New electricity prices introduced

The Ministry of Industry and Trade (MoIT) has announced new prices for electricity which it says will have a minimal impact on people’s daily life or the economy.

At a press briefing in Hanoi on February 26, MoIT Deputy Minister Do Huu Hao said electricity prices will increase by 6.8 percent on average as of March 1.

Mr Hao described the new price level as appropriate given the fact that the national economy has just reversed the downturn and is on track to recovery.

The MoIT and the Ministry of Finance (MoF) have calculated that the new prices will not have a big impact on people’s daily life or on business operations, said Mr Hao.

The price for the first 50kWhs will remain unchanged, protecting low-income consumers and State employees. Consumers will pay an additional VND7,000-36,500 per month if they use between 100 and 400kWhs.

Production sectors will see an average increase of 6.3 percent, equivalent to 0.36 percent of their total production value.

Essential commodities such as food, garments, petrol and oil will only increase slightly in price as the cost of electricity needed for production of these products is still acceptable.

Mr Hao said the MoIT and the MoF will keep a close watch on market fluctuations and take appropriate measures to prevent opportunists from cornering the market.

He said the new electricity price level is expected to lower the GDP growth rate this year by 0.34 percent and cause the consumer price index (CPI) to increase by 0.2-0.27 percent.

He also noted that the increase will give the power sector additional capital for its new projects.

As a result, return on equity (ROE) for the Electricity of Vietnam (EVN) Group will be likely at 2.85 percent in 2010 – a very low level compared to that of other State economic sectors such as coal and oil. This means the power sector will still find it difficult to pay off debts to financial institutions.

With the adjustment, Vietnam’s average electricity price is approximately 5.54 cents/kWh, which is a bit higher than Laos (5.4 cents), but much lower than that of other ASEAN countries such as Brunei (6.2 cents), Indonesia (6.77 cents), Thailand (8.5 cents), the Philippines (17.5 cents) and Cambodia (17.68 cents).

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