Raise electricity prices to offset losses for power sector?

Electricity price increases affect to the whole the economy

The average retail electricity price was adjusted up by 6.08% from December 1st . Economist Ngo Tri Long acknowledged that electricity prices will certainly affect the entire economy. This creates more obstacles for enterprises, because electricity is an important input factor for all industries. The most visible impact is the CPI in December as well as in 2018. For consumers, the cost will also be more from the increase in electricity prices, as well as the situation of commodity prices increased by the price of electricity.

Given the more detailed calculation of the impact of electricity price increases on the economy, Mr. Nguyen Anh Tuan, Director of the Electricity Regulatory Authority (Ministry of Industry and Trade), said, the Prime Minister has assigned the relevant ministries to study and review. According to calculations, in the year 2017, the adjusted electricity prices increased the production index by 0.07% and the CPI increased by 0.08%.

Regarding this issue, Mr. Vo Quang Lam, Deputy General Director of Electricity of Vietnam (EVN) added, It is expected that in 2018, the increase in electricity retail price will affect the CPI increase 0.1% and GDP 0.66%.

Nam Dinh Textile and Garment Corporation is a unit directly producing and trading, using a lot of electricity. According to Mr. Nguyen Manh Hung, CEO of the enterprise, electricity prices currently account for 30-35% of the cost price. Therefore, the increase in electricity prices will naturally increase the cost of production. The object to suffer in the end is still the consumer. However, in order to ensure competitiveness, the enterprise also has to carefully calculate the use of electricity for maximum savings. Long-term plans, the enterprise also takes into account replacing old equipment because it consumes large amount of power.

Other representatives of agricultural and seafood exporters said that the electricity price increase will give businesses quite "headache". Although While production costs increase, but the price of products can not always can be increased. Electricity price increases can mean the profit of enterprises decrease. At this point, enterprises will calculate the agreement, negotiate gradually to increase the price but the negotiation is not simple and it takes a lot of time.

Eliminate monopoly

It is expected that not only this price increase, but from now until 2020, electricity prices will gradually be adjusted up. This means that the electricity price increases to businesses and people's lives will last longer. One of the reasons is that, EVN is still "hanging" a huge loss due to exchange rate differences over the years have not been allocated to electricity prices.

According to a report of the Ministry of Industry and Trade, in 2016, EVN reported a profit of 2,658 billion VND from its production and business activities, but electricity production still lost nearly 594 billion VND. Remarkably, at present, there are still more than 9.7 trillion VND unrealized exchange rate difference in electricity prices. Further explanation on this issue, Mr. Nguyen Anh Tuan said, on demand, losses are to be included in the tariff immediately, but the Government does not do so to avoid huge pressure on the market. The Ministry of Finance has allocated the above losses for each year and has a specific roadmap to include electricity prices. In the past, adjustment was only introduced into the price of electricity.

Mr. Vo Quang Lam added, according to the Prime Minister, from now to 2020 will gradually bring the exchange rate difference into the electricity price. "When the input parameters fluctuate, the average electricity price increases by 3% or more compared to the current price, and the electricity price can be adjusted up. The average price adjustment period is 6 months from the latest electricity price adjustment. Therefore, if the increase is faster, it will have to adjust prices in May, 2018, Mr. Lam said.

Some commentators have said that over the past two years, the power sector has to hold back price increases. Therefore, the power price adjustment is unavoidable. However, the key is to remove monopoly power in all stages of electricity activities, especially in power transmission, and gradually move to socialization to ensure optimal electricity prices.

With regard to this issue, as a member of the EVN Business Costs Audit Team in 2016, Mr. Nguyen Minh Duc, Legal Department (Vietnam Chamber of Commerce and Industry) added, the adjustment of electricity prices in the coming time should also try to be more transparent. "The annual cost of electricity production and business has been represented by the buyer of electricity is the Vietnam Association of Standards and Consumer Protection, however, at the stage of increasing electricity prices with no increase, there is no buyer participation only by EVN and the State. Options to raise electricity prices before publication are also classified as confidential documents. To make it more transparent, it is necessary to publicly calculate the price increase of electricity as well as supplement the participation of the buyer's representative in this stage", Mr. Duc emphasized.

Standing on behalf of consumers, Mr. Nguyen Manh Hung, Vice President and General Secretary of Vietnam Standards and Consumer Protection Association, said that he himself was surprised when the electricity price increased from the last 1st December. The rise in electricity prices is not only directly related to consumer spending, but electricity is also the input of the manufacturing industry, so consumers also have to accept more price increases. Therefore, in the time to come, in the adjustment of electricity prices, more careful preparation should be available for consumers to easily approach the price increase. At the same time, Mr. Hung expressed his sympathy with the view of enhancing transparency in raising electricity prices by letting the representatives of electricity buyers participate in contributing to the adjustment of prices.