What is the 2-component electricity price?
Energy economist, Assoc., Professor, PhD. Bui Xuan Hoi said as follows: Currently, the electricity selling price according to the current electricity tariff only includes the electricity component, while the electricity supply process includes 2 components: Registered capacity and consumed electricity. Therefore, the application of a 1-component price mechanism does not accurately reflect the costs consumers cause to the system, and does not contribute to improving the equipment utilization coefficient, creating risks for the Electricity industry when recovering fixed costs through electricity prices.
For example, comparison is taken for a household consuming 1kWh in 1 hour/day (using 24kWh in 1 day) with a household using 24kWh in just 1 hour/day and also consuming 24kWh in 1 day, Mr. Bui Xuan Hoi stated: Even though the electricity consumption is the same (24kWh/day), paying the same bill, the actual costs that the Electricity industry has to pay for these two households are completely different. Specifically, in the first case, the Electricity industry only invests 1kWh (fixed cost) and pays 24-hour operating fees (variable cost). In the remaining case, the Electricity industry shall invest up to 24kWh and pay an operating fee for 1 hour.
Two-component electricity price will give the right signal to both electricity producers and electricity consumers – Illustration photo
Commenting on this issue, Mr. Tran Viet Hoa - Director of the Electricity Regulatory Authority (Ministry of Industry and Trade) also said: "The two-component price will bring the right signal to both electricity producers and consumers, helping to improve economic efficiency from the reasonable allocation and use of resources. Specifically, in addition to the electricity price component, applying additional capacity price (VND/kWh or VND/kVA) will encourage customers to use electricity effectively, contributing to improving the electricity load factor and saving bill charge; At the same time, it helps reduce investment in power capacity and expand the power grid to meet customers' electricity needs and recover investment costs for customers who register for large capacity but use less than the registered capacity. Therefore, this is considered a measure to manage natural load demand."
How is the pilot implementation expected?
Up to now, many Electricity units under EVN have deployed electronic meters capable of measuring capacity and electricity for customers using electricity for production and business purposes (customers who use electricity for production and business purposes are subject to the application of electricity prices based on the time of electricity use in the day (TOU).
If the two-component electricity price is applied based on capacity and electricity, the electricity price will be reflected correctly and fully cost electricity customers. Customers with the same monthly power output (in kWh) but have a low maximum registered capacity usage time - that is, a low load factor, shall pay a higher price than customers with a high load factor. In addition, the application of 2-component electricity prices combined with current peak/off-peak price regulations will contribute to balancing the system's load chart and reducing resource and grid investment resources to meet electricity usage during peak hours.
The Electricity Regulatory Authority affirms that at present, the application of the new two-component electricity price is in the pilot research step through measurement data from electricity meters to calculate, research, and apply but not affecting the electricity bills of electricity users. This is a necessary pilot step to evaluate and calculate the difference in electricity bills between the current electricity tariff and the two-component electricity tariff to help management agencies build a ready-made two-component electricity price mechanism to make it ready for application at the appropriate time.
After completing the research process and proposing to build a two-component electricity price mechanism, based on the proposal of the mechanism and selecting customers to apply the two-component electricity price, the Ministry of Industry and Trade requested EVN to perform counter calculations, comparing the application of electricity selling prices according to two components with the application of electricity selling prices based on the current electricity tariff. On the other hand, EVN shall also conduct research and evaluate the impact on the implementation of the average retail electricity price as well as the impact on customer groups when applying the two-component price mechanism. After the calculation and comparison phase, the Ministry of Industry and Trade continues to research and submit it to the Prime Minister for consideration and decision on implementation.