E
Electricity price is still being "subsidized".
Regarding Vietnam's current electricity pricing policy, Associate Professor, Ph.D. Tran Dinh Thien believed that the electricity price was being subsidized. In the context of very high input fuel costs for electricity production and increasing exchange rates, Vietnam's electricity price is still quite low. Over the past 4 years, the electricity price has not increased significantly - only by 3% - to support people and society in difficult times. However, keeping electricity prices low makes the market imbalanced, and electricity generation and distribution enterprises face many difficulties.
According to Dr. Nguyen Tien Thoa, the calculation of electricity price has been done based on consistent principles set forth by the Government. As per Decision No. 24/2017/QD-TTg of the Prime Minister stipulating the average retail electricity tariff adjustment mechanism, the retail tariff should be adjusted at least every 6 months if audits and controls show increased input costs. However, since 2017, Vietnam has only made three adjustments to the electricity tariff and the recent adjustments have failed to meet the principle of compensating for electricity production and business costs.
Also as said by Dr. Nguyen Tien Thoa, to stabilize the macroeconomy, control inflation, or support pandemics, natural disasters, etc., costs of electricity production and business have not been passed through adequately to the electricity retail tariff. Typically, the electricity generation cost in 2022 increased by 9.27% but the average retail tariff was adjusted by only 3%. This situation leads to many difficulties. Firstly, difficulty in cash flow to maintain investment and business activities, not to mention electricity reproduction. Second, the lower the electricity price is, the less interested investors are in investing in the electricity industry. Third, low electricity price is said to be good for production, business, and life, but when input costs are unrealistic, output products do not reflect the true market values.
Experts and delegates participated in the Dialogue.
According to Dr. Ha Dang Son, low electricity price cannot change the consumption behavior of electricity users. He also said that low electricity price is essentially subsidizing businesses with outdated technologies, creating unfairness between businesses trying to use green energy and businesses using low, energy intensive and inefficient technologies.
It is necessary to separate electricity price from social security policy
According to Associate Professor, PhD. Tran Dinh Thien, one should not argue that “income is low, electricity price thus should be low". Electricity price needs to be established correctly and sufficiently to ensure balance between production and consumption.
Currently, the electricity price is partially subsidized. However, Associate Professor, PhD. Tran Dinh Thien believed that electricity price must cover costs of electricity production, while the State's subsidy portion for social security needs to be separated. Only then will users be aware of electricity saving, as well as promoting investment in electricity production.
Also according to Associate Professor, PhD. Tran Dinh Thien, subsidy will undermine the market mechanism. More worryingly, if the current low electricity price is maintained, it is likely to create a technology trap, that is, only targeting investors with outdated, electricity-intensive technologies, which then will severely affect the economy.
This expert emphasized that the reality shows that unreasonable electricity price causes the electricity industry to neither have resources to invest in development, nor attract domestic and foreign investors to invest in. A correct and adequate pricing mechanism for electricity is an objective factor driving the development of the country's power industry.
Sharing this opinion, expert Nguyen Tien Thoa stated that hydropower (having the cheapest cost) accounts for 28% of the current power generation mix, the rest are high-cost generation sources such as coal, oil, and gas, etc. Recently, when water levels in hydropower reservoirs were lower than the minimum operating levels, high-priced electricity sources were dispatched to meet the electricity demand of the economy. The cost of oil-fired electricity can be up to VND 5,000/kWh, coal-fired is about VND 2,500 - 2,800/kWh. With the efforts of the Government and the power industry in subsidizing electricity price, we are striving to have enough electricity supplied for the economy with a price incorrect and insufficient to cover costs. Expert Nguyen Tien Thoa expressed his opinion that the current practice of "buying high and selling low" is unreasonable. As for vulnerable people, the State can consider other support measures.
Opportunity is mature to introduce market-based electricity price
Delegate Phan Duc Hieu said that electricity price needs to be calculated correctly to fully cover reasonable costs, harmonizing the interests of the parties; at the same time, energy security must be ensured.
According to Dr. Nguyen Tien Thoa, a correct and sufficient pricing mechanism is a mandatory requirement in production when moving towards a market mechanism. The consistent principle of the Price Law is to ensure compensation for actual and reasonable costs, with profits; timely adjusting when price forming factors change. This principle is applicable to all the sectors. However, recently, due to multi-objective performance, electricity pricing has not been implemented accordingly.
"I think it's time for us to reach out to market principles to account and calculate electricity price to ensure the principle we have set out," Dr. Nguyen Tien Thoa emphasized.
Sharing the above viewpoint, Associate Professor, Dr. Tran Dinh Thien believed that it is time to seriously and realistically consider and discuss the electricity pricing, because Vietnam is moving towards an internationally competitive market economy. The policy already exists, now a political determination should be there to put the pricing mechanism into practice, with a regulatory mechanism that ensures both stability and flexibility.