VietNamNet Bridge – The government has decided that from June 1, 2011, the electricity pricing mechanism will go in accordance with the market rules. However, analysts have raised their doubts about the operation of an electricity competitive market.

A competitive market must have different prices

An expert has pointed out that though Vietnam will apply a market-based power pricing mechanism from June 1, 2011, it still will not have a competitive market, because a competitive market must be the market where there are many sellers and many buyers. Although, in Vietnam there is only one seller – the Electricity of Vietnam.

He said that if a market-based pricing mechanism is applied, there must be different electricity prices for different times of the day. The principle has been applied for a long time in many countries in the world. Meanwhile, in Vietnam, EVN still cannot calculate the power generation costs separately for peak hours, non-rush hours, daytime or at night.

Besides, when such a mechanism is applied, EVN needs to calculate the production costs of hydropower and thermo power. For example, if in the dry season, power plants need more oil to generate power, the electricity price should be priced at higher levels.

“Under the mechanism, the electricity price only increases considerably in summer, while in the rainy season, EVN should think about slashing electricity sale prices,” the expert said.

“Power generation units need to think of cutting down expenses and minimizing losses before raising sale prices,” he added.

Tran Huu Nam, General Director of the Hai Phong Thermopower Company, said “that there would be many problems to deal with when applying the market-based electricity pricing mechanism.” According to Nam, “it is easy to calculate the prices of input materials, but it would be difficult to calculate the prices in accordance with power plant,s capacity, because different power plants use different technologies.”

One should not expect electricity price decreases

Dr Nguyen Manh Hien, former Head of the Energy Institute, said that a competitive power market still has not existed in Vietnam, because there is only one seller. A competitive market needs to have a 20 percent provisional power supply, while in Vietnam, the electricity output is still cannot satisfy the demand.

Another analyst also said that Vietnam proves to be too hasty when deciding to apply a market based pricing mechanism before a real competitive market forms up in the country.

According to Hien, a big problem existing now is that the National Power Transmission Corporation, the National Power System Regulatory Center and the Power Trade Company all belong to EVN. This has led to the overly high number of workers in the power sector.

Hien said that in other countries, only two or 2.5 workers are counted on for every megawatt of installation capacity, while the figure is 4.5-6 workers in Vietnam. “This is the problem that needs reconsideration. It is necessary to audit the expenses on power production at EVN,” he suggested.

According to Vu Dinh Anh, a well known economist in Vietnam; it is necessary to set up a power stabilization fund, which has the similar operation mechanism like the petroleum price stabilization fund. If such a fund is established, EVN will come forward and proposes the power price increases or decreases, while the Ministries of Finance, and Industry and Trade will act as the supervision bodies which make decisions on the electricity price adjustments, if the prices are raised or lowered by more than five percent.

Source: Tien phong