Has the EVN lost its monopoly in operating the competitive electricity retail market?

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The Ministry of Industry and Trade has been developing a project to restructure the electricity industry to serve the competitive electricity retail market to submit to the Prime Minister in 2020. Photo: Nguyen Thanh

Electricity price determined by the market

Recently, the Ministry of Industry and Trade received many questions and requests from members of the National Assembly related to the modification of the electricity retail price schedule, the electricity price adjustment roadmap as well as the operation of the competitive electricity retail market

Specifically, some have said that the implementation of the electricity market in Vietnam is slow and how has the Ministry of Industry and Trade been implementing a competitive electricity retail market amid the impact of competition on the electricity market?

Regarding this, according to the Ministry of Industry and Trade, on August 7, the Ministry issued Decision No. 2093 / QD-BCT approving the design of the competitive retail electricity market model.

In the fully competitive retail electricity market, electricity users will have the option to change their electricity retail unit and at the same time reach agreement with electricity retailers on electricity selling prices.

Putting the competitive electricity retail market into operation will change the nature of electricity purchase and sale transactions, shifting from the State-regulated mechanism of electricity prices to a market-determined electricity price mechanism and according to an agreement between the electricity seller and the electricity user.

The competitive electricity retail market plan from 2022 has been developed by the Ministry of Industry and Trade according to the roadmap, expanding the number of customers participating in the retail market according to scale of electricity consumption and by supply voltage from high to low.

In particular, the first step will pilot a mechanism allowing large electricity users to sign contracts directly with renewable energy sources, before proceeding to expand the large electricity consumers (110 kV) allowed buying electricity directly in the spot market and the final step will be for smaller electricity retailers to change electricity retailers.

"In preparation for the electricity retail market, the Ministry of Industry and Trade has been developing a project to restructure the electricity industry to serve a competitive electricity retail market to submit to the Prime Minister in 2020, and at the same time coordinate with relevant ministries and branches to review and propose amendments and supplements to legal documents that are suitable for the operation of the electricity retail market,” said a representative of the Ministry of Industry and Trade.

Has the EVN lost the monopoly?

From the perspective of whether developing the electricity market can erase the monopoly role of EVN or not, the Ministry of Industry and Trade clearly states that according to each level of the development of the electricity market, the Ministry of Industry and Trade has developed and submitted a project to the Prime Minister on restructuring the electricity industry to meet the requirements of electricity market operation.

The principle throughout the restructuring process is to create a fair and transparent competitive environment, eliminating monopoly in electricity generation, buying/wholesaling electricity and retailing electricity. Activities with a natural monopoly (power transmission and distribution) will be separated and subject to State regulation.

Via that process, the monopoly of the EVN in the stages has been gradually eliminated.

In the power generation stage, currently, two power generation corporations belong to State economic groups, namely Vietnam Oil and Gas Group (PVN) and Vietnam Coal-Mineral Industries Group (TKV), have been equitised. A third of EVN's Power Generation Corporations have been equitised.

After equitisation, companies have the participation of many domestic and international private investors. The remaining two power generation corporations under the EVN are also in the process of implementing equitisation procedures.

In the electricity wholesale stage, the EVN is no longer the only electricity wholesaler as before, there are five more Electricity Corporations (Electricity Corporation in the north, central, south, Hanoi, HCM City) are directly involved in purchasing electricity in the spot market as well as signing contracts with power plants.

At the electricity retail stage, the Ministry of Industry and Trade is implementing a project to restructure the electricity industry to serve a competitive electricity retail market to submit to the Prime Minister in 2020. The distribution stage of retail electricity will be restructured to create a competitive environment, allowing customers to choose their electricity suppliers.

To attract social resources to invest in the power sector and enhance the competitiveness and efficiency of electricity units, the Ministry of Industry and Trade believes a strong synchronous institutional innovation is required and accompanying mechanisms on organisation, finance, mechanism to attract domestic and foreign private investment.