VEA Mulls Power Price Hike

 

VEA pointed out that at an average retailing price of VND 1,058 per kWh of electricity in 2010, the Electricity of Vietnam (EVN) had to suffer a loss of VND3,000 billion in the first half.

 

VEA proposed two types of electricity prices. The first type is subsidised electricity price which will be applied to poor families, preferential families, people in remote, border and island areas, retired civil servants, students and some others. The state will choose a reasonable rate, lower than the market price, for this type of users.

 

To apply this regime, VEA suggested the formation of a corporation to management the electricity price for poor families and public services. This unit will be put under EVN.

 

VEA said in its report that the increment regime is unsuitable because the limit of first 50 kWh is not only for the sake of poor people but also benefits high-income earners.

 

However, to achieve these objectives, the Government needs to increase the electricity price to 8 cents per kWh from 2011 though the rate is still lower than the regional rate. Besides, coal price has climbed to US$100 per tonne.

 

According to VEA, this is the only solution to overcome the long-standing capital shortage in the energy sector. Energy corporations in Vietnam are Vietnam now must sell their products at non-market prices.

 

Apart from proposals on electricity price, VEA also suggested the Government to increase the price of coal sold to power plants and apply the market-based price of gas sold to power plants to deal with capital shortages incurred by Vietnam National Coal - Mineral Industries Group (Vinacomin) and the Vietnam National Oil and Gas Group (PetroVietnam). Coal output slumped but the supply rose 16.9 percent to 13.2 million tonnes. Particularly, power plants burned 4.96 million tonnes, up 36.8 percent, cement plants fired 2.9 million tonnes, up 34.8 percent but other users managed to cut their consumptions. Coal inventory gradually reduced to only about 4.8 million tonnes.

 

Electricity output was estimated to reach 51.6 billion kWh in the first seven months of 2010, up 15 percent over the same period of 2009 but power consumption was estimated at 47.6 billion kWh, up 15.5 percent. Electricity used for industry and construction rose 19.7 percent and accounted for 50.9 percent; electricity used trading areas, hotels and restaurants expanded 12.8 percent, electricity used administrative and civil purposes increased 7.2 percent, accounting for 38.2 percent. In the past two months, electricity used for manufacturing shrank but the civil consumption surged.

 

VEA recommended that the electric generation and supply remains tense although water levels at reservoirs are higher than in previous months. Coal-fired power plants in northern region like Pha Lai 2, Hai Phong 1 (turbine 1), Quang Ninh 1 (turbine 2), Cam Pha (turbine 1) broke down, causing unstable operation. Therefore, hydropower plants and oil-fuelled plants have to operate at full capacity to meet the demand.

 

VEA pointed out that the low price of electricity discouraged foreign investors from investing in the power industry.

 

State-owned economic groups like EVN, PetroVietnam, Vinacomin, Song Da Corporation reported very low rate of returns on power production, not enough to re-invest or not persuasive to apply for commercial loans.

 

On March 1, 2010, the electricity price increased. According to the Decision 21 issued by the Prime Minister, power price is allowed to increase only once in a year from 2009 to 2012. Electricity is one of essential goods whose prices need to be stabilised. As a result, there are many different opinions about this proposal.