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Electricity pricing: monopoly control law needed
Le Dang Doanh, a senior economist, said that Vietnam needs to have a monopoly control agency to supervise issues related to electricity pricing and provisions.
EVN has proposed increasing the electricity price by 20% in 2009. Do you think that the electricity price increase would badly affect the national economy?
As far as I know, Minister of Industry and Trade Bui Xuan Khu said that the Electricity of Vietnam initially suggested a more than 20% increase, but the ministry decided to propose the 20% increase only.
An electricity price increase proves to be unavoidable as the government has been keeping the price stable while input material prices have been increasing sharply. It is unfeasible to keep the electricity price unchanged for too long. However, the question is, how much should the electricity price increase be?
Power investors need to get profit with their projects. If the profit was not big enough, no one would inject money in electricity, which would result in the collapse of the electricity grid and no power. This once happened in California, the US, in the 1980s.
Moreover, the stable electricity price in the last time in the context of the high gas price prompted people to consume more gas, putting more pressure on the electricity sector.
There are three problems here, I think. First, we should raise the electricity price step by step, while the 20% increase is really overly sharp.
Second, it is necessary to think about what production cost is reasonable and how much the electricity price increase should be to bring profit to investors. It seems to be impossible to make a decision which satisfies both power investors and consumers.
Third, we need to emphasise that in the current conditions, consumers and businesses have to economise electricity while trying to seek alternative energy sources, like solar and wind energy. This is a long-term solution.
The Electricity of Vietnam (EVN) reasoned that the price in Vietnam is lower than in other regional countries to propose adjusting the electricity price. Meanwhile, some experts say that the comparison is not reasonable as EVN did not consider the average income of Vietnamese people. What do you think about that?
In fact, EVN has a reason to suggest raising the electricity price. Input material prices (oil, coal and equipment) have been increasing, which do not depend on the income levels of countries, thus leading to the higher electricity production cost.
However, I have to say that Vietnam has a lot of hydropower plants, which have been operating for a long time, with their depreciation periods over. The hydropower plants can provide electricity at low prices.
I think that we should apply a flexible electricity price scheme. We need to set a low price for those who consume little electricity. Price levels would be higher for electricity use in peak hours.
Do you think that the electricity price increase will mean improvement in electricity quality?
That is the issue I hope EVN will clarify. It is quite normal that consumers expect better services when they pay more.
By the way, I don’t think that it would be better to raise the electricity price on household consumption to compensate for losses due to the lower electricity price on business consumption. A reasonably high electricity price would create healthy pressure, forcing enterprises to improve technologies and economise electricity.
Do you think that the monopoly of EVN is the cause of the regular power cuts and low quality of services?
Vietnam has an electricity regulatory unit, but it still does not have an agency that controls monopolies. The efficiency of the unit, which also belongs to the Ministry of Industry and Trade like EVN, therefore, has not been as high as expected. I think we need to have a monopoly control law, which allows the establishment of a supervisory commission in charge of controlling issues related to electricity prices and provisions.
VNN
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