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EVN raises motion to increase electricity price
Dinh Quang Tri, Deputy General Director of the Electricity of Vietnam (EVN), on October 6 said that the most important thing now is a suitable electricity pricing scheme.
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Sources said that EVN is drafting a plan on adjusting electricity prices from 2009-2012, under which the average electricity price is expected to be VND1,017/kwh by 2009 and VND1,125/kwh by 2012.
As for household electricity, there are two options for pricing. In the first option, the suggested price is VND750/kwh for the whole 100kwh of consumption, or the increase of 36% over the currently applied level of VND550/kwh. In the second option, the first 50kwh would be priced VND700/kwh (+ 27.3%), the next 50kwn VND900/kwh (+ 63.6%).
The first option includes six price levels which have the average increase of 16% over the current levels, while the second option includes seven price levels.
An official from the Ministry of Industry and Trade said that the electricity price increases will be mostly applied to household consumption. In other countries in the world, the electricity for production is lower than for household consumption in order to encourage production. Meanwhile, the contrary is the case in Vietnam.
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Tri stressed that to date, no official draft on electricity pricing has been completed and that EVN has not submitted any electricity price adjustment plan to the Ministry of Industry and Trade (MOIT) and the government.
He said that EVN is building up a mechanism that fits the market mechanism, thus allowing investors to easily mobilise capital for power project development. If there is not a clear mechanism, investors will be unable to arrange capital.
I have heard that the electricity price will increase by 20% in 2009. Is that true?
We have not made any suggestion like that. I think that the government will have to consider every aspect of the issue before making decisions. Raising electricity prices is a long-term plan, not a plan for 2009 only.
I think that the price increase could be less than 20% or 20%, depending on the socio-economic situation at the end of the year. If inflation is curbed, people would accept higher price increases. And if investors find electricity prices high enough to bring profit, they will inject money in power plants; if not, Vietnam will lack electricity, not only in the immediate time, but for five or seven more years.
In the Philippines, for example, as the government did not increase electricity prices and adjust the pricing mechanism, an electricity shortage occurred, forcing the country’s government to put into operation oil-run BOT projects with very high production costs. Its electricity price is now UScent22/kwh.
If we have a suitable comprehensive plan which allows us to mobilise capital from different sectors in the economy to develop power plants, the electricity price will increase step by step in accordance with market supply and demand. If so, electricity shortages will not occur while Vietnam’s electricity price will be competitive. We will suffer if we do not do anything now, and rush to build power plants only when serious electricity shortages occur.
Do you think that raising electricity prices is the only thing that helps attract investors?
I think the electricity price increases are not important to them. The most important thing for them is a suitable mechanism, not commitment on fixed prices. When input material prices increase, they need to raise electricity prices, and when fuel prices decrease, they will cut sale prices.
A lot of power projects have been going slowly due to lack of capital. Could you please tell us how serious is the capital shortage?
Our capital demand is very big. Meanwhile, it is very difficult to borrow money as banks do not have enough capital, and the lending interest rate is very high at 21%.
It is also very difficult to find foreign capital sources as the international financial market has been influenced by the US financial market.
You have mentioned the pricing scheme. What factors do you think the pricing scheme needs to have?
The scheme needs to clarify how retail prices will be adjusted and who has the right to make decisions. EVN is now not the only electricity producer. In the near future, EVN will only make up 50% of power sources.
VNN
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