Household electricity retail price list: The more you try to fix it, the more complicated it gets.

The Ministry of Industry and Trade has just released a draft Government Decision "Regulations on the structure of retail electricity prices" to amend and replace Decision No. 28, which was issued more than 6 years ago (from April 7, 2014).

Although it was claimed that these options had been widely discussed with many relevant stakeholders, immediately after the draft was published, many experts argued that these options not only failed to address the frustration of many households using electricity when their bills "shockedly increased" at certain times, but also increased doubts about the electricity pricing method - which has had many shortcomings in the past.

The fundamental difference in this revision of the retail electricity pricing structure is that, instead of having only one tiered progressive retail electricity pricing option, there is now an additional "single-price retail electricity" option for customers to choose from.

Household electricity retail price list: The more they try to fix it, the more complicated it gets. (Illustrative image)

However, according to calculations, under all three electricity pricing options proposed by the Ministry of Industry and Trade, most electricity consumers will have to pay more for electricity compared to the current retail electricity price. Notably, approximately 4 million customers (currently using 200-300kWh/month at tier 4 in the current 6-tier progressive pricing system) will see a 3% increase in electricity bills because the new retail electricity price has combined tiers 4 and 5 into one tier (specifically, according to the new price - this is tier 3 - for households using 200-400kWh/month).

Regarding the "single-price electricity" option, experts assert that only households consuming 700 kWh or more per month (corresponding to monthly electricity bills exceeding 2 million VND) should consider it, as the single-price electricity rate is far from "affordable." If based on the current average retail electricity price of 1,864.44 VND/kWh (excluding VAT), consumers would pay approximately 3,000 VND/kWh for a single-price electricity rate, or even higher!

Furthermore, the proposal, which includes both a five-tiered retail electricity pricing system and a "single-price" system, has presented two options (Option 2A and 2B). Significantly, in these options, to achieve a "single-price" of approximately 3,000 VND (145% of the average retail electricity price), households consuming over 700 kWh using the tiered system would have to pay over 5,000 VND/kWh (274% of the average retail electricity price).

And, with alternative option (2B), to reduce pressure on households using more than 700kWh, choosing the tiered electricity pricing option at 3,800 VND/kWh (equal to 185% of the average retail electricity price), the amount to be paid for each kWh of "single-price electricity" would also reach nearly 3,200 VND/kWh (equal to 155% of the average retail electricity price).

The question is: on what basis did the Ministry of Industry and Trade establish the reference levels and regulate the tiered retail electricity pricing as outlined in the Draft?

The reason for these options is that the management agency is calculating them based on ensuring that the revenue from electricity production and business activities, plus the profit margin required by the Ministry of Industry Management, does not fall short. This means that whether it's a one-tier, a five-tier, or a combination of both, one-tier and five-tier options, the total revenue of the electricity sector remains unchanged.

In this draft, the social security policy is quite clearly reflected – the proposed 5-tier pricing system combines the first two tiers of the current rate into one new tier (0-100kWh), while maintaining the current rate for the 101-200 kWh range and proposing to maintain, or even reduce, the current rate. This means that adjustments must be made at the higher tiers to compensate; if one tier is reduced, another must be increased to make up for it.

According to energy experts, the current average electricity price is calculated based on the total revenue of the electricity sector divided by the total amount of electricity sold/consumed in the year. Will the revenue from electricity sales under these methods equal the approved average retail electricity price and the actual total costs? The total revenue from electricity sales and the revenue for each tariff tier for residential customers need to be made public.

The Ministry of Industry and Trade also needs to clarify the legal basis for proposing a retail electricity price that is up to 274% higher than the average retail electricity price in the proposed new electricity pricing scheme. It cannot present options that "puzzle" consumers like the draft does!