Vietnam cut electricity price adjustment period to align with market


(Photo: EVN)

Vietnam issued the latest electricity pricing mechanism on March 26, deciding to shorten the price adjustment period. Electricity of Vietnam (EVN) can adjust electricity prices as frequently as every three months from May 15. The Electricity Regulatory Authority of Vietnam of the Ministry of Industry and Trade (MOIT – ERAV) stated that this move aims to align with market.

Under the current regulations, EVN must wait 6 months between each electricity price adjustment. ERAV emphasized that even the new regulations take effect, it will still be necessary to evaluate the overall economic impact and cost. The period will be shortened based on circumstances, rather than having to be adjusted every 3 months.

In Vietnam, part of electricity prices is determined by generation costs, changes in the power structure, and other fluctuating costs. The new adjustment mechanism must adhere to the following principles:

  • When input costs are lower than the current electricity prices by more than 1%, EVN must cut the corresponding proportion.
  • When input costs are higher than the current electricity prices by 3% to 5%, EVN may increase the corresponding proportion.
  • When input costs are higher than the current electricity prices by 5% to 10%, EVN may increase the corresponding proportion after obtaining permission from MOIT.
  • When input costs are higher than the current electricity prices by more than 10% or have an impact on the overall economy, MOIT will review EVN's adjustment plan and consult opinions from relevant departments.

MOIT officials stated that the shortened electricity price adjustment period aims to prevent significant losses for EVN, which could affect its financial balance, and guarantee that electricity prices align with generation costs and market fluctuations.

Nguyen Tien Thoa, Chairman of the Valuation Vietnam Association (VVA), pointed out that adjustments period was every 3 months in 2011, but revised to 6 months in 2014. Now back to 3 months could pose challenges in implementation.

He argues that if the government raises electricity prices four times a year, it will be difficult for national economy, businesses, and citizens to accept. He also called for establishment of a competitive retail market to make electricity prices more in line with market mechanisms.

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