Power price rise sparks debate

Minister of Industry Hoang Trung Hai said that the average new electricity price would be VND852 ($0.053) per kWh, an 8.8 per cent increase on the current price.
Hai said that the increases would come into effect in early June if approved by Prime Minister Phan Van Khai.
“The increase is expected to be applied to households but not to enterprises which are using electricity for business and production activities,” Vice Minister of Industry Bui Xuan Khu said.
The Ministry of Industry (MoI) said that the increase had received strong support from the public and enterprises, and would bring long-term advantages for the economy.
A survey of some 2,000 citizens and businesses conducted by a joint committee of the Government Office, Ministry of Industry (MoI), Ministry of Finance (MoF), Ministry of Planning and Investment (MPI) and Electricity of Vietnam (EVN) released last week indicated that 57 per cent of respondents would accept the increase while 41 per cent were against it.
Khu said that the 8.8-per-cent increase would not unduly burden households or enterprises and that it should be considered in light of the benefits it would ultimately bring in terms of the nation’s integration into the world economy. The new rates, if approved, would still be 6 per cent lower than EVN’s proposed price of VND898 ($0.056) per kWh, which the committee said would slow the economy given that per capita income is just $640 in Vietnam.
“The increase in electricity prices, coming after four years of talks, will no longer discourage foreign investment in the electricity industry and may settle the problem of capital shortages for the development of electricity plants,” EVN general director Dao Van Hung said.
EVN recently reported that the cost of generating electricity had increased by 20.4 per cent due to fluctuations in oil, gas and coal prices between 2002 and 2005, and that its net profits had dropped to less than VND1 trillion ($65 million) as a result. The company’s low returns have resulted in several commercial banks denying loans to EVN for fear it would default.
Dao Van Hung said that after four years of waiting, investors had doubts about profits in a climate of artificially low prices.
“Presently, there are only two foreign-invested power plants, Phu My 2-2 and Phu My 3, while the country is facing a possible shortage of electricity over the next few years,” he said.
Analysts estimate that EVN will need $5bn per year in the period to 2025 if it is to develop enough plants to meet the energy requirements of the nation’s growing economy. The MoI has said that electricity rates will go up again in 2008, rising 4.5 per cent to VND890 ($0.056) per kWh, with a further increase planned for 2010.
The EVN director said the initial price increase would bring in an additional VND1tn, a low figure compared to the large amounts needed by the industry.





No. 756/April 10-16, 2006