New electricity price adjustment mechanism: The foundation of transparency and energy security

Mr. Le Dai Hai, Deputy Director of the Department of Civil and Economic Law, Ministry of Justice - Photo: VGP

Speaking with the Government Electronic Newspaper, Mr. Le Dai Hai, Deputy Director of the Department of Civil and Economic Law, Ministry of Justice, clarified the outstanding new points in the above legal documents and their significance in the context of current electricity market development.

Sir, what is your assessment of the notable new points in the Electricity Law (amended) recently passed by the National Assembly and Decree 72/2025/ND-CP of the Government related to the electricity price adjustment mechanism? What is the significance of these changes for the operation of a transparent, efficient and market-based electricity market?

Mr. Le Dai Hai: The Electricity Law 2024 was issued to replace the Electricity Law 20 years ago, so there are many changes in policies, especially policies related to electricity prices and the mechanism for adjusting retail electricity prices.

Specifically, Clause 12 of Article 5 of the 2024 Electricity Law stipulates the policy on electricity prices and electricity service prices. Accordingly, electricity prices are implemented according to the market mechanism with state regulation and in accordance with the level of competitive electricity market, in which electricity prices must ensure reasonable and valid electricity production and business costs of electricity units.

This new regulation creates an important legal basis for timely adjustment of retail electricity prices according to fluctuations in input parameters, gradually moving towards applying a complete market mechanism when a competitive retail electricity market is formed. Accordingly, retail electricity prices will reflect and be flexibly adjusted according to actual fluctuations, ensuring reasonable costs and appropriate profits for businesses to maintain and develop business capital in each stage of socio-economic development and electricity market level.

A major difference from the past is that when the retail electricity market operates according to the market mechanism, the retail electricity price will be calculated according to input parameters, ensuring that businesses have a reasonable profit margin. Meanwhile, for many years, the retail electricity price has been directly controlled by the State because this is a special commodity, having a large impact on production, business and people's lives, as well as the consumer price index (CPI). Although the price forming factors have partly followed the market mechanism, the retail output price is still controlled, making electricity businesses unable to be proactive in finance. In fact, for many years, the public has witnessed information about the Vietnam Electricity Group (EVN) losing thousands of billions of VND due to input costs following the market but the selling price is controlled by the State. Since the beginning of the year, businesses have been able to calculate the expected loss level according to the electricity consumption output.

Decree 72/2025/ND-CP provides detailed guidance on this issue. The Decree has outlined a flexible price adjustment mechanism, in which Article 5 stipulates that if the calculated average retail electricity price decreases by 1% or more compared to the current price, the full authority to adjust the corresponding decrease is given to the enterprise, in this case the state does not need to control. That is, there is a two-way valve, when the price decreases, the enterprise must reduce the price accordingly, and when the price increases, there is a regulation that if the calculated average retail electricity price increases by 2% to less than 5% compared to the current price, the enterprise must report to the Ministry of Industry and Trade for comments as a basis for increasing the retail electricity price.

If the calculated average retail electricity price increases from 5% to less than 10% compared to the current price, the enterprise shall report to the Ministry of Industry and Trade for approval to serve as a basis for increasing the retail electricity price, that is, the Ministry of Industry and Trade shall control the calculation of the price formation for the enterprise to ensure whether it is guaranteed, thereby approving the enterprise to increase the retail electricity price from 5-10%. In case the calculated average retail electricity price increases from 10% or more compared to the current price, the enterprise shall report to the Ministry of Industry and Trade for inspection, review and report to the Government for consideration and comments.

According to regulations, although there is a flexible price adjustment mechanism, in all cases of price increase, there must be an examination, review and assessment by relevant ministries and branches, especially the opinion of the Government. If errors are found in the calculation of retail electricity prices, the Ministry of Industry and Trade is responsible for requesting enterprises to stop adjusting the average retail electricity price. Enterprises are responsible for complying with the request of the Ministry of Industry and Trade within 5 working days from the date of receipt of the request.

Thus, the regulations and adjustments in the Electricity Law and Decree 72/2025/ND-CP will contribute to enhancing the transparency and efficiency of the market, through increasing the autonomy of enterprises (specifically EVN) with many levels of retail electricity price adjustments within the retail electricity price framework prescribed by the Prime Minister on the basis of reasonable and valid electricity production and business costs.

At the same time, clearly define the responsibilities of enterprises and the State, enhance the effectiveness of state management and supervision when all calculations of enterprises are reviewed, inspected and commented on.

From there, there is a mechanism to protect consumers' rights on the basis of ensuring that the adjustment of retail electricity prices is calculated according to current legal regulations, minimizing errors that may occur in the process of operating retail electricity prices.

In addition, these changes also contribute to promoting the direct trading mechanism between renewable energy generators and large electricity users according to Decree 57/2025/ND-CP when the results of the review and inspection by the Ministry of Industry and Trade according to Decree 72/2025/ND-CP are the basis for determining the cost of using electricity system services for a unit of electricity, creating the premise for the formation of a transparent and effective retail electricity market.

The Electricity Law (amended) has made many important changes in the mechanism for determining electricity prices. In your opinion, what is the most important factor to ensure transparency, stability and predictability in electricity price management?

Mr. Le Dai Hai : With many changes in the mechanism for determining retail electricity prices according to the provisions of the Electricity Law 2024, the most important factor to ensure transparency, stability and predictability in the management of retail electricity prices is that the calculation formulas for determining retail prices are specified, honestly reflecting the revenue, costs, reasonable and valid profits of the unit and are inspected, reviewed and commented on by competent state agencies before application.

The mechanism for periodic electricity price adjustment under Decree 72 can be considered an inevitable step in the process of building a competitive electricity market. In your opinion, why is this necessary at the present stage?

Mr. Le Dai Hai : Determining and periodically adjusting retail electricity prices according to Decree 72/2025/ND-CP contributes to promoting the direct electricity trading mechanism between power generation units using renewable energy and large electricity customers according to Decree 57/2025/ND-CP. The results of the review and inspection by the Ministry of Industry and Trade will be the basis for determining the cost of using electricity system services for each unit of electricity, thereby creating the premise for forming a transparent and effective retail electricity market.

In addition, adjusting retail electricity prices periodically helps businesses accurately reflect input costs, avoiding the situation where businesses incur losses when input parameters increase sharply. In addition, clearly defining adjustment levels and distinguishing the roles of businesses and the State will reduce arbitrariness and increase accountability, an indispensable feature in a competitive electricity market, while helping electricity customers understand the reasons for price adjustments and create higher consensus.

The signal of adjusting retail electricity prices according to Decree 72/2025/ND-CP is an inevitable step to gradually form a market mechanism for energy types; Resolution No. 55-NQ/TW dated February 11, 2020 of the Politburo on the orientation of Vietnam's National Energy Development Strategy to 2030, moving towards eliminating all barriers to ensure transparent energy prices decided by the market.

As you mentioned above, while the electricity purchase price is applied according to the market mechanism, the electricity sale price is under the management of the state. So in the context of the electricity industry's continuously increasing input costs, if the electricity price is not promptly adjusted according to the market mechanism, how will it affect national energy security and the ability to attract investment in electricity infrastructure, sir?

Mr. Le Dai Hai : We can see this very clearly. Failure to promptly adjust electricity prices according to market mechanisms not only affects the financial efficiency of the electricity sector, does not create pressure to use electricity economically and efficiently, and ensures energy security, but also directly threatens national energy security, slows down the modernization of electricity infrastructure, and loses the opportunity to attract strategic investment. A flexible, transparent, and predictable electricity price mechanism is a prerequisite to protect both the economy and the long-term investment environment.

When electricity prices do not accurately reflect input costs, power companies will suffer prolonged losses, seriously affecting their ability to pay for power plants. This can lead to disruptions in the fuel supply chain, reducing the ability of power plants to operate continuously and potentially leading to power shortages. In addition, businesses also face difficulties in paying principal and interest on loans due, affecting their reputation and financial capacity.

Failure to adjust electricity prices in a timely manner also puts great pressure on balancing investment capital, affecting the payment schedule for power source projects, as well as the repair and maintenance of power projects to ensure safe and stable operation in the following years. In the long term, this situation will hinder the implementation of the roadmap for developing a competitive electricity market, reducing the efficiency and sustainability of the entire system.

In addition, new power projects, especially LNG, renewable energy with storage, and offshore wind, require huge capital investments and long payback periods. The cost of purchasing electricity from these projects will be reflected in retail electricity prices through power purchase agreements with businesses. If electricity prices do not ensure transparency and the ability to recover capital, investors will switch to other markets, slowing down the progress of adding power sources in the future.

Thank you very much!

Anh Tho (performed)

Source: https://baochinhphu.vn/co-che-dieu-chinh-gia-dien-moi-nen-tang-cua-minh-bach-va-an-ninh-nang-luong-102250509153910048.htm