Reducing household electricity price from 6 to 3 levels: Electricity bill may not decrease

The Ministry of Industry and Trade is directing the Electricity Regulatory Authority to study and reduce the current household electricity price list from 6 levels to 3 levels and eventually to only 1 level. This is a new proposal requested by Minister of Industry and Trade Vu Huy Hoang because recently, the application of electricity price steps has caused a series of electricity bills reported by people to increase 2-3 times higher than normal levels.

According to the direction of the Ministry of Industry and Trade, the electricity price list will be reduced from the current 6 levels to 3 levels. Photo: QT

The culprit is the progressive pricing scheme.

With the above directive, the Ministry of Industry and Trade seems to officially acknowledge that the skyrocketing electricity price increase of 2-3 times that people reported in May - June 2015 was due to the progressive electricity price table with 6 levels and the higher the level, the higher the electricity price that consumers have to pay compared to the average electricity price. The representative of Hanoi Electricity Corporation also confirmed that the application of the electricity price table with the above cumulative calculation method caused most people to have their electricity bills increase dramatically.

According to Minister Vu Huy Hoang, the current inadequate calculation of electricity prices and the electricity sector's ladder price list are the main reasons. "For ordinary people, the application of the new 6-step progressive electricity price list from March 16, 2015 has caused the electricity bills of many households to increase from 200,000 - 300,000 VND/month to over 1 million VND/month, which is problematic," said the Minister.

Affirming that the culprit causing the high electricity price increase is the progressive calculation of electricity prices up to 6 levels, Dr. Ngo Tri Long - former Deputy Director of the Institute for Price Market Research (Ministry of Finance) - analyzed, saying that the average increase in electricity prices from 16.3 is only 7.5% (equivalent to 1,622 VND/kWh), but for users of 400kWh or more, the electricity price does not only increase by 7.5% but doubles, even triples. This is the reason why electricity prices have increased so rapidly. Therefore, recalculating the step-by-step electricity price list, shortening the number of levels, even to 1 level is necessary, beneficial for consumers.

3-tier electricity price list, users are not sure of benefits

Mr. Dinh Quang Tri - Deputy General Director of EVN, many countries are currently applying a 1-step electricity price list, such as Singapore, but the electricity price is up to 16-17 cents/kWh. If the electricity price list is reduced to 3 steps, the problem is how the electricity price will be calculated. According to the direction of the Ministry of Industry and Trade, the Electricity Regulatory Authority must study and review the price list and the method of calculating retail electricity prices in the direction of having fewer steps and especially must shorten the price difference between steps.

Minister Vu Huy Hoang also requested relevant units to change the current price list and the way of dividing into many small steps, bringing the electricity price list down to only 1 step. In the immediate future, when it is not possible to build a 1-step level, it must be reduced to only about 3 steps.

At a recent meeting of the Ministry of Industry and Trade, Deputy Minister of Industry and Trade Hoang Quoc Vuong - former Chairman of the Board of Directors of EVN - said that with the current 6-tier electricity price structure, if you use more than 400 kWh, the electricity price will be higher than the average level by about 1,000 VND/kWh. The current price list has many different levels according to the principle that the more you use, the more you have to pay; taking the electricity price at a high consumption level to compensate for low numbers is not really convincing to consumers.

However, many economic experts agree that reducing the number of steps is one thing, but what needs to be done more is to narrow the price gap and calculate appropriate electricity prices based on public and transparent electricity production and business costs. Only when the electricity industry can do this can consumers hope to benefit.

Mr. Ngo Tri Long affirmed: “In addition to changing the electricity price table, reviewing the retail electricity price structure is an urgent task for the Ministry of Industry and Trade. If the average retail electricity price continues to increase in 2016, even if there are only 3 levels, the electricity bill that people have to pay will certainly not decrease.

According to Labor