Vietnam: Electricity single-price policy not feasible: experts

• Jul 22, 2020

The Ministry of Industry and Trade (MOIT) said it is designing a new electricity pricing mechanism to give more options to consumers.

Households could either pay in accordance with the currently applied six-tier pricing, or the single-price mechanism. The current six tiers would be reduced to five.

MOIT’s Deputy Minister Hoang Quoc Vuong said if many households choose the single-price mechanism, this may affect revenue of the Electricity of Vietnam (EVN), the only retailer. However, in principle, no matter which pricing mechanism is applied, retail prices must ensure benefits for both consumers and sellers.

Commenting about MOIT’s annoucement, Ngai said that the single-price mechanism has low feasibility.

MOIT’s Deputy Minister Hoang Quoc Vuong said if many households choose the single-price mechanism, this may affect revenue of the Electricity of Vietnam (EVN), the only retailer. However, in principle, no matter which pricing mechanism is applied, retail prices must ensure benefits for both consumers and sellers.

He said in principle, the single-pricing mechanism has to satisfy two requirements. First, consumers are not put at a disadvantage. Second, the pricing mechanism won’t lead EVN to a loss.

The majority of consumers have monthly consumption of 400-500 kwh of electricity and it is necessary to pay attention to them. The number of those who consume 600 kwh or more is also high, but they can afford high electricity bills.

The electricity price under the single-price mechanism would be higher than the average price. This means that poor and medium income earners, who consume little electricity, would have to pay more. Meanwhile, others would support the single-price mechanism because they can benefit from it.

It is difficult to define a single price so that EVN does not have to take a loss and the poor won’t have to pay for the better-off.

An analyst noted that MOIT announced the single-price mechanism after many people complained about higher electricity bills. In theory, people would have two options. But it is clear that the majority of people, who consume 400 kwh a month or less, would not choose the single price mechanism.

He pointed out that the single-price mechanism does not encourage people to practice thrift in using electricity, while the current mechanism can.

Under the current policy, when households use more electricity, they have to pay higher electricity prices.

MOIT has also promised that it would adjust the current tier-based electricity pricing mechanism and would submit the new policy to the government by the end of the year. It is expected that there will be five tiers instead of six as currently applied.

In the past, MOIT thought of designing a single price policy, but after consideration, it did not choose the solution.

Thanh Mai 

Source: https://vietnamnet.vn/en/business/electricity-single-price-policy-not-feasible-experts-659370.html