The Rising Cost of Electricity: A Strain on Household Budgets

Hearing the news of a 4.8% increase in electricity prices, effective from October 11, Tran Minh Dang, a resident of District 11 in Ho Chi Minh City, couldn’t help but feel dismayed as he estimated his family’s electricity bill could exceed 2.1 million VND per month.

The Pressure of Rising Costs

“My wife and I rent an apartment, and the landlord has installed old air conditioners and refrigerators that consume an enormous amount of electricity, resulting in high electricity costs comparable to those of a rented room,” Dang lamented.

Dang went on to explain that his apartment building has a bustling wet market and a residential area below. With many karaoke establishments operating throughout the day and night, creating a noisy environment, he rarely opens the windows to let in natural light and air. Instead, he relies on electricity and air conditioning around the clock, making it challenging to conserve energy.

Vo Van Duy, a student at the University of Transport’s Campus 3 in District 12, expressed concern about a potential increase in rent as a result of the rising electricity prices. “I share a room with two friends, and our landlord charges us 3,500 VND per kWh, amounting to approximately 150,000 VND per month. Some other boarding houses have already raised their electricity rates to 4,000-5,000 VND per kWh, and I worry that this trend might reach our lodging as well,” said Duy anxiously.

Sharing similar concerns about the additional expenses, Nguyen Ngoc Han, a resident of District 8, anticipated higher electricity bills during the hot season after Tet, adding to the financial burden on her family’s spending. “What worries me more is that, as Tet approaches, businesses and distributors will use the electricity price hike as a reason to increase the prices of their goods. During Tet, we often have to purchase many items, regardless of the cost, unlike our usual practice of saving money,” Han stated.

Business Owners Bite the Bullet

Hoang Ngoc Em, the owner of two pho restaurants in Binh Chanh District, estimated that the electricity price hike could cost her an additional 600,000-700,000 VND per month. According to Ngoc Em, the operating expenses for her two restaurants amount to approximately 70 million VND per month, with electricity costs alone reaching around 11 million VND. This month, with electricity prices surging by nearly 5%, the cost of herbs and spices has also nearly doubled, while customer footfall has decreased by 10-15% compared to the summer months, resulting in lower revenue and higher expenses.

“In my restaurants, we use electric stoves, and regardless of the number of customers, we have to cook for a certain amount of time. On weekends, when there are more customers, we might need to use two stoves, which further increases our electricity consumption. However, raising prices at this time would mean losing customers, so we have to endure and wait until Tet to make any adjustments,” Ngoc Em shared.

On a larger scale, the electricity price increase has impacted the operations of enterprises, directly affecting their profits, especially in industries that rely heavily on electricity, such as cement, iron and steel, and frozen seafood.

“Enterprises cannot afford to raise prices at this time without losing their market share, so we have to be very careful. For now, we have to accept lower profits and then look for other ways to reduce financial losses,” said the director of a processed food production company.

In the industrial production sector, Nguyen Van Khanh, Vice Chairman of the Ho Chi Minh City Leather and Footwear Association, expressed concern that the rise in electricity prices would increase the overall production costs for businesses, posing a significant challenge amid the industry’s existing difficulties. He added that orders have already been negotiated and are in the process of fulfillment, leaving no room for price adjustments.

Some businesses, worried about potential future price hikes as EVN continues to report losses and implements periodic electricity price adjustments every three months, are considering investing in rooftop solar panels to reduce long-term costs while also enhancing their “green” credentials.

According to Dr. Nguyen Bich Lam, former General Director of the General Statistics Office, a 10% increase in electricity prices would result in a 0.33% increase in the consumer price index for the entire economy. Therefore, the electricity price hike is not expected to significantly impact inflation this year. However, Dr. Lam noted that higher electricity prices would increase production costs for businesses, reducing their profits and increasing household consumption expenses. “Businesses are forced to adapt and find ways to reduce costs and restructure their production without raising product prices, as that would hinder their competitiveness,” he asserted.