Vietnam - EVN’s monopoly main reason for high power prices: experts

The monopoly currently held by the Electricity Group of Vietnam (EVN) in the country’s power sector should be completely broken to free consumers from high prices and create a healthier power price management system, a conference heard Wednesday.

“There is a loophole in directive no 24, which allows EVN to hike power prices by a maximum 5 percent” said Vu Xuan Thuyen, a senior expert from the Ministry of Planning and Investment at the conference on power price management in accordance with market forces held by the Institute of Finance.

This means the power selling price can be as high as 10 cents a kWh, while EVN has only paid power generating plants 2 – 4 cents a kWh, added Thuyen.

He said EVN has monopolized the market by buying power at lower prices and selling at far higher rates.

“Inspections should be conducted into the buying prices EVN has made with other power suppliers,” urged Thuyen.

Thuyen continued, revealing that in 2006 EVN reaped VND18 trillion (US$864 million) in revenue by announcing a price increase.

But the entire sum has been sunk in non-core investments, he said.

“If power production grows by 20 percent a year, power prices can be cut by 2 percent,” said Pham Minh Thuy, an official from the Institute of Finance and Economics under the Ministry of Finance, citing figures from a recent study.

Thuy added that many power generators have faced difficulties in negotiating selling prices with EVN.

In response, Dang Huy Cuong, head of the Electricity Regulatory Agency under the Ministry of Industry and Trade, said the current power price is only 6.5 cent a kWh, not 10 cents, as claimed by Thuyen of the Ministry of Planning and Investment.

“It is said that hydropower has a low price, while it has in fact amounted to 4.5 cent a kWh,” said Cuong.

Regarding the troubled negotiations power generators reportedly encountered in dealing with EVN, Cuong said EVN has to demand a purchase price that will not cause it to lose money.

Meanwhile, Doctor Nguyen Thi Dieu Hien, former member of the government’s researcher board, said the power sector still provides large subsidies to the steel and cement manufacturing industries.

“While poor households only receive a monthly subsidy worth VND30,000, the figures granted to the two industries are as much as VND2.5 trillion,” she elaborated.

For his part, Cuong said that if power prices sold to the cement and steel sectors are hiked, the prices of the two commodities will also soar.

“A solution for this is to ban steel exports, or calculate a particular price scheme for steel and cement,” he said.

In need: an independent institution

Thuyen said that while power price increases are inevitable, what should be done is to create a transparent and competitive power market.

“At present, EVN has its hands in all three sectors of the market -- generating, transmitting, and distributing,” said Thuyen.

“Some parts of EVN, such as the Power Selling and Purchasing Co, and the National Load Dispatch Centre, should be detached to be an independent body from EVN.”

As for a competitive power market, Thuyen said it is completely feasible, and can be done immediately.

For instance, the power distribution task should be assigned to non-EVN companies, which will have to win tenders to distribute power directly to households at competitive prices, he said.

Meanwhile Thuy, of the Institute of Finance and Economics, demanded that any power price hikes be approved by the Ministry of Finance, rather than the Ministry of Industry and Trade, which is EVN’s watchdog body.

“Moreover, the Electricity Regulatory Agency should also be separated from EVN,” he added.

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