In the process of completing the plan to improve the price structure of electricity for households, in addition tothe division of five steps, the Ministry of Industry and Trade is calculating the option of one electricity price. Many experts say that if the two options are really applied in parallel, it is necessary to calculate carefully, and it needs a full legal corridor to ensure harmony of interests.

Option of one electricity price and option of a ladder electricity price are applied
in parallel, the Ministry of Industry and Trade needs to build a full legal corridor
to avoid obstacles. Photo: Nguyen Thanh 

One electricity price – low consumption will suffer a loss

About calculating the option of one electricity price, Deputy Minister of Industry and Trade Hoang Quoc Vuong said the price level of one price was considered, but it would certainly be higher than the current average electricity price of VND1,864,44 per kWh. The initial calculation showed thatpeople using a lot of electricity, over 400 kWh would choose the optionof one electricity price.Meanwhile, people using below 400 kWh, currently accounting for 70-80% of the totalcustomers, might choose the ladder electricity tariff because they would still benefit more.

"Any optionis okay and not okay, so we have to calculate overall affectedobjects in the society.With the current ladder electricity price policy, low-income people using less than 300 kWh are still more profitable," Ministry of Industry and Trade leaders assessed.“ 

Before setting out the additional calculation of one electricity price, the Ministry of Industry and Trade has proposed five options to improve the structure of daily-life electricity retailing price table of 1, 3, 4 and 5 levels (5-level plan with two scenarios).

In scenario one, the cost of electricity includes five levels (instead of the current six levels). In particular, electricity price level 1 (for 0 - 100 kWh) is kept the same as the price level 1 according to the current price table; new level 2 from 101 - 200 kWh; new level 3 from 201 to 400 kWh; new level 4 from 401 - 700 kWh; level 5 is from 701 kWh or more.

In scenario two, the average electricity daily life retail price is unchanged; consolidating levels 1 and 2 with unchanged electricity of level 1 to ensure unchanged support of the State budget for poor households and social policy households. The lack of revenue is compensated at level of over 700 kWh. The electricity price of level 3 (201 - 400 kWh) is consolidated the average price of level 4 (201 - 300 kWh) and level 5 (from 301 - 400 kWh) of the old electricity price.

According to the Ministry of Industry and Trade: Scenario one has a reasonable electricity price increase among levels, ensuring non-increasing or decreasing electricity costs for all households with electricity usage below 700 kWh (accounting for 98.2% of total households)when applying the new electricity tariff,so the impact when applying this scenario is smaller than the 5-level option, scenario two.

In addition, the difference between the last level and the first level is in line with the trend of countries around the world to encourage households with large electricity consumption use economically and efficiently.

The Ministry of Industry and Trade proposes to select the 5-level option and scenario one to apply.

In particular, when making one electricity price will increase the current price levels in the ladderprices being lower than the average price, and also reduce the price levels being higher than the average price. Therefore,about 18.6 million households (accounting for 73.5% of total households using electricity) consuming below 200 kWh per month(with electricity consumption accounting for 42.3% of total electricity consumption)will have to pay an additional electricity bill of 1.98-13% (from 7,400 VND - 19,000 VND per household once month, VAT-exclusive price)compared to the electricity price according to the ladder price.Mr. Nguyen Tien Thoa, Chairman of the Vietnam Valuation Association analyzed that economically, in the context of scarce resources, insufficient supplyapplying the one-price electricity option would be difficult to create strong pressure to implement policies to encourage electricity savings;at the same time,social security policiesfor poor households and policy households will not be implemented in accordance with the Electricity Law.

In contrast, the remaining 6.75 million households (accounting for 26.6% of total households using electricity, consuming 57.6% of total electricity output) using over 201 kWh per monthwill receive electricity reduction from 0.8 - 28.79% (from 56,500 VND - 767,200 VND in the range of 201-1,000 kWh per household per month).

Need full legal corridor

According to Mr. Nguyen Quoc Dung, Head of the Business Department, Electricity of Vietnam (EVN), statistics of EVN showed that the average level of electricity used by people was increasing. Specifically, in 2016, the average electricity consumption of domestic households was 156 kWh per month and now this figure was 189 kWh per month.

In favor of the plan to maintain the ladder electricity tariff, Mr. Dung explained that many developed countries in the world were applying this form because of the clear goal in saving electricity and paying lower prices for using less electricity.

Even in developed countries like the US, Japanstill maintained the ladder price policyto encourage people to save energy.

"The governing agencies will calculate to make a reasonable plan based on the average electricity price.Whatever the plan, the technical system of EVN will meet and support. EVN will comply the final decision of the competent authorities," Mr. Dung affirmed.

Also considering that the option of one electricity price was difficult to enact when the current electricity structure was lacking in Vietnam, Mr. Ha Dang Son, Director of the Center for Energy Research and Green Growth, said: "Output electricity pricesare calculated on the basis of the input price and the cost of operating and managing the system.The Government is controlling the output price to ensure social security and economic development goals. So, one electricity price will be difficult to help the industrydevelop sustainably and ensure social security targets.”

Assoc. Dr. Bui Xuan Hoi, Senior Lecturer in the Department of Energy Economics, Hanoi University of Technology, said that if the Government agreed twooptions in parallel: ladder price and one-price for people to choose, easily, households using less electricity would select the ladder electricity price option to enjoy the low price while households using a lot of electricity would select the one price option to avoid the electricity price increase of the ladder electricity price option.

However, which electricity consumption choosing the one-price option would be good for consumersdepended entirely on the price level.The higher the similar price level was, the greater the electricity consumption was and the choice of one price would be effective.

On the contrary, if offering two types of ladder tariffs and one price which both consumers using low electricity and using more electricity benefit, there will certainly be very big problems to the financial balance for EVN.Therefore, this expert thought that the principle of similar price was simple, but how muchand how to apply the mechanism was an issue that the Ministry of Industry and Trade should study carefully to harmonize the interests of consumers as well as financial balance for EVN.

"The Ministry of Industry and Trade must study to build a completely new price tariff, not based on the existing price list. Therefore, in addition to the proposed price, it must be accompanied by a legal corridor related to implementation, it needs a complete legal corridor to avoid obstacles in the implementation.The legal corridor determines the flexibility of consumers' choice, so the Ministry of Industry and Trade needs to propose a harmonious implementation scenario," Dr. Bui Xuan Hoi said.