It took nearly 10 years to improve one level of electricity price. When will we have one price for electricity?

What are the benefits of reducing electricity prices to 5 levels?

According to the draft Decision of the Prime Minister on the structure of retail electricity prices that has just been sent by the Ministry of Industry and Trade to the Ministry of Justice for appraisal, the calculation of household electricity bills has been reduced to 5 levels. The cheapest level is calculated for households using less than 100 kWh instead of the current 50 kWh, and the highest level is from 701 kWh and up.

The electricity price of levels 1-5 is calculated at 90-180% of the average retail price of VND2,006.79 per kWh (adjusted from November 9). Thus, the lowest price (level 1) is about VND1,806 per kWh and the highest (level 5) is VND3,612 per kWh. These prices do not include VAT.

The Ministry of Industry and Trade proposed to restructure the retail electricity price structure into 5 levels. Photo: Screenshot

Speaking with Lao Dong, Professor Tran Dinh Long - former Director of the Vietnam Electricity Institute said that improving the retail price of household electricity by steps, shortening from 6 steps to 5 steps is good.

Because in principle, the fewer the steps, the better for consumers, helping electricity users get closer to paying for their usage needs.

According to the roadmap, by 2024, we will start implementing competitive retail electricity prices and gradually move towards a single price, so the reduction in levels must be applied sooner. However, the current retail electricity price list was established in 2014. In nearly 10 years, we have only reduced one level, which is very late. Thus, the road to a single price is still very far away.

Cross-subsidy problem still exists

Dr. Ngo Duc Lam - former Deputy Director of the Institute of Energy (Ministry of Industry and Trade) said that according to the new price list, the cross-subsidy problem of electricity prices remains intact.

Specifically, those who consume a lot of electricity must compensate those who consume little. Such compensation is not in accordance with market rules.

Dr. Ngo Duc Lam - Energy expert, former Deputy Director of the Institute of Energy, Ministry of Industry and Trade. Photo: Binh Nguyen

"When people use electricity according to the electricity market, those who use a lot have to pay a lot, those who use less pay less; there is no such thing as customers who use a lot (have to pay a lot), and also have to pay a high electricity price (up to 3,457 kWh for electricity price level 5). No one has the right to take from one person to compensate another, so cross-subsidization is invalid and ineffective," he said.

Mr. Lam said that the current way of calculating electricity prices of the Ministry of Industry and Trade does not ensure the principle that total revenue from household electricity calculated according to each level (5, 6 levels) for customers (called T2) must be balanced with total revenue calculated according to average electricity price (called T1).

Since the application of the 6-tier electricity price list, there has not been any proper inspection to announce the above figures to the public, to see if the electricity price according to the ladder is reasonable. Therefore, Mr. Lam wants the figures to be transparent, the inspector needs to get involved to clarify.

Regarding the retail electricity price list, the Ministry of Industry and Trade said that the advantage of the new price list is that it is simple and easy for people to understand because it is reduced from 6 levels as in the current electricity price list structure to 5 levels.

The new tariff combines the tiers together to increase the gap in electricity consumption between tiers and widen the gap in consumption of higher tiers, reflecting the actual situation of electricity consumption and encouraging more economical and efficient use of electricity while at the same time partially limiting the increase in electricity bills during the changing seasons.

According to the Ministry of Industry and Trade, with the new price list, households with low electricity usage of less than 700 kWh (accounting for 97.85% of households) will have their electricity bills unchanged or reduced, while households with high electricity usage of more than 701 kWh/month (accounting for 2.15%) will have to pay an increase in electricity bills to compensate for the decrease of households with electricity usage of less than 700 kWh.

Source