Electricity price hikes to cover losses by state generator

Electricity price hikes to cover losses by state generator

Vietnam may face more power price rises this year and into the near future as state-owned Electricity of Vietnam Group (EVN) continues to incur big losses.

Deputy Minister of Industry and Trade Do Thang Hai

Deputy Minister of Industry and Trade Do Thang Hai told reporters there were three options on the table for higher power prices this year, but the final decision would be based on the ability of people to pay a market-based price balanced against the country’s economic growth.

If power prices remain low, EVN may have to file for bankruptcy as it doesn’t have the financial resources to continue selling electricity at below cost, Hai said.

EVN has reported a group loss of more than VND8.8trn due to foreign exchange rate fluctuations, noting it had been ordered by the government to get its balance sheet in order by 2015.

Hai said it was inaccurate to claim a hike in power prices was designed to help EVN offset its losses, maintaining that power prices were much lower than its cost of production.

“The foremost purpose of price increase is to build up a competitive power market upon the government’s policies,” Hai said.

“Many people disagree with sharp power price hikes, claiming that Vietnam is still an average-income country. However, I wonder whether people really have so little money when they consume a lot of electricty,” he said.

Hai expected that higher electricity prices would encourage people to use energy more efficiently.

Several international organisations have urged Vietnam to increase electricity prices by 40 percent over three years, so the country can build a competitive power market in order to attract investment and raise competitiveness in the power sector.

Due to low power prices and increasing demand, EVN has had to import electricity from foreign sources, including China. The government subsidises electricity, which can be seen as supporting energy exporters to the detriment of local consumers.

The European Chamber of Commerce in Vietnam (EuroCham) recently published a “white book” on energy in Vietnam, in which it saw great potential for wind energy, and stressed the need for transparency and competitiveness in Vietnam’s electricity industry.

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