Vietnam’s power sector has asked the Government to approve an increase in average electricity prices from 5.5 US cents per kilowatt hour (kWh) to 8 cents. Energy Association Chairman Tran Viet Ngai explained why such a big increase is necessary to the HCM City newspaper, Tuoi Tre.
“We’ve proposed that the electricity price be raised to eight cents per kWh,” Ngai said, “about 1500 dong, an average increase of about 400 dong. It’s not so high. We need to recognize that for over a decade, not a single foreign company has been willing to invest in Vietnam’s energy sector, because our present electricity tariffs are too low to make an investment profitable.
“Vietnamese industrial groups like Electricity of Vietnam, PetroVietnam, the mining group Vinacomin and the engineering and construction group Song Da are earning very little on their investments in the power sector. That’s why they don’t have the capital to push such projects. If we don’t raise the price consumers pay for electricity, we’ll still have serious power shortages decades in the future.
“Not having enough electricity will hurt our national economy much worse than increasing the price of power by a few hundred dong to ensure that we’ll be able to finance the additions to supply that we must have. We’ve surveyed foreign companies, and they’ve confirmed that if they can sell electricity for eight cents per kilowatt hour, they’ll invest in Vietnam’s power sector.
“Our own industrial groups agree that they too can mobilize capital for new power plants if the electricity price is seven or eight cents per kilowatt hour. At that price, they can expect to earn four or five percent per year on capital invested in such projects.”
Tuoi Tre: The industry’s proposal for a 400 dong/kWh increase has shocked the public, even people who are well off. Why not take a more gradual approach?
Vietnam Energy Association Chairman Tran Viet Ngai: An increase of a couple of hundred dong won’t solve anything. The country can’t afford to continue what are, in fact, subsidized power prices. I want to emphasize that though we’ve proposed to raise the basic price to eight cents per kWh, poor people will still get a minimum level of electricity at a low cost. Overall, however, we must shake up the management environment so that the energy sector – that is, electricity, coal and oil and gas – don’t take losses on power generation.
Going to eight cents isn’t such a big leap. If it were ten cents or more per kWh, that would be a leap. Think of it this way – a small glass of chè xanh (a popular snack) is about 2000 dong, so is it so much to ask people to pay 1500 dong for a kilowatt hour of electricity?
Tuoi Tre: Many are saying that your proposal just serves the interests of big business and not the people’s interest.
Tran Viet Ngai: That’s not true. We’re addressing this problem from the standpoint of the people, the Party and the Government. We all need to figure out a way for the energy sector to do its job. I don’t know who’ll gain and who’ll lose. I do know that so far, of the thirteen power projects in the sixth five year plan, that are supposed to add 13,800 megawatts of capacity to our system by 2015, only two have broken ground.
Electric power companies lost more than three trillion dong during the recent dry season. Who wants to take losses like that? As for consumers, losing power for an hour can mean business losses of billions of dong, cause big problems to our society and make people miserable. So we have put forward our recommendations; whether they are accepted or not is up to the State.
Tuoi Tre: If you get the price increase, are you sure the power outages will end?
Ngai: Not immediately, of course, but if our recommendations are accepted, the power sector will have to promise the Party, the Government and the people that we will have the capital, we will lose no time, and certainly with a big rise in investments in power supply, we can end power shortages. If the price of electricity is raised to eight cents/kWh, I’m sure that hundreds of foreign investors will jump in. We’ll be able to think about developing solar and wind power – that will be the subject of further proposals.
Tuoi Tre: Has the power association calculated the impact of the proposed power price increase on society?
Ngai: Yes, we suggested two prices, not one. We agree that poor people and people who live in remote areas should get help from the State, that is, should get their first 50 kWh at a subsidized price, and if they use more than that, only pay 1000 dong per kWh.
As for families that are better off, I doubt they’ll sense a big difference if the electricity price is increased by 400 dong/kWh. What’s more important to them is that the quality of service is good and reliable. We estimate that the average family’s electricity bill will only go up by 16,000 dong per month. Power cost increases for business users will be insignificant.
Further, there’s a lot of electricity being wasted. The more it costs, the more it will be conserved.
PV
