Electricity prices should be adjusted every three months.

EVN Hanoi workers inspect power lines, June 2023

In the latest draft of the mechanism for adjusting average retail electricity prices submitted to the Ministry of Justice for appraisal, the Ministry of Industry and Trade proposes shortening the adjustment period for average retail electricity prices from the current 3 months to 2 months from the last change. The price adjustment will be implemented by authorities when electricity production costs fluctuate by 2% or more, lower than the currently applied 3% regulation.

In its feedback, the Vietnam Chamber of Commerce and Industry (VCCI) stated that the mechanism for adjusting the average electricity price throughout the year is based on quarterly data. This means the electricity sector compiles data once every three months. Therefore, VCCI suggested that the drafting agency reconsider the minimum adjustment period for the average electricity price to be three months, to align with the data compilation schedule, especially considering the input costs of the electricity sector and accounting practices.

Experts have previously suggested that the electricity sector needs to conduct independent audits of input costs and business management before adjusting selling prices. This transparency is necessary to help businesses and people easily accept price increases and avoid negative reactions.

Currently, retail electricity prices are implemented according to Decision 05/2024, with a 3-month interval between price adjustments if input costs are reviewed and checked, resulting in a price increase of 3% or more. However, the implementation of this decision does not occur periodically. In October 2024, the average retail electricity price increased by 4.8%, to 2,103.11 VND per kWh (excluding VAT).

Previously, explaining the bi-monthly adjustment schedule, the Ministry of Industry and Trade cited statistics on the fluctuations of the global coal price index from 2022-2024. The data showed that coal prices could increase sharply in a single month, up to 40%. Similarly, factors such as the price of liquefied natural gas (LNG) – a raw material that will be widely used in the coming period – and exchange rates are also factors that can fluctuate significantly in the short term. Therefore, the agency argued that the current quarterly electricity price adjustment schedule does not adequately reflect the changes in input parameters.

Over time, the price adjustment threshold is also proposed to be reduced to 2%, instead of the current 3%. The operator stated that this change aims to help adjust the average retail electricity price at a more appropriate and timely level.

However, analysts believe this could make it difficult for businesses to forecast and balance costs. Typically, electricity accounts for 4-10% of a business's cost of goods sold, depending on size and sector. In the long term, with market-based electricity pricing, the operator should soon adopt a two-component pricing mechanism (price per capacity and price per energy), instead of adjusting prices up or down within the year.

In addition, the Ministry of Industry and Trade also plans to readjust the basis for determining the standard profit margin in calculating the average electricity selling price for distribution-retail, operation-management, hydropower plants, and dependent accounting units that have not yet participated in the competitive electricity market of EVN.

Specifically, the return on equity (ROE) of these stages is determined by the average interest rate on 12-month time deposits of the four state-owned commercial banks (Vietcombank, Vietinbank, BIDV, and Agribank) as of September 30 of the previous year, plus the projected CPI for the current year.

Thus, the ROE, according to current data from four banks in December 2024, is approximately 9.2%, corresponding to an after-tax ROE of about 7.6%. According to the Ministry of Industry and Trade, this level is appropriate for the coming period to help EVN improve its financial situation, preserve capital, and develop the business. This level also provides the electricity sector with a basis for mobilizing capital to continue investing in power sources, especially nuclear power plants. Currently, EVN is requesting the Prime Minister to allow them to continue implementing the Ninh Thuan nuclear power project, which is expected to be completed in 2030.

EVN and its power generation corporations (Gencos) account for approximately 37.5% of the electricity supply; the remaining 62.5% depends on PVN, TKV, and external investors (BOT, private). Last year, EVN's consolidated revenue reached approximately VND 575,000 billion. The parent company - EVN - made a profit, but the group has not yet released detailed figures.

TH (according to VnExpress)

Source: https://baohaiduong.vn/nen-giu-gia-dien-3-thang-dieu-chinh-mot-lan-403429.html