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Experts demand comprehensive power market reforms
Comprehensive reform of the power market is needed to break the monopoly of the national utility, experts said at a conference in Hanoi on Thursday.
Tran Viet Ngai, chairman of the Vietnam Energy Association, said by 2025 the power industry needs an annual investment three or four times higher than now.
And in order to attract more investors, market reforms are needed to prevent the monopoly of any single firm or investor, he said.
Le Van Dinh, vice chairman of Tay Ninh Power Plant, said it is necessary to create a competitive power market and break the monopoly of Electricity of Vietnam, or EVN.
But if there is any reform, it needs to be comprehensive, break the monopoly at the core, and create a truly competitive market, he added.
Nguyen Manh Hien, former director of the Energy Institute, said there should have been reforms long ago.
“If a competitive power market had been formed, consumers would not have had to pay high power costs. So far, power prices have only gone up and never come down.
“With oil prices dropping to US$50 a barrel now, power prices can’t be high and EVN can’t keep saying it has to sell below cost.”
The average electricity price went up by 8.9 percent on March 1 to VND948.5 a kilowatt hour. The Ministry of Industry and Trade said the increase is expected to slow the country’s GDP growth by between 0.05 and 0.07 percent.
Vietnam targets generation of around 83.3 billion kilowatt-hours this year. EVN is expected to produce 57.44 billion kilowatt-hours, or nearly 70 percent, according to the Ministry of Industry and Trade.
Generation is expected to reach 190 billion kilowatt-hours in 2015, with EVN still accounting for 60 percent of it, Vietnam Agriculture newspaper reported, citing Vietnam Energy Association figures.
The newspaper quoted Ngai as saying that without any measures to break its monopoly, EVN would continue to dominate the market since it controls 60 percent of generation capacity.
EVN would be able to set any prices it wanted to, he warned.
The state-owned monopoly controls all transmission grids and 11 power retailers around the country, including Hanoi Power and Ho Chi Minh City Power, and is the sole buyer in the country.
PetroVietnam Deputy General Director Vu Quang Nam said power producers, both domestic and foreign, hope there would be no monopoly in the power market.
PetroVietnam said last month its Ca Mau 1 and 2 power plants did not operate at full capacity in January and February partly because EVN cut back on buying. PetroVietnam supplies around 11 percent of EVN’s annual output but has said it will be able to meet 30 percent of the country’s needs in 2020.
In a recent dispute, the Vietnam Coal and Minerals Group complained to the Ministry of Industry and Trade it is unable to reach agreement with EVN over the price of the electricity it produces despite a year of negotiations.
The group wants VND710 for a kilowatt-hour but EVN is not willing to pay more than VND678.4. EVN said the proposed price by the Vietnam Coal and Minerals Group was higher than what it pays its own coal-fired plants.
Ministry proposals
Delegates at the conference also discussed the viability of a recent plan to reform the market proposed by the Ministry of Industry and Trade.
The proposals, submitted to the government in February, envisage restructuring the traditional power market by separating EVN’s generation, transmission and distribution functions for good.
But energy expert Bui Huy Phuong said such a move could be too abrupt. He instead suggested EVN’s power plants be taken out of its control to create a competitive generation market first.
But Ngai from the Vietnam Energy Association said it is unnecessary to group EVN’s power plants into three or four independent producers as proposed by the ministry.
He said EVN should remain the major power generator in the country and it is its trading function that needs to be taken away.
His association has submitted to the government another reform plan under which an independent power trading company would be set up, he said.
Other experts suggested the new trading firm be managed by the State Capital and Investment Corporation, a sovereign fund with stakes in thousands of state-run enterprises.
The firm would have the job of purchasing electricity from various producers and selling to distributors.
EVN warned that the ministry’s proposal to break it into smaller companies would make it hard to generate funds for power projects.
But several international financial institutions said funding would not be a problem.
The World Bank, for instance, said it supports the proposals by the ministry. The Washington-based lender said the proposals would not affect the financing of power projects in Vietnam.
The Asian Development Bank said the ministry’s reform plan to develop a power generation market on a “cost-based pool” model, using cost instead of capacity as a gauge, is viable.
It added that EVN’s subsidiaries in the financial and telecommunication sectors must also be spun off.
VietNamNet, TN
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