VietNamNet Bridge – Seriously lacking electricity, Vietnam has to purchase electricity from China.
However, the partner, who will provide 4.6 billion KWH of electricity to Vietnam
this year is attempting to raise the sale prices.

Chinese electricity price will soar by 15 percent?

A source from the Northern Power Company told VietNamNet that the
negotiations on purchasing electricity from China stalled because of the disagreement
on the price. Until now, March 2011, the contract on purchasing electricity
from China
has not been signed because the two sides still have not reached an agreement
on the price.

Earlier this year, the company received a notice from the Chinese partner
that it will raise the electricity price from 5.1 cent in 2010 to 6-7 cent per
kwh. The proposed new sale price is even higher than the average retail price
in 2011 in Vietnam.

The source also said that though it is still unclear about how high the
new electricity price would be, the two sides have agreed that the new price
would be applied as of January 2011.

However, the Electricity of Vietnam EVN has not accepted the proposed
new sale price. The price increase will heavily burden the economic group,
which is incurring heavy losses because it has to sell electricity at prices
lower than the production costs.

The heavy losses will be increasing if EVN purchases 4.6 billion kWH of
electricity from China
as previous planned (or four percent of the total electricity supply) at the
new prices. In the first two months of 2011 EVN bought 956 million KWH from China,
an increase of 28.89 percent in comparison with the same period of the last
year. In February alone EVN purchased 418 million KWH, an increase of 33.36
percent in comparison with February 2010.

In 2008, China sold
electricity to Vietnam
at 4.5 cent per KWH, while the price increased to 5.1 cent per KWH in 2010.

The news that China
is attempting to raise the electricity price is bad news for Vietnam, especially when Vietnam plans to import electricity from China
not only for one or two years, but for a long term.

Vietnam should rely
on Chinese supply?

In the last 3-4 years, Chinese supply has been considered a stable supply
source for Vietnam.
In 2005, Vietnam only
imported 200 million KWH from China
and the imported electricity was only provided to two mountainous provinces Ha
Giang and Yen Bai. Meanwhile, the volume of electricity purchased from China
increased by 13 times in 2007.

Since 2008, the electricity from China has always been accounting
for four percent of the total consumption. This is the main source of
electricity supply to 12 northern provinces,
including Thai Nguyen, Cao Bang, Bac
Kan, Phu Tho, Vinh Phuc, Son La,
Dien Bien, Lao Cai, Lai Chau, Yen Bai, Ha Giang and Tuyen Quang.

Experts say that Chinese electricity sellers strictly supervise the
implementation of contracts. If Vietnam
purchases less or more than the contracted volumes, it will be imposed a fine.

In the 2010 dry season, when Vietnam was seriously lacking
electricity because hydropower plants did not have enough water to generate
electricity, the Yun Nan Power company halted the electricity supply for 20
days due to technical problems.

EVN has many times mentioned the possibility of increasing of
electricity volume it will purchase from China.  This has raised worries among the public that China
will make the corrupt use of the contracts to raise the electricity price
continuously.

It is clear that four percent of the total supply is not an overwhelming
proportion and that the proportion will not be able to control the market.
However, since electricity is a kind of special commodity, if problems occur
with just one percent, the security of the national energy supply will be
affected.

Pham Huyen