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Power price surge could hurt firms, households
Electricity of Vietnam (EVN) has submitted a plan to the Ministry of Industry and Trade, proposing major increases in the retail prices of electricity.
EVN is a state-owned monopoly in Vietnam. It controls all transmission grids and network of retailers including Hanoi Electricity Company and Ho Chi Minh City Electricity Company.
Under the proposal, prices of electricity for production will be increased by 15.5 percent over current prices. The increase will be 16 percent for the services sector.
Two options have been proposed for electricity for household use. Under the first one, the first 100 kWh used will be charged 36 percent higher and consumption over this threshold will subject to an average price increase of 16 percent.
The second option has electricity consumption divided into seven levels of 50 kWh each. The price increase rates will be 27 percent for the first level, 63 percent for the second level and 12 percent for the rest.
EVN has listed many reasons for the proposed price increase, including surging input costs, increasing power demand as well as shortage of funds.
The proposal will be considered and then submitted to the government later this year, said Vu Huy Hoang, Minister of Industry and Trade.
Shocking
The plan to increase electricity prices has come as a shock to many businesses.
Le Quoc An, chairman of the Vietnam Textile and Garment Association, told Thanh Nien a 15.5 percent increase in electricity prices is “shocking.”
“Electricity costs account for as much as 15 percent of the production cost in the industry,” he said. “The industry will definitely be unable to handle the price increase.”
It was a right move to increase electricity prices to regional levels but EVN’s profits must be managed strictly by the government, he said.
The price increase should be gradual, for example 5-7 percent for the first time and then to about 10 percent, he suggested.
Nguyen Thi Nguyet Huong, a National Assembly member, said local products already suffer from low competitiveness and the 15.5 percent increase in electricity prices will make it even harder.
A recent study conducted by the Center for Economic and Policy Research of the National University in Hanoi found that electricity prices have increased by 170 percent since 1995.
But it is in fact a price drop if inflation is taken into consideration, with the consumer price index surging by 250 percent over the same period.
However, if the local electricity industry had been able to increase its output by 2 percent every year over the period, there would be no need for a price increase now, according to the study.
Unjust reward
EVN has come under criticism lately for requesting that it use more than one third of its 2007 profits to grant a whopping VND1,002 billion (US$60.6 million) – in bonuses to its staff.
The bonus is necessary for “the interests of 84,000 workers nationwide,” EVN said in a financial report submitted to the Ministry of Finance and the Ministry of Industry and Trade.
National Assembly deputies, however, slammed the request, saying it came after repeated proclamations of losses and lack of investment funds by the national power utility.
Deputy Minister of Finance Tran Xuan Ha rejected the suggestion and scaled down the bonus to VND668 billion ($40.5 million).
The remainder will be added to the national fund for development, Ha said.
Le Danh Vinh, Deputy Minister of Industry and Trade, refused the request outright. The ministry also asked EVN to clarify how it calculated its 2007 profit at VND2,763 billion ($167.4 million).
“I can’t think of any reason to reward [EVN],” Tuoi Tre newspaper Monday quoted Nguyen Dinh Cung of the Central Institute for Economic Management as saying.
He said it was not convincing enough to say EVN’s staff needs bonuses as a motivation to work since many workers and farmers nationwide were still working hard despite low incomes.
“Everyone wants to be rewarded, but at least they should ask themselves whether they deserve such a reward before asking for it,” Cung said.
From the beginning of this year to July 25, there were at least 3,000 power cuts nationwide, he said, citing a report by the Ministry of Industry and Trade’s Electricity Regulatory Authority.
EVN said such power cuts were beyond its control. But the report showed that sometimes the overload was the fault of EVN’s electricity companies that ran after profits, Cung said.
In August, EVN refused to invest in 13 power projects the government had assigned to it, claiming it lacked funds. The projects were later taken up by the Vietnam Oil and Gas Group’s PetroVietnam Power Corporation.
“There is no business in Vietnam that is more capable than EVN in developing generation capacity, but EVN turned down the projects,” Cung told the newspaper.
“It’s impossible that EVN doesn’t have enough money. The problem is it doesn’t know how to generate capital.
“A business cannot just depend on bank loans or government support. [If it is that easy] everyone can become a manager.
“I don’t understand how the Ministry of Finance could allow EVN to extract its profit like that,” he said, noting the investment into state-owned corporations like EVN came from the public.
Thanhnien
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