Increase electricity prices to compensate for people living in villas and hotels?
In the draft on the new retail electricity price list, the Ministry of Industry and Trade wants to reduce the electricity price for tourist accommodation establishments to the same level as the price applied to production establishments. This is estimated to cause the electricity industry to lose more than 2,600 billion VND in revenue. Therefore, the Ministry wants to increase the electricity price for production during off-peak hours to compensate.
Significantly reduce electricity for tourist accommodation facilities
The draft on the new retail electricity price structure prepared by the Ministry of Industry and Trade wants to reduce the electricity price for tourist accommodation establishments to the same level as the price applied to production establishments.
If this is applied, the electricity price for hotels, tourist villas, etc. will be significantly reduced. Specifically, the current peak hour electricity price for hotels, tourist villas, etc. is from 3,923 - 4,233 VND/kWh. The off-peak hour electricity price is from 1,256 VND to 1,497 VND/kWh.
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| Electricity prices for hotels and tourist villas will decrease sharply. |
Thus, the electricity price for hotels, tourist villas,... during peak hours will be lower than the current price by more than 1,300 VND/kWh. During off-peak and normal hours, the expected electricity price for this group will decrease by 300-800 VND/kWh.
According to Vietnam Electricity (EVN), adjusting the retail electricity price for the group of customers "tourist accommodation establishments" to be equal to the retail electricity price for production has caused EVN's revenue to decrease by more than VND 1,800 billion (2016 data) and more than VND 2,600 billion (equivalent to the expected commercial electricity output in 2018). Therefore, EVN believes that it is necessary to increase the price for the group of production customers to compensate for this decrease in revenue.
EVN proposes to keep electricity prices unchanged during normal and peak hours for now, and only increase electricity prices during off-peak hours.
It is expected that the retail electricity price during off-peak hours for high-voltage production customers will increase by about 68 VND/kWh, the price for medium-voltage customers will increase by about 78 VND/kWh, and the price for low-voltage customers will increase by about 134 VND/kWh.
Consider carefully
Reducing electricity prices for tourist accommodation establishments will reduce the electricity industry's revenue by about VND2,600 billion, but analysis by the Vietnam Chamber of Commerce and Industry (VCCI) shows that adjusting electricity prices according to the draft will only help increase revenue for the entire tourism industry by an estimated VND480 billion to VND960 billion.
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| Off-peak electricity prices are expected to increase. Photo: L. Bang |
Commenting on this proposal, the Ministry of Finance expressed its agreement to apply the tourism electricity price equal to the production electricity price, but requested to carefully evaluate the increase in off-peak electricity price. Because, applying a low price for off-peak hours is to ensure the principle of encouraging the use of electricity during off-peak hours, limiting the use during peak hours to avoid overload and power shortage during peak hours.
The Vietnam Association of Small and Medium Enterprises argues that adjusting the electricity price for production in the current period needs to be carefully considered. Because increasing the electricity price will increase the costs of enterprises, affecting the stability and development of their business.
Explaining the comments, the Ministry of Industry and Trade reserves the view that the retail electricity price for the "tourist accommodation" customer group is equal to the retail electricity price for the production customer group.
In addition, because currently, the electricity price for off-peak hours is much lower than the average retail electricity price (from 52% to 56%), it is possible to study to adjust the off-peak hour price for the production customer group.
VCCI suggested “further consideration of the policy effects”. However, VCCI acknowledged that shifting hotels to electricity production could be a policy to help develop Vietnam’s tourism. According to the draft, the electricity price reduction for hotels is about 37%. With this electricity price reduction, hotel room prices could decrease by 0.65%.
VCCI stated its opinion: According to the experience of many countries in the world, industrial electricity prices are always lower than electricity prices for residential and commercial use because the cost of distributing and transmitting electricity to factory customers is lower than the cost of transmitting and distributing electricity to residential and commercial customers.
“The decision to switch from business electricity users to production electricity users should be based on a cost-benefit analysis. Will the benefits of reducing electricity prices for the hotel industry outweigh the costs to the electricity industry and the economy?” VCCI stated its opinion.
