The two-component power tariff mechanism is expected to enhance equity by accurately apportioning costs associated with line maintenance, transformer stations, and electricity consumption to each customer

This mechanism has been suggested by many experts as a strategy for Vietnam to expedite its adoption. The topic was discussed at a recent workshop focused on the shared responsibility for peak electricity supply in the dry season of 2024.

EVN is currently presenting the two-component power price mechanism to the Ministry of Industry and Trade, with the aim of initiating a pilot application early this year and commencing widespread implementation in 2025 and subsequent years.

Mr. Nguyen Tien Thoa, Chairman of the Vietnam Valuation Association, explained that the two-component electricity tariff, which has been adopted by many countries primarily for corporate customers and in some places for household electricity, includes an electricity price based on both electric capacity and power. Currently, a one-component electricity tariff based on electric power is being applied. The capacity-based power price is determined to be paid to the electricity supplier.

Mr. Thoa clarified that the electricity tariff based on electric power is determined to be paid to the electricity supplier. The key difference lies in the fact that the single-component power tariff based on electric power primarily compensates for variable costs of raw materials, while the two-component power price also accounts for fixed costs, depreciation costs, repair costs, salary costs and other expenses.

He emphasized that the one-component power tariff does not fully reflect all impacts on electricity production, whereas the two-component tariff comprehensively includes both investment costs and operating costs.

EVN is currently conducting research on a two-component electricity tariff. A pilot study has been proposed to assess the impacts of this tariff and to highlight the differences between this and other options.

According to Mr. Nguyen Tien Thoa, this research will provide consumers with the opportunity to evaluate and compare the two options in terms of price differences in electricity usage. He believed that a period of evaluation, summarization, and widespread replication is necessary if the pilot proves to be effective.

Mr. Nguyen Minh Duc, from the Legal Department under the Vietnam Chamber of Commerce and Industry (VCCI), said that the two-component power tariff mechanism will be more equitable as it accurately reflects the cost used to serve each customer, including line cost, transformer stations and electricity cost.

Duc provided an example of two customers: a restaurant and a factory. The factory operates continuously, maintaining stable power consumption, while the restaurant only uses high amounts of electricity during lunch and dinner hours. He analyzed that if the electricity volume used by both entities is equal, the maximum capacity of the restaurant is larger, necessitating larger capacity lines and transformer stations, and thus higher costs.

Duc stated that the two-component power tariff will reduce cross-compensation among customers, a matter of concern. This tariff is not a new proposal; in 2013, the Government requested its application and assigned the Ministry of Industry and Trade to prepare an application roadmap for the Prime Minister’s approval.

Looking ahead, if the new scheme is accepted, it should initially be applied to corporate electricity customers. Duc emphasized the necessity of piloting the mechanism on new customers in some locations over a period of time to gather their feedback.