Optimizing Electricity Pricing: A 2-Year Deficit of 47.5 Trillion Dong

On the morning of August 20, the Government Portal held a seminar on “What breakthrough to attract investment in the electricity industry” with the participation of state management leaders, economic, financial, and energy experts.

At the seminar, Mr. Nguyen Tien Hoa – former Director of the Price Management Department, Ministry of Finance – said that everyone likes cheap electricity, but if it is too cheap and the manufacturing industry suffers losses and has no goods to buy, it will cause many negative consequences. Therefore, it is important to have reasonable pricing and a stable supply.

According to Mr. Hoa, the current electricity prices have many shortcomings, are not calculated accurately, and do not fully match the market mechanism. As a result, electricity production and trading face numerous challenges. The latest data from 2022-2023 shows that the way prices have been managed has caused losses of about VND 47,500 billion for the electricity industry. “This is a significant challenge for the electricity industry to improve cash flow for investment and development of sources and grids,” said Mr. Hoa.

Associate Professor Dr. Bui Xuan Hoi – Energy Economics expert – cited the actual cost of providing electricity to islands, with a supply cost of 7,000-8,000 VND/kWh, but the selling price remains uniform nationwide at around 2,200 VND/kWh. Therefore, Mr. Hoi believes that the key issue is price management, and it is necessary to separate public welfare activities from market activities to have a price adjustment mechanism.

Stating that “not having an iPhone won’t kill you, but not having electricity will”, Mr. Hoi warned that if EVN incurs too much loss and loses its payment capacity, other businesses participating in selling electricity to EVN will surely be affected, creating a domino effect, making it difficult to attract investment in the electricity industry. “We see that the Power Development Plan VIII is very massive and ambitious, but if we continue to manage prices as we do now, I think the implementation of the Power Development Plan VIII is very far-fetched, at least very difficult,” said Mr. Hoi.

Regarding solutions, Mr. Nguyen Tien Hoa said that electricity prices must be calculated accurately and fully in accordance with market principles, but especially transparency is crucial. All barriers must be removed. “Of course, it’s not a free market, and the state must regulate it. There will still be state monopolies, and private entities cannot participate 100%,” said Mr. Hoa.

Mr. Phan Duc Hieu – a member of the National Assembly’s Economic Committee – said that to promote market dynamics, it is necessary to increase competition in all activities and aspects of the power industry.

To reduce electricity costs, Mr. Hieu suggested reforming investment procedures for power projects, as well as procedures for participating in wholesale and retail electricity sales. Secondly, it is necessary to review the policy of supporting electricity prices for certain entities. This, according to Mr. Hieu, must be done immediately, but on the principle of separating support from business activities.

Finally, Mr. Hieu proposed promoting competitive electricity sales and encouraging the participation of multiple entities. “In this way, along with the system, we must find ways to get the best electricity prices with the best direction and the most cost-effective approach,” said Mr. Hieu.