Reporter: How have the soaring global energy prices affected the market and enterprises operating in the energy sector in Vietnam, Sir?
Mr. Nguyen Tien Thoa – Former Director of Price Management Department (Ministry of Finance)
Mr. Nguyen Tien Thoa: In 2022, the world has witnessed many enormous changes caused by the impacts of the Ukraine conflict and supply-demand factors. Fuel prices (coal, petrol, oil, gas, etc.) have increased dramatically, leading to instability in the energy market; electricity prices in many countries have skyrocketed; many countries have faced difficulties in securing energy for their economies.
For example, electricity prices in the UK have increased by 80% compared to 2021; that in Hungary doubled, etc. Vietnam is not out of the negative spiral of the global market. Prices of imported fuels for electricity generation have augmented; fluctuated exchange rates have resulted in an upsurge in electricity generation costs (accounting for over 80% of electricity retail prices). Specifically, the global coal prices in 2022 have increased by 6 times against 2020 and 2.6 times against 2021; the increase in imported coal prices has caused a rise of about 25% in electricity purchasing prices from thermal power plants using imported coals or a blend of domestic coals and imported coals, compared to 2021.
Oil prices as the basis for calculating gas prices for gas-fired power plants in 2022 have increased by 2.2 times compared to 2020 and 1.34 times compared to 2021, causing an increase of about 11.31% in the average electricity purchasing price of gas turbine plants, etc. Costs rise while selling prices are kept stable and thus not being able to cover the costs has put the power sector in a difficult situation.
Reporter: Sir, when market prices have fluctuated critically, should we consider adjusting electricity prices?
Mr. Nguyen Tien Thoa: According to the report I received, due to rising global fuel prices and exchange rate fluctuations, the electricity purchasing costs of EVN have increased sharply. Increasing input costs for electricity generation and increasing exchange rates are among the fundamental and objective causes of force majeure nature that make the cost of electricity generation higher than the current retail price.
In fact, if we manage electricity prices in accordance with the Regulation No. 24/2017/QD-TTg dated June 30, 2022 of the Prime Minister, accordingly EVN is entitled to adjust electricity prices every 6 months if the fluctuation of input cost factors raises the average selling price by 3% or more; the Prime Minister has the right to do price adjustment when the calculated average selling price is 10% higher than the current one, thereby cash flow difficulties of electricity production and business activities will be resolved. However, in order to achieve the goals of controlling and curbing inflation, stabilizing the macro-economy, and social security, Vietnam has kept electricity prices unchanged since March 2019 even when electricity selling prices are lower than generation costs, causing EVN to suffer financial losses.
And in my opinion, it’s the right time to adjust electricity prices suitably, enabling electricity production and business on track.
Reporter: In the context of globalization, prices are greatly affected by the global market, how should electricity prices in Vietnam be managed, Sir?
Mr. Nguyen Tien Thoa: In this current globalization trend, Vietnam's economy in general, and the power sector in particular, cannot stand apart from the trend. In order to produce electricity, we have to import input fuels at global market prices. Therefore, electricity prices in our country cannot fail to reflect the global market prices of these inputs and other price components in the electricity price structure. Therefore, the management of electricity prices according to the market price mechanism must be done.
PV: Thank you very much!