Adjusting power prices to market fluctuations

In an effort to develop the country’s competitive electricity market, the Electricity of Viet Nam (EVN) is building a plan to adjust power prices to market fluctuations.

The new policy is expected to come into effect next year, Minister of the Industry and Trade Vu Huy Hoang said at a press meeting on October 7.

In most countries, public services are not run for profit whereas private enterprises are, but in Vietnam, public services are run as private enterprises and must earn a profit. Therefore, the debate is still going on in many nations over the detrimental effects of privatizing public services. Given this, EVN must follow market regulations which state that the selling prices of commodities must not only offset production costs but also earn producers a profit.

Minister Hoang claimed that the current price of electricity is lower than the cost of power generation and that the electricity sector is suffering. He added that, if prices are maintained at the current level, the country’s power sector will not have enough capital to develop its projects or encourage new investment in power production, which will lead to an increase in the already widespread shortages seen all over the nation.

The Ministry of Industry and Trade will co-operate with other ministries and sectors to consider the suitability of EVN’s plan based on the power sector’s financial situation and the potential impact of the adjustment on the consumer price index, said the Minister.

After EVN’s plan is completed, the ministry will take responsibility for analysing the proposal in the fourth quarter of the year and then submitting it to the Government for approval, Mr Hoang said, adding that the new price regime is expected to be applied by 2009. (VNS)