Vietnam: Electricity Regulatory Authority rethinks single pricing model

• Aug 20, 2020

Nguyen Anh Tuan, head of ERA, said at a meeting on August 18 discussing the draft of the Prime Minister’s decision on electricity retail prices that the agency has decided to withdraw its idea about the 2A and 2B electricity pricing options, which would allow electricity consumers to choose either the multi-level or single-price models.

Under the 2A option, the electricity single price would be 145 percent of the average electricity price (VND2,704 per kwh, not including VAT).

Under the 2B option, the electricity single price would be 155 percent of the average electricity price (VND2,890 per kwh, not including VAT).

Tuan said after the Ministry of Industry and Trade (MOIT) opened the draft pricing mechanism for public opinion, the ministry received opinions from many scholars, journalists and electricity users.

The new single-pricing mechanism was expected to give more choices to customers, thus better harmonizing the benefits of consumers and power companies.

However, the weakest point of the mechanism is that it does not encourage clients to use electricity economically. This is one of the major policies of the Government and MOIT.

Tuan said that the ERA will continue to consult with experts and consumers about the No 1 option, i.e. the multi-tiered scale will be improved to make it more reasonable.

ERA plans to reduce the number of price levels from six to five and to adjust prices to make it suitable to people’s electricity consumption.

The single prices suggested by MOIT are far higher than the average electricity price. High-income earners could choose the single-price mechanism, but it won’t bring any benefits to low income earners.

Tuan said ERA will coordinate with units belonging to MOIT to conduct a price appraisal according to current regulations and submit to the Prime Minister for a decision.

Ngo Tri Long, a respected price expert, said on VTC News that the single price mechanism is just a provisional measure and that it has a lot of problems and cannot be applied for a long time.

The single prices suggested by MOIT are far higher than the average electricity price. High-income earners could choose the single-price mechanism, but it won’t bring any benefits to low income earners.

“Low income earners won’t get benefits from the single-price mechanism. But they are the people who need the support,” Long said.

The electricity retail pricing needs to be designed in a way to reach three major goals – covering production costs and ensuring reasonable profit for enterprises, ensuring social security, and encouraging economical use of electricity. 

Luong Bang

Source: https://vietnamnet.vn/en/business/electricity-regulatory-authority-rethinks-single-pricing-model-667725.html