Electricity price increase: A pre-planned scenario?
(Baonghean)Despite announcing to the press that the Vietnam Electricity Group (EVN) made a profit of 3,500-4,000 billion VND in 2012, EVN did not hesitate to deliver another blow to consumers and businesses when, starting August 1, 2013, electricity prices increased by another 5%. Looking back, it seems that electricity price increases are happening "regularly"...
Sewing line at Haivina Kim Lien Co., Ltd.
According to the business performance report of Vietnam Electricity Group (EVN) that we have obtained, in 2012, the entire Group produced 117 billion kWh of electricity, of which hydropower contributed 53 billion kWh (exceeding the target by 5.5 billion kWh), coal-fired thermal power 22 billion kWh, gas turbines 40.2 billion kWh, oil-fired thermal power 0.159 billion kWh, and imports 2.3 billion kWh. In 2012, the Group reduced electricity production from oil by 125 million kWh compared to the plan.
In the national electricity production structure: hydropower accounts for approximately 40%, gas turbine power 33%, coal-fired power 22%, with the remainder being oil-fired power and imported electricity. Given this structure, coal-fired power accounts for a relatively small percentage; therefore, the electricity sector's justification for raising electricity prices based on rising coal prices is unjustified. |
EVN's 2012 report affirmed that, despite the difficult national conditions, the Group had ensured employment, increased income, and benefits for all its employees.
According to EVN's press release on the business performance for the first six months of the year, dated July 1, 2013: The total system output in the first six months reached 64.121 billion kWh of electricity, an increase of 10.48% compared to the same period in 2012. Of this, commercial electricity sales in the first six months of 2013 reached 55.67 billion kWh, an increase of 10.13% compared to the same period in 2012. Within commercial electricity sales: electricity for economic sectors accounted for 58.2%, and electricity for management and residential consumption accounted for 36.6%. The Group achieved financial balance in the first six months of the year.
With those impressive figures, consumers and businesses using electricity thought they would benefit from cheaper electricity prices because the Corporation had made profits in 2012, or at least wouldn't increase electricity prices, as the price increase had only taken effect in July 2012. However, while the economy remains extremely difficult, and the list of struggling businesses grows longer, EVN delivered another blow to businesses and consumers when, from August 1st, 2013, the electricity price increased by 71.85 VND/kWh, to 1,508.85 VND/kWh (excluding VAT); (the previous price was 1,437 VND/kWh).
The reasons given by the Corporation are: to partially offset the increased electricity generation costs due to rising coal and gas prices. Coal prices have increased by 37-41% depending on the type since April 20, 2013. At the same time, it aims to compensate for approximately 1.34 billion kWh of electricity from hydropower due to insufficient water levels in hydropower reservoirs at the end of 2012 compared to normal levels, and the potential for severe drought in Central Vietnam and the Central Highlands in 2013. Furthermore, there is a potential gas shortage for electricity generation in the South in July and September; it is expected that 1.8-2.4 billion kWh of oil-fired power will need to be mobilized to ensure electricity supply for the South…
Analysis of the figures provided by EVN shows that: Regarding the electricity shortfall of 1.34 billion kWh due to low water levels in hydropower reservoirs at the end of 2012, EVN saved 1.16 billion kWh in the first six months of 2013, so this shortfall can be said to be only 0.18 billion kWh.
Furthermore, according to EVN's report, "in 2013, the power system will be supplemented by approximately 3,000 MW compared to 2012 from new projects" (equivalent to about 10 billion kWh of electricity). This is because the Son La Hydropower Plant alone, with a capacity of 2,400 MW, produces approximately 10 billion kWh of electricity annually. EVN will complete and put into operation 6 generating units with a total capacity of 1,440 MW, including: units 1 and 2 of the Nghi Son Thermal Power Plant, 2 units of the Ban Chat Hydropower Plant, the Quang Ninh 2 Thermal Power Plant with a capacity of 600 MW, and the Hua Na Hydropower Plant with a capacity of 180 MW… In addition, "many transmission and distribution grid projects have been put into operation, including projects to strengthen North-South transmission and alleviate overload in some key areas."
If EVN's report is accurate, the additional electricity production of 3,000 MW in 2013 will certainly be more than enough to compensate for the 1.8-2.4 billion kWh of oil-fired power needed to ensure electricity supply in the South due to the aforementioned gas shortage and other drought-related reasons…
With coal prices rising since September 15, 2012, EVN responded by increasing electricity prices by 5% on December 22, 2012. And from April 20, 2013, coal prices rose again, leading to a further surge in electricity prices. At this rate, coal and electricity prices will continue to rise indefinitely, showing no signs of decreasing despite being market-driven. These are two essential commodities for production and daily life, so price increases have a severe and profound impact on the economy and society, especially in the context of businesses not yet recovering and market outlets for many goods remaining stagnant. Every business needs electricity. With rising coal, electricity, and gasoline prices, many businesses will find closure to be the safest option.
According to Mr. Dinh Quang Tri, Deputy General Director of Vietnam Electricity Group (EVN): With the increase in electricity prices, EVN expects to collect an additional 3,500 billion to 3,600 billion VND, while the increased cost of coal will require an additional 5,000 billion VND in expenses. The additional increase in electricity prices is not enough to offset losses due to rising coal and gas prices. However, we must manage to reduce production costs, ensuring that we generate profits to offset the increased coal and gas costs, and guarantee that we will not incur losses in 2013.
However, in a televised interview on the evening of August 1, 2013, Mr. Dang Huy Cuong, Director of the Electricity Regulatory Authority under the Ministry of Industry and Trade, stated that EVN owed 3,000 billion VND to the National Gas Corporation and had not yet secured the funds to repay the debt, thus forcing EVN to increase electricity prices! Clearly, the Ministry of Industry and Trade, as the agency managing EVN, cannot misunderstand the nature of the issue. The only problem is that the people and businesses cannot understand why they should be the ones to "pay the debt" for the management weaknesses that led to EVN's losses. EVN should bear the consequences of its own actions; it cannot force its "customers" to pay for the service provider's shortcomings. That is extremely illogical. EVN's electricity price increase on August 1st was also very sudden, without any "public consultation," causing public and business outrage. People and businesses are forced to accept using electricity; surely they can't go back to primitive times, enduring darkness or using oil lamps like during wartime?
Looking back, it's clear that EVN has increased electricity prices "regularly" four times: December 20, 2011, July 1, 2012, December 22, 2012, and most recently, August 1, 2013. This was truly a pre-planned "scenario," not due to rising coal or gas prices.
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(References: Report on the implementation results of the 2012 plan and the objectives and tasks of the 2013 plan of EVN; EVN's press release on the production and business situation in the first six months of 2013; National power development plan 2011-2020 of the Prime Minister (July 2011).
Chau Lan
