VietNamNet Bridge – An input cost increase of 2% over the current average retail price of electricity is a sufficient condition for Vietnam Electricity Group (EVN) to propose a new round of power price hikes, says a draft decision of the Ministry of Industry and Trade.
The draft decision about the mechanism for retail power price management and adjustment currently put up for comment suggests that the management agencies are seeking to ease the condition for power price increase.
Since April 2011, retail power prices have been governed by the Government’s Decision 24. The decision allows EVN to raise power prices if input costs, including production-business costs and exchange rate, pick up 5% against the current average retail power price upon approval from the trade ministry.
The new decision currently in its draft form will replace Decision 24. If input costs rise 2-5% over the current average power price, EVN is allowed to adjust prices, says the draft decision.
Other provisions in the draft decision are almost unchanged from the old decision.
If input costs surged more than 5% or the average adjusted retail power price stayed outside the price frame, EVN would have to ask the Government and relevant ministries for approval of price increases. If there was no reply after 15 days of receipt of its proposal, EVN could automatically raise prices.
The draft decision retains the minimum interval of three months between two bouts of price revisions.
Besides, if input costs went down by 5%, EVN would have to reduce prices accordingly.
However, in recent years, no power price cuts have been made.
The average retail price of each kWh of electricity in 2012 was VND1,361, or some 6.53 U.S. cents. With 10% value added tax on each electricity bill, consumers had to pay around 7.48 U.S. cents for every kWh last year, says a report of EVN.
The average power price in 2013 is estimated at VND1,459, or seven U.S. cents per kWh. Including tax, the price is 7.92 cents per kWh, applicable from December 20, 2012.
With the new regulation to be introduced soon, there may be many power price adjustments in the coming time.
In addition to power price hikes, power shortages in the dry season may be another headache in 2013. In February, EVN published a statement about limited power supply during this year’s dry season.
Therefore, the electricity group intends to produce some 1.1 billion kWh of power from fuel oil and diesel oil at a higher cost than coal and gas. The group will also import about 3.6 billion kWh from China.
Source: SGT