Why may electricity prices increase in the near future?

At the meeting of the Price Management Steering Committee on September 28, Deputy Minister of Industry and Trade Do Thang Hai said that electricity prices will not be increased in the last three months of 2018 in accordance with the Prime Minister's direction. However, retail electricity prices may be adjusted in 2019.

According to Mr. Hai, the basis for the adjustment is due to the total cost "increased" in 2018 and 2019 of Vietnam Electricity Group (EVN) by about 20,735 billion VND. "With this total increased cost, it may be necessary to consider adjusting the retail electricity price in 2019 according to the provisions of Decision No. 34/2017," Mr. Hai said.

Explaining more specifically, the Deputy Minister of Industry and Trade said that the total costs incurred above include both 2018 and 2019. In 2018, the additional costs in the electricity price calculation structure were about VND 5,483 billion, including the exchange rate difference in 2017 of VND 3,071 billion, the fee for granting the right to exploit water resources of VND 502 billion and the gas price in the market-based consumption increased by VND 1,910 billion.

In 2019, the Electricity industry estimated that the exchange rate difference in 2018 would be 3,516 billion, the fee for granting water resource exploitation rights would be 502 billion, the gas price implemented according to the market in 2019 would increase by about 10,500 billion VND... The total cost increase in 2019 will be 15,252 billion VND.

In addition, the exchange rate difference remaining from 2015 is expected to be allocated to 2019 at about VND 734 billion.

Mr. Do Thang Hai added that this agency is coordinating with the Government Office, the National Assembly's Economic Committee, the Price Management Department and the Department of Corporate Finance (Ministry of Finance)... to check EVN's electricity production and business costs in 2017.

After completion, if there are objective fluctuations in input parameters of all stages (power generation, power transmission, power distribution - retail, industry regulation - management and power system ancillary services) compared to the parameters used to determine the current average electricity price, it will be reported to competent authorities for consideration and direction of adjusting the 2019 electricity price.

The most recent retail electricity price increase was on December 1, 2017. Accordingly, each kWh of electricity increased to VND1,720.65 (excluding VAT), equivalent to an increase of 6.08% compared to the previous price.

Also at the meeting, Deputy Prime Minister Vuong Dinh Hue - Head of the Steering Committee assessed that price management and operation in September and the first 9 months of 2018 "closely followed reality and increased forecasting and proactiveness". With a 9-month GDP growth of 6.98% and well-controlled inflation, it contributed to strengthening the macro foundation.

However, in the face of complicated developments, he requested ministries and branches to "not let expected inflation happen, with the target of keeping 2018 inflation at around 3.7% - 3.95%".