Vietnam’s price of per kWh of electricity too cheap, official says

Vietnam Electricity Authority’s chief Pham Manh Thang confirmed that the 2011 electricity price increase plan was based on fluctuations of input material prices. The increase will be calculated on inflation and kinds of electricity users.

VnExpress quoted the chief as saying that electricity prices would be adjusted annually according to the government’s Decision 21, thus it should have been increased just in the start of this year but the government considered a suitable time and increase level to create least impacts to people’s production particularly and socio-economic issues generally.

Ministry of Trade and Industry is the agency in charge of submitting planning with the least affects and the planning will be reviewed by Ministry of Finance. Basing on approvals of ministries, Prime Minister will offer a final decision. Time of increasing power prices will be respect to the government’s decision, he added.

Gas and coal prices will be increased in line with market but the increasing roadmap has not been available. Defining coal and gas prices belongs to the authority of finance ministry, both kinds of commodities are input materials of electricity production industry. If input costs surge, the power industry will “die” without further price hikes.

Questioned if electricity price is raised by 18% against the current level, he said he did not have authority to announce a particular increase, but adding that all plans were calculated and considered in comparison with affects to inflation as well as users.

Vietnam’s electricity price in 2010 was 1,058-1,060 dong per kWh. According to the early year’s forex rate, each kWh was priced at 5.3 cent (US dollar). But basing on Feb 11 forex rate, the current electricity price is only over 4 cent per kWh. Therefore, since the beginning of 2010, Vietnam’s power price has been the lowest in the southeastern Asia region. Laos’ electricity price stands at 5.8 cent per kWh, he compared. We (Vietnam) has to run electricity by oil, gas, coal with expensive costs, which clearly is unreasonable and this does not reflect output matter. The government is planning a roadmap to help electricity prices show input costs.

However, low or high power prices are respect to generating source structure, energy as well as cost structure of each country. He gave an example that Vietnam’s power price is 1,100 dong per kWh but a cup of tea costs 2,000 dong. To produce one kWh of electricity, Hoa Binh hydropower plant costs 5 cubic meters of water and Thac Ba at 10 cubic meters. Each kWh of electricity can be used to run an air-conditioner in one hour. Thus, we can see how low electricity price is in Vietnam, he explained.

He made sure that if the price was raised, consumers will use electricity more economically.

Hoang Quoc Vuong, Vice Minister of Trade and Industry said the government’s standing committee would meet and make the final decision on electricity price increase plan for 2011 on late Feb 17. The ministry will officially announce the decisions in next week.

Previously, the ministry had proposed three plans with the increases such as 26.3%, 18.03% and 30.3%. And the second plan is the most feasible.

Tags: Vietnam electricity, Vietnam electricity market, Vietnam energy