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Expert calls for rationalizing power tariffs
Regular price hikes are not the solution for the sustainable development of the electricity sector, Dam Xuan Hiep, General Secretary of the Vietnam Electric Power Association, tells Tuoi Tre.
The government’s approval for hiking power tariffs by 15.28 percent this year aims at keeping them affordable for the poorest. This rate is much lower than Electricity of Vietnam Group (EVN)’s proposal to hike the tariffs by 24-40 percent.
Some say that the existing electricity prices are not low compared to the average Vietnamese income …
The price revision is one-sided, just EVN’s demand.
The calculation of power tariffs must be based on the demands of the electricity sector, the health of the economy, and incomes.
Though many say power tariffs in Vietnam are low compared to regional levels, I think it is not very low considering Vietnamese people’s incomes.
In the region, what percentage of their incomes do people spend on power?
Energy bills, including for power, account for 15-20 percent of the income of a family in the region.
In Vietnam, though we have yet to do any research on this matter, we know that the average monthly power bill for a middle-class family in the dry season is around VND1 million, or 20-25 percent of the monthly income of VND4-5 million. This is besides the spending on gasoline and cooking gas.
Is the way we charge consumers unreasonable?
In Vietnam, power costs more for household consumption than for industrial production in other countries.
So the hike in power tariffs is higher for the former than the latter, and least for state agencies.
But we need to reconsider this since power wastage at state offices is common.
So, what will be the smallest and biggest hikes to the rate of VND1,000 a kWh for household consumption?
The smallest increase of will be VND600 a kWh. But the biggest may vary based on actual consumption.
The problem here is that the existing pricing mechanism imposes equal increase rates for all levels of consumption. I think it should be progressive and the highest increase should be for those who use more than 200 kWh a month.
Whenever there is a price hike, customers wonder if they will enjoy better power supply …
We cannot ask for sufficient power supply in the context of Vietnam.
The important thing here is that the price hike should follow a regular roadmap with a gradual hike so that we will not face strong public opposition due to a sudden and large price hike.
In other countries, the power tariffs are often reworked every year based on inflation rate, average floor price, and salary increases in the previous year. This causes no shock to the economy.
Is investment for the power sector to be sourced only from consumers?
In Vietnam the power sector often relies on bank loans, with the interest taken into the account to compute tariff hikes. Low power prices also discourages investment in power generation.
But the investment can be sourced by restructuring the sector, dividing it into three separate segments - generation, transmission, and distribution - so that other sectors will join in.
The restructuring will offer a fair and competitive environment for all businesses.
What are the long-term solutions for the sector to grow sustainably?
I think there should be an elimination of monopoly and new rules allowing power-related associations to watch the operations of the sector to boost transparency, reduce wastage, and improve efficiency.
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