Power price hike will not have huge impact: ministry

An increase of less than 10 percent in retail electricity prices, as proposed by the Ministry of Industry and Trade, will not seriously affect production and daily life, Deputy Minister Do Huu Hao said Tuesday.

The impact of the proposed price hike on the economy and society had been carefully calculated, Hao said. In December, the ministry submitted to the government a proposal to raise retail power prices by less than 10 percent. Pham Manh Thang, head of the Electricity Regulatory of Vietnam, said the Ministry of Finance was assessing the proposal and the increase will be considered alongside the prices of coal and oil used for producing electricity. If the proposal is approved by Prime Minister Nguyen Tan Dung, the new retail power prices will take effect in late February, Thang said. The Ministry of Industry and Trade has proposed the first 50 kilowatt hours of electricity used by families each month be subsidized to minimize the effect of higher power prices on the nation’s poor The current average retail price in Vietnam is VND860 (5 US cents) per kilowatt hour, with power for production costing more than power for household use. Thang said the proposed electricity price increase was expected to wipe 0.05 to 0.07 of a percent off economic growth and push inflation up by 0.25 to 0.3 percent. Power and gasoline are the two products that determine the prices of almost all goods on the market, and both power and gasoline prices should not be raised at this juncture, Lao Dong (Labor) Newspaper quoted economist Dinh Son Hung as saying. Hung said an increase in power prices would undermine efforts to stimulate the economy this year in the face of a global economic slowdown. Nguyen Van Son of the Vietnam Standard and Consumers Association said local consumers would be unhappy with the price increase proposal. The proposal favored power producers and did not mention any efforts by the power industry to lower prices or anything about consumer rights, Son said. Hao said power prices were not being raised to help Electricity of Vietnam (EVN) offset its losses but to encourage investment in new generation capacity. The price increase was necessary to facilitate investment, Hao said, pointing out that electricity costs in Vietnam were lower than those in other Southeast Asian countries. State-owned EVN currently controls all power transmission grids and retail networks, including the Hanoi Electricity Company and Ho Chi Minh City Electricity Company. EVN had previously submitted a plan to the government proposing increases of up to 20 percent in the retail price of electricity. According to the proposal by the Ministry of Industry and Trade, the state will subsidize the first 50 kWh of electricity used by local residents each month to minimize the effect of the price hike on low-income families. Up to 2.5 million poor households in Vietnam use less than 50 kWh of electricity per month, Hao said. He also said from 2010 power prices will be adjusted in accordance with input costs. Hao said his ministry will coordinate with the Ministry of Finance in deciding power price adjustments of 5- 7 percent. Price changes of more than 7 percent will require approval from the prime minister. Vietnam, whose electricity capacity stands at some 15,000 megawatts now, is expected to increase capacity by 4,000MW a year by 2025. Meanwhile, the country now is out of sources for hydroelectricity plants, which need less investment than thermoelectricity or nuclear power plants. Vietnam’s relatively low electricity prices have attracted many steel, cement and chemical production technologies from other countries. Last year, Vietnam’s power demand jumped around 16 percent while supply only rose 12 percent, forcing the government to import electricity from China and rotate power outages across the country. Vietnam plans to generate about 83.3 billion kWh of power this year to support an economy forecast to grow by 6.5 percent. Reported by Ngan Anh – Xuan Toan