Switching up power prices

“Sufficient factors are not in place to be able to confirm that the power price will be set following market mechanism starting from June 1, 2011,” said deputy minister of Industry and Trade Hoang Quoc Vuong.

According to Vuong, power costs are set based on three key input parameters- the dong-US dollar exchange rate, fuel costs and power sources structure in the last three months.

Electricity of Vietnam (EVN) reportedly incurred some pending debts including over VND8.8 trillion ($425.1 million) in losses resulting from 2010 at the time when the government approved the application of current power pricing scheme which saw an average power price upsurge of 15.28 per cent from March 1, according to EVN deputy general director Dinh Quang Tri.

“Auditing results will become available in late May 2011. By that time, we will report on our plans to deal with such pending debts,” Tri said.

According to Ministry of Industry and Trade’s (MoIT) Electricity Regulatory Authority of Vietnam estimates, EVN will incur additional losses of VND3.366 trillion ($162.6 million) in 2011 despite March 1’s power price upsurge.

“The power price must be up 62 per cent but not 15.28 per cent to ensure the power sector is not running at losses,” said Minister of Finance (MoF) Vu Van Ninh.

To limit hike levels, the state considered some supports to the power sector such as allowing just a 5 per cent hike in coal prices selling to the power sector or temporarily not collecting some kinds of fees and restructuring losses to be dealt with later.

“Theoretically, Decision 24/2011/QD-TTg allows power price revision every three months. However, we await concrete guidance from MoIT and MoF on how to calculate power cost and other expenses,” Tri said.

He added that EVN would carefully consider the date of applying the new power pricing scheme to avoid shocking people.

On the proposed establishment of the power cost stabilisation fund, deputy head of MoF’s Price Management Department Nguyen Thanh Huong said part of the power cost will go to the fund, therefore, the birth of the fund will drive up the power cost.

“Such a fund is still non-existent as the power sector still incurs pending debts. The fund will become active when the pending debts are counted on power costs,” Huong said.

Some EVN’s pending debts:

- Hydropower plants’ forest environmental services fees: VND738 billion ($35.6 million)

- The dong-US dollar exchange rate difference of EVN’s total outstanding loans in foreign currency by February 11, 2011: VND25.508 trillion ($1.23 billion)

-Total interest of loans put into buying oil for power generation in 2011 dry season: VND970 billion ($46.8 million)

- Operating, maintenance and associated costs at Ca Mau power plants from 2008-2009: VND720 billion ($34.7 million).