed demand and activities whose timing can be flexibly managed. Policies should focus on incentivizing the latter group rather than expecting families to alter fundamental daily routines.

In his view, the price gap between peak and off-peak hours must be substantial enough to generate a clear economic signal, but it should not be set excessively wide from the start. 

If the gap is too narrow, residents will lack motivation to adapt. Conversely, if peak rates are exorbitant while load-shifting capacity remains constrained, the policy will primarily inflate living expenses rather than ease peak demand on the grid.

Thorough impact assessment 

Hoach stressed that whether electricity bills rise or fall depends on more than the price difference between peak and off-peak hours. The outcome also depends on the average electricity price, the consumption in each time period, and how time-of-use pricing is combined with the existing tiered tariff system.

Tiered pricing and time-of-use pricing serve different purposes. The tiered system encourages households to reduce their total electricity consumption, while time-of-use pricing aims to shift consumption to different times of the day. If the two mechanisms are applied together, regulators need to clarify how bills will be calculated so that consumers can understand and predict their costs.

The expert proposed simulating electricity bills under various tariff options for households with different consumption levels and living conditions before rolling out the policy nationwide. Directly comparing bills under the proposed mechanism with those calculated under the current system would help identify which groups would benefit and which could face higher costs.

Regulators could also consider a phased rollout, accompanied by guidance on efficient electricity use and incentives for households to voluntarily adjust their consumption patterns. 

The impact assessment should also take into account households with young children, older people and other special living circumstances when evaluating the introduction of peak and off-peak periods.

Hoach also recommended conducting pilot programs before a wider rollout. These trials should cover areas with different demand patterns and electricity-use conditions, with clear evaluation criteria, including reductions in peak-hour demand, the amount of electricity shifted to off-peak periods, changes in household bills and the cost of investing in metering systems.

The pilot results should be made public to inform adjustments to the tariff structure and time periods. If peak-hour demand falls only marginally while the bills of many households increase, the proposal should be reconsidered before expansion. Conversely, if the benefits of demand management are demonstrated and the impact on households remains within acceptable limits, the policy could be gradually extended.\

Tam An