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Improving the electricity retailing price list: Who benefits, who suffers?

10:18 | 05/03/2020

VCN- The Ministry of Industry and Trade has just sent a written request to many agencies, ministries and branches for plans to improve the structure of electricity price tables. Instead of being divided into six steps, the Ministry of Industry and Trade is inclined to divide the plan into five steps, considering that this option has a reasonable increase in electricity price among the steps, while encouraging households to use electricity more economically.

improving the electricity retailing price list who benefits who suffers
Improving the electricity tariff is not adjusting electricity prices but only revising the electricity price scale to suit the actual use of electricity. Photo: Nguyen Thanh.

460,000 customers suffered

Nguyen Anh Tuan, Director of Electricity Regulatory Authority (Ministry of Industry and Trade), said that to consider the options to improve the structure of the electricity retail price tariff, the Ministry of Industry and Trade gave actual statistics on electricity output of customers. Accordingly, more than 1.2 million customers use less than 50 kWh/month; over 18 million customers, accounting for 72% of customers using 50-300 kWh/month, equivalent to about 60% of total output. The number of customers over 700 kWh/month compared to the survey in 2015 has increased significantly, accounting for about 1.7%, with consumption volume of about 13%.

Based on the report byEVN, the opinions of experts, associations, the Ministry of Industry and Trade has researched, checked and proposed five options to improve the electricity price structure; in which, there is a 1-level plan (all customers apply the same price), three levels, four levels and five levels. Particularly, the 5-level plan has two different options. The change of these must be in line with the approved average cost of electricity. Therefore, the improvement of the electricity price index is not actually adjusting the electricity price, but only revising the electricity price scale to suit the current use of electricity by customers.

"With each proposed plan, the Ministry of Industry and Trade has calculated and compared the amount of money customers on each stagemust pay compared to the 6-level plan being applied. The advantage is that the number of steps is reduced compared to the current regulations.However, the 1-level, 3-level and 4-level options have the common disadvantage that low-end customers must pay more, and customers that use a lot of electricity have to pay less," said Tuan.

Specifically, with the 1-level, 2-level and 3-level options, customers using less than 300 kWh/month, accounting for 87% of customers,suffer from losses. This does not achieve the goal of encouraging people to use electricity economically.At the same time, the state budget must support poor households and policy beneficiaries. Meanwhile, the plan proposed by the Ministry of Industry and Trade is five steps to overcome the above-mentioned disadvantages. Tens of millions of customers who use less than 300 kWh / month benefit from and pay lower electricity bills, especially for poor households, the policy continues to be supported by the state, about 1.8 million households with a total amount of support over 1,000 billion/year as today. In the opposite direction, with this option, households that use more than 700 kWh/month will suffer. The total number of customers is 0.46 million, accounting for 1.8% of the total customers paying higher.

Why use more, the higher the price?

In fact, when the improved retail price of electricity is raised, many views expressed interest in the perspective of why electricity is contrary to other products, using more, customers have to pay the higher price?

Regarding this right from the time of commenting on "Scheme on Improving the structure of Vietnam's electricity retail price list" at the seminar held by EVN in mid-May 2019, Nguyen TienThoa, Chairman of the Appraisal Association said: The more you pay, the higher it is in fact the economic logic that goes from the characteristics of the electricity system. That method is to solve the problem of electricity production costs, including at normal times and also during periods of peak load; must mobilize sources of electricity with different prices to meet consumption needs.

"Using as much electricity andpaying more at a higher price is the way to respond to the objective requirements of the law of resource scarcity, which operates in a controlled monopoly market, not in a competitive market,”said Thoa.

The Chairman of the Appraisal Committee emphasized: Electricity is a resource that is transformed from many non-renewable resources. This is not endless, even some are running out (oil, coal, natural gas) leading to electricity that is not endless resources, but wasteful use.

On improving the electricity retailing price list, Mr. Nguyen Anh Tuan added: The improvement of the structure of electricity retailing price remains the average price of electricity issued under Decision 648/QD-BCT of March 20, 2019 adjusting the retail price of electricity. Therefore, the adjustment of the electricity retailing price structure this time only for the purpose of adjusting the structure to best suit the actual use of electricity of customers, without changing the price level average daily electricity retail.

"At present, the Ministry of Industry and Trade has submitted a written request to 155 units including the provincial People's Committees, ministries, branches and industry associations. On the basis of the comments from the units, the Ministry of Industry and Trade will summarize and complete the plan, report and submit to the Prime Minister for consideration and direction. After the Prime Minister's decision, the Ministry of Industry and Trade will issue a new price list," the Director of the Department of Industry and Trade Electricity said.

By UyenNhu/ HuuTuc