Power price bids to spark competition

EVN announced last week it would replace the current purchase mechanism that is based on an price agreed between EVN and power supply and production companies.
From the end of this year, EVN will ask power companies to make bids on the price of electricity at the end of each year.
The company will then consider the bids based on national power demand and supply before contracting with power generators.
Dinh Quang Tri, EVN’s deputy general director, said the power companies that offer the lowest prices “will be prioritised for the agreements to be reached”.
“This is considered the first step in the move toward a competitive electricity market,” he said.
Tri said the Ministry of Industry and EVN were embarking upon a plan to develop a competitive market for electricity, which would soon be submitted to the government for approval.
EVN last week forwarded the announcement on the competitive price offer mechanism to electricity supply and production companies such as Hiep Phuoc, Vedan and PetroVietnam.
In the document EVN reassured suppliers that non-EVN companies would be placed on an equal footing with EVN generators in their entitlement to bid for supply contracts to the national power grid.
He said the new pricing methods would help electricity generators calculate the optimal operating method of their power plants, as well as satisfy the competitive needs of a market economy.
Electricity supply and production companies contacted by Vietnam Investment Review last week applauded the EVN move.
One company director, who did not want to be named, said the new mechanism “would create a competitive market for electricity companies and pave the way for creating a competitive electricity market in the time to come”.
The pricing changes come as a backdrop to news the power sector will require between $1.8 and $2 billion annually in capital investment to meet the predicted growth in demand for electricity by 2010.
HE final draft of Vietnam’s first law on electricity has been submitted to the government for consideration.
If it gains the prime minister’s approval the law will be put before the National Assembly next year to come into force in 2005. Key points in the 12 chapter law include principles for a legal foundation for restructuring the state power monopoly, introducing competition to the power sector and reforming tariffs.
It will also allow large consumers directly connected to the national grid to purchase their own power in the long run. In addition, it establishes a legal basis for the split of the existing tariff into separate generation, transmission, distribution and retail tariffs.
Vietnam Electrical Engineering Association vice president and member of the law working group, Tran Dinh Long said, if approved, the law would benefit both businesses and consumers.
The draft law submitted to the government last week, was the 20th draft of the law, which was first designed seven years ago.