Power tariffs to follow market mechanism

Workers regularly check the power transmission line in the central province of Phu Yen to ensure service and safety. VNA/VNS Photo Ngoc Ha

Hoang said that power supply has been better since 2011, with preventive capacity meeting 25-30 per cent of the country's total demand.

He noted that power price has to follow a market-based mechanism under the Government's supervision to ensure profits. Viet Nam will implement a price roadmap transparently to make investors feel safe about investing in the sector.

However, most businesses, especially FDI firms, expressed their concern about power shortage in the southern region.

A Viet Nam Business Forum (VBF)'s report revealed that FDI companies have not been worrying about increasing power prices as much as about unstable supply. The Government can increase the electricity tariff of enterprises that consume more power while ensuring adequate supply.

Responding to this situation, the minister remarked that it would require the Electricity of Viet Nam (EVN) to ensure capital for a proper power transmission system.

"We have asked the EVN to implement nine supplemental power projects to supply electricity to the southern region, following a forecast of power shortage in 2017-18," he added.

Economist Nguyen Minh Phong said a market mechanism can be implemented if there is free competition. It meant that all economic sectors, including private, State-owned, and FDI, will be allowed to compete to sell electricity to distributors.

However, the retail price of electricity faces no competition as it is decided by the Government.

Phong pointed out it is impossible to have a market-based retail price by 2016 as the sector has been enjoying a monopoly. The Government's role still accounts for 97 per cent of the total production and distribution, thus ensuring no competition.

He proposed to divide production and distribution to set the price of power under a market mechanism.

Sharing the ideas, Pham Quy Tho, a public policy specialist with the Ministry of Planning and Investment, said Viet Nam lacks enough conditions to implement a mechanism.

According to Tho, the country should have a preference power price to help guide producers to clarify production costs.