MOF proposes two options for electricity price increases

The Ministry of Finance (MOF) has suggested two options for electricity price increases, either by 10.7 percent or 6.8 percent, much higher than the 4.9 percent increase suggested by the Ministry of Industry and Trade (MOIT).

According to the director of the Price Control Agency Nguyen Tien Thoa, his agency has submitted a report suggesting they raise electricity prices by either 10.7 percent or 6.9 percent from the 2009’s average price. The suggestion has been made after the agency considered the Prime Minister’s instruction on the policy on price of coal, the raw material for electricity production.

A document released by the Government Office on August 1, 2009 stipulated that the coal price to be applied to electricity producers will be the market price in 2010.

With Option 1, the electricity price increases by 10.7 percent from 970.9 dong per kwh in 2009, according to MOF, this will make the consumer price index (CPI) increase by 0.36 percent. Meanwhile, prices of some products and services are expected to increase by between 0.14 and 3.5 percent.

In this case, households are expected to have to spend 5,000-10,000 dong for their power bills every month. Families who use less than 50kwh a month, will have to spend 5,000 dong more only a month.

In Option 2, MOF suggests raising electricity prices by 6.8 percent from the average level of 2009. In this case, the CPI is expected to increase by 0.23 percent, while prices of some products and services are expected to increase by 0.09-2.28 percent.  Households will have to spend 5,000-8,600 dong a month for electricity use.

Prior to that, MOIT suggested three options for electricity price increases with increases of 10.7 percent, 5.62 percent and 4.91 percent. The ministry thinks that the 4.91 percent increase should be chosen because it is the safest solution. MOIT said that the low price increase will not create a big impact on the society and the national economy. This will help businesses gradually recover from difficulties in a post-crisis period and avoid shocks to consumers.

Meanwhile, MOF argue that with low price increases, it will take a long time to implement the Government’s instructions on implementing a market price mechanism for coal.  Currently, the coal price at which the Vietnam Coal and Mineral Industries Group is selling to power plants is lower than the market price.

MOF also emphasizes that maintaining low coal prices will continue to distort the market. This will be especially true if coal producers have to sell products at prices lower than the production cost.

The ministry said profits of electricity producers must not be built on a loss of coal producers.

The solutions on electricity price increases suggested by MOF are discussed at the Government’s meeting today February 4.

VietNamNet/VNE

Tags: Vietnam elecyticity price, Vietnam energy