Will electricity prices increase?
Reduce the number of household electricity steps
The Ministry of Industry and Trade has just completed the Prime Minister's draft decision on the structure of retail electricity prices. Surprisingly, if this draft is approved, the electricity price for production depending on the time of use will increase quite sharply from 2-7%, the price of electricity for daily life will reduce the number of progressive steps...
Household electricity prices in the ladder electricity price list (lowest and highest levels) through adjustments - Photo: NGUYEN KHÁNH - Graphics: NHƯ KHÁNH. Unit: VND/kWh
According to the draft decision that the Ministry of Industry and Trade is soliciting public opinion on, compared to the retail price list currently in use (since 2011), if approved, the new price list will increase the percentage on the average electricity price, leading to a sharp increase in the selling price for the production sector.
Increase 2-7%
Specifically, according to the 2011 electricity price list, the retail price of electricity for the manufacturing industry (voltage level from 22kV to under 110kV) compared to the draft new price list will increase by 2-6%. Units using electricity during normal and peak hours will have to pay an increase of 2%, and the electricity price during off-peak hours will increase by 6%.
For voltage levels of 110kV or higher, peak and normal hour electricity prices remain the same, while off-peak hours increase by 5%.
Voltage levels below 6kV have the strongest increase. Normal and peak hour electricity prices will both increase by 4%, off-peak hour electricity prices will increase by up to 7%!
Explaining why the off-peak hours also increased, and the increase was quite strong, an official from the Ministry of Industry and Trade said that it needed to be adjusted because the current off-peak electricity price for production is only 51-58% of the average retail price of electricity, which is only about half the average price for other households. This is unreasonable because people who use electricity for daily life, even if they only save 100 kWh/month, still have to pay 100% of the average electricity price.
It is worth noting that while increasing the rate, thereby possibly increasing the price of electricity for production, the draft strongly adjusts the retail price of electricity for businesses (for restaurants, hotels, etc.). Depending on the voltage level and hours of use, the price of electricity for this group will decrease by 3-9%.
Responding to this, the Ministry of Industry and Trade official emphasized the fact that businesses and business households are paying very high prices compared to the manufacturing industry. If the cement and steel industries, according to the new draft tariff, have the highest electricity price only reaching 187% of the average electricity price, then the electricity price for many businesses is up to 257% of the average electricity price. Even with a 9% reduction (for peak hour prices, voltage levels below 6kV), the price for this item is still at 248% of the average electricity price - the highest compared to all subjects...
Another new point in the electricity price list is that this time the Ministry of Industry and Trade has separated the cement, iron and steel industries to set their own price list, instead of allowing them to enjoy the same price as other manufacturing industries. The electricity price for this large electricity consuming manufacturer is quite high, from 59-187% of the average retail electricity price, depending on the voltage level and the time of electricity use during normal, low or peak times.
Retail price list of household electricity:
| STT | According to current regulations | According to the draft new regulations | ||
| Usage level electricity (kWh) | Price compared to average annual electricity price | Usage level electricity (kWh) | Price compared to the average annual electricity price adjusted by authority | |
| 1 | From 0-50 (low-income people, must register with EVN) | Equivalent to average electricity cost | From 0-50 (low income people, must register with EVN) | Not greater than 80% of the average retail electricity price |
| 2 | From 0-100 | 100% | From 0-100 | Not greater than the average retail price |
| 3 | From 101-150 | 106% | From 101-200 | 108% |
| 4 | From 151-200 | 134% | ||
| 5 | From 201-300 | 145% | From 201-300 | 138% |
| 6 | From 301-400 | 155% | From 301-400 | 154% |
| 7 | From 401 kWh and up | 155% | From 401 kWh and up | 165% |
Source: Decision 268/QD-TTg dated February 23, 2011; draft decision of the Prime Minister
drafted by the Ministry of Industry and Trade
Reduce the number of household electricity steps
According to the draft, the number of steps for household electricity is reduced to only six steps compared to the current seven steps (including the step reserved for low-income people who use less than 50kWh/month). The support policy also changes in nature.
Specifically, if previously the electricity price at the first step of 0-50kWh (for low-income people registered with EVN) was equal to the average cost of electricity, meaning the electricity industry would sell to this group at the same price regardless of how much it produced, without taking any profit. Now, according to the new price list draft, this will no longer be the case. The price of the first step - according to the draft decision - will be at most 80% of the average retail price of electricity. That means the poor may also have to pay a price for the electricity industry to make a profit if the average retail price of electricity increasingly follows the market, far from the cost of electricity production (currently the price of electricity at the first step is calculated corresponding to the cost).
In the draft, the Ministry of Industry and Trade is assigned the responsibility to research and develop a two-component electricity price mechanism, which means that in addition to calculating electricity prices based on electricity capacity, electricity prices will be calculated based on capacity (the higher the capacity users, the more they will have to pay - PV). The Ministry of Finance is assigned the responsibility to research and submit a plan to adjust the support level (currently at 30,000 VND/month) for poor households and social policy households to suit the socio-economic situation of each period.
Need to consider the whole picture
According to Mr. Ngo Tri Long - former deputy director of the Institute of Price Market Science, in the current context, adjusting electricity prices can lead to many different consequences. If the production electricity price is not increased, while the electricity source is limited, it will result in price compensation and not encourage businesses to innovate technology that consumes less electricity. But businesses are also facing many difficulties, if electricity prices are adjusted, it will make businesses face even more difficulties. The same goes for people, with low payment capacity, everyone wants to keep the electricity price, not increase is the best.
According to Mr. Long, countries often have independent price appraisal agencies. In Vietnam, electricity price increases are often assigned to the Ministry of Industry and Trade and the Ministry of Finance for appraisal. Whether electricity prices increase or not, according to current regulations, depends on whether input prices have increased in the past three months. In the dry season, there is little hydropower, and oil-fired power generation has to be used, so electricity prices may have increased. However, in recent times, the exchange rate has been stable, and many other factors have also helped stabilize electricity prices if efforts are made. From there, Mr. Long believes that it is necessary to make the factors more public and transparent so that decisions to adjust electricity prices receive social consensus.
| When does it take effect? Although refusing to answer specifically about the new draft decision, Mr. Dang Huy Cuong, Director of the Electricity Regulatory Authority, reassured: the new draft has not said anything about adjusting electricity prices. Submitting the draft decision on the new electricity price list for comments is just a procedure to draft a legal document in accordance with regulations. There may be many other opinions that the drafting agency will take into account before submitting to the Prime Minister for decision. However, it is worth noting that the draft decision of the Ministry of Industry and Trade clearly states that the old decision of the Prime Minister on the 2011 electricity price list will expire on July 1, 2013! |
According to Tuoi Tre - TH