'Electricity prices are low because they are subsidized'

Electricity prices still have a "subsidized" color

That is the viewpoint given by Associate Professor Dr. Tran Dinh Thien, former Director of the Vietnam Economic Institute, at the seminar on "Correct and sufficient calculation to have appropriate electricity prices", organized by the Government Electronic Information Portal on the afternoon of October 31.

Mr. Tran Dinh Thien shared: Our electricity price is still heavily subsidized, so the price is quite low, while in recent years the cost of electricity production has increased very high. Specifically, input conditions, capital, exchange rates and even prices of other energies are also high, but Vietnam's electricity price is still very low, there is an increase but it is almost insignificant.

Fuel prices in recent months of 2023, although lower than in 2022, are still high compared to the 2020-2021 period.

Therefore, in reality, the estimated cost of electricity production in 2023 is about VND 2,098/kWh, still higher than the average retail electricity price of about VND 178/kWh.

electricity price.jpg — Electricity prices are not yet following the market. Photo: Hoang Giam

"Keeping electricity prices low makes us pay the price of market imbalance, especially the electricity producers, EVN and many businesses suffer heavy losses," said Mr. Tran Dinh Thien.

Mr. Nguyen Tien Thoa, Chairman of the Vietnam Valuation Association, said that the recent electricity price adjustments have not ensured the principle of compensating for production costs and generating profits for electricity production and business. We have not fully calculated the cost of electricity into the price.

"Like last year, the cost price increased by 9.27% but we only adjusted it by 3%. All of that causes difficulties in many aspects. Firstly, the cash flow to continue investing in business of the electricity industry, not to mention reproduction, is facing difficulties. Secondly, the lower the electricity price, the less interested investors are in investing in building generation and transmission systems," Mr. Nguyen Tien Thoa analyzed.

Furthermore, low electricity prices are said to be good for production, business, and life, but the problem is that when the input is not real, the output does not reflect the true market value.

Therefore, this expert affirmed that it is time for us to reach out to market principles to calculate and account for electricity prices, and ensure the proposed principles.

Must accept market electricity prices

Mr. Tran Dinh Thien said: Electricity price must ensure electricity production, and the State support must be separated into social security.

"We cannot have high input but still keep electricity prices low," Mr. Tran Dinh Thien noted. "We should not argue that 'low income so low electricity prices' but must argue at a more general level that 'electricity prices must be correct to ensure balance between production and consumption'," he emphasized.

Therefore, Mr. Tran Dinh Thien believes that to calculate correctly and sufficiently, the market principle must be the dominant and guiding factor. Between the market electricity price and low-income groups, social policies need to have appropriate and separate support mechanisms. Then, EVN and its units will not have to bear losses and risk bankruptcy as they do now.

“I have said that high electricity prices are not fatal, but power outages are. Pricing tools need to be used actively and effectively according to market principles. Correct and adequate calculation is an objective factor and leads to the development of the electricity industry,” Mr. Thien stated his opinion.

Agreeing with Associate Professor, Dr. Tran Dinh Thien, Mr. Nguyen Tien Thoa shared: The current electricity structure has thermal power, hydropower and other sources, of which the cheapest is hydropower (accounting for 28%), the rest are high-cost electricity sources. Thermal power using imported coal or gas-fired thermal power cannot have low cost.

For example, during the period when hydropower is at low water levels, we must mobilize the maximum amount of expensive electricity sources, such as imported coal and oil, to ensure the electricity demand of the entire economy. "If calculated correctly, the cost of electricity running on oil will be up to 5,800 VND/kWh, while coal-fired electricity will be about 2,500-2,800 VND/kWh.

"We cannot buy high and sell low due to dependence on input materials," Mr. Thoa said, emphasizing that electricity prices need to be calculated correctly and fully.

Despite the increase in electricity prices, EVN still suffers heavy losses . The estimated cost of electricity production in 2023 is about VND2,098/kWh, about VND178/kWh higher than the average retail electricity price. Therefore, EVN continues to suffer heavy losses despite the increase in retail electricity prices since May 4.

Source