The Ministry of Industry and Trade (MOIT) announced that electricity prices in Vietnam could remain unchanged or rise by only 2–5% this year if nearly VND 45 trillion (approx. USD 1.8 billion) in accumulated losses of Vietnam Electricity (EVN) are factored into tariff calculations.
Proposal to Amend Decree 72
Last month, the MOIT proposed amendments to Decree 72, which would allow EVN to include unrecouped costs of electricity production and supply from 2022 onwards into retail electricity prices. These costs correspond to EVN’s accumulated losses of around VND 44.8 trillion by the end of 2023.
In the third draft submitted to the Ministry of Justice, MOIT presented two options for addressing these costs:
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Option 1: EVN may allocate unrecouped costs of power generation and supply into the average retail tariff from 2022 onwards, after deducting profits from other activities. This mechanism could be applied in subsequent years if similar costs arise. While this creates flexibility in pricing, it may reduce incentives for cost savings and efficiency within EVN.
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Option 2: EVN may only recover unrecouped costs from 2022 up until the decree takes effect, with no carryover to future years. This would require stricter cost management and operational efficiency to avoid recurring deficits.
Favorable Conditions in 2024
According to MOIT, favorable hydrological conditions in the first seven months of this year have improved EVN’s business performance. As a result, if EVN is allowed to include its losses in tariff calculations, average electricity prices by year-end would remain unchanged or increase slightly by 2–5%.
For example, if electricity tariffs rise by 3% starting in October, Vietnam’s annual Consumer Price Index (CPI) would increase by only 0.03 percentage points.
Gradual Adjustment to Ensure Stability
The Ministry emphasized that any adjustment to electricity prices would be made gradually, avoiding sudden shocks, in order to maintain macroeconomic stability and balance the interests of both enterprises and citizens.
Nhân viên điện lực kiểm tra thiết bị. Ảnh: Ngọc Thạch
In fact, according to the 2023 electricity production cost audit report conducted by the Ministry of Industry and Trade (MOIT), EVN’s total production costs reached over VND 528.6 trillion. This was equivalent to a production cost of VND 2,088.9 per kWh, up 2.79% compared to 2022. Revenues from asset liquidation, sale of recovered materials, and rental of power poles by EVN and its subsidiaries were deducted from this figure.
Also in 2023, retail electricity tariffs were adjusted twice (by 3% in May and 4.5% in November). Following these adjustments, the average retail electricity price rose to VND 1,920.3 and later VND 2,006.79 per kWh (excluding VAT). This means that even after the price hikes, EVN still incurred losses of VND 82.1–168.6 per kWh sold.
“The accumulated losses have reduced the State’s capital investment in EVN, failing to preserve this capital,” EVN’s report stated. Therefore, the group argued that these losses should be recovered through electricity prices. This would promptly offset the decline in State investment capital in recent years, and provide EVN with resources to invest in major projects such as the Ninh Thuan Nuclear Power Plant, the Quang Trach power complex, offshore wind projects, and other power sources to ensure supply in the coming period.
The mechanism for adjusting the average retail electricity tariff is regulated under Decree 72. According to MOIT, EVN has calculated and proposed adjustments to the average tariff in line with this regulation, enabling more timely and flexible adjustments than in the past.
However, regulators admitted that this mechanism must be reviewed and revised under the 2024 Electricity Law to ensure that all reasonable and valid costs are fully accounted for in determining and adjusting retail electricity prices, thereby safeguarding and expanding the enterprise’s investment capital.
Currently, the average retail electricity tariff stands at VND 2,204.07 per kWh (excluding VAT), following the 4.8% increase on May 10.
Source: Phuong Dung – VnExpress.net
