Electricity of Việt Nam (EVN)'s Power Transmission Company 1. EVN will be given autonomy to implement a price increase within the range of 3-5 per cent. — VNA/VNS Photo
The Government allows the adjustment of the average retail electricity prices every three months. But that does not mean regular changes will happen. Adjusting this price will depend on the assessment of impacts on the macroeconomic development and updated electricity production and business costs.
That was the message from Nguyễn Thế Hữu, deputy director of the Electricity Regulatory Authority, Ministry of Industry and Trade (MoIT) speaking at the ministry's regular press conference in Hà Nội last Friday.
This adjustment according to the Decision No. 05/2024/QĐ-TTg, signed by Deputy Prime Minister Lê Minh Khái on March 26, basically inherits the old decision, but the new point is shortening the adjustment time to every three months.
According to Hữu, shortening the adjustment period of the retail electricity price will not affect the Electricity of Việt Nam's financial balance, and make the electricity prices follow closely the fluctuations in input factors of the market.
The MoIT still manages the electricity prices and will coordinate with the Ministry of Finance and relevant units to ensure fairness and transparency in managing this price, and also in operating the energy market, including the electricity market.
Every year, the MoIT will cooổdinate with agencies to review the costs of electricity production and transmission, and disclose them to the people and press agencies to ensure fairness and transparency.
As manager of the Electricity of Việt Nam (EVN), MoIT still holds the main role and responsibility in the process of inspecting and reviewing the electricity price plan built by EVN.
It also has the responsibility in carrying out the inspection and adjustment of the electricity prices, as well as proposing solutions on managing electricity prices to the Prime Minister.
Also, according to Decision No. 05/2024/QĐ-TTg, EVN will be given autonomy to implement a price increase within the range of 3-5 per cent.
In the event that EVN proposes a price increase within the range of 5-10 per cent, it must report to the MoIT. Within 15 working days, the ministry, in turn, must provide EVN with an answer.
In case EVN proposes a price increase greater than 10 per cent, the MoIT is charged with the task of submitting a report, after a period of consulting other ministries and governmental agencies, to the Prime Minister for consideration.
The new mechanism could make the retail electricity price increase after the decision takes effect from May 15, 2024. MBS Securities believes that retail electricity prices will likely increase in the range of 5-10 per cent this year.
According to MBS, this mechanism will significantly reduce the pressure from input fluctuations that were clearly reflected in the 2021-2023 period. Accordingly, EVN's financial situation will not only improve in the short term, but also be more secure in the long term.
In 2024, the new mechanism will create conditions for EVN to increase the retail prices, partly having money to pay for factories, especially the group of thermal power, such as PetroVietnam Power Corporation (stock code: POW), Power Generation Joint Stock Corporation 3 (PGV), PetroVietnam Power Nhơn Trạch 2 JSC (NT2), and Quảng Ninh Thermal Power Joint Stock Company (QTP).
Meanwhile, the group of power construction, such as PC1 Group Joint Stock Company (PC1) and Power Engineering Consulting JSC 2 (TV2), will also benefit from the retail price increase because the demand for power infrastructure investment this year is expected to increase 12 per cent year on year.
Improving the finance helps EVN ensure investment activities without interruption. If the retail electricity prices increase by 5 per cent-10 per cent in 2024, 0.4 per cent-5 per cent higher than the average input price in Q3 2023, EVN's revenue is expected to increase by VNĐ43-73 trillion.
For the long term, the new retail price mechanism is necessary. According to the Power Master Plan 8, the proportion of high-cost power sources will increase. Of which, the liquefied natural gas (LNG) power capacity will increase from 9 per cent to 24 per cent, and the wind power capacity increase from 6 per cent to 18 per cent.
This is expected to push up the average mobilisation costs of EVN's plants rapidly when the proportion of low-cost traditional power sources is expected to gradually decrease.
With the new mechanism, MBS hopes the room to mobilise high-cost power sources will also increase and partly help speed up the progress of negotiating purchase power agreements (PPA) for gas power projects, as well as deploy renewable energy policies because this mechanism helps transfer part of the risk of increased costs to retail prices.
Electricity enterprises with LNG power projects such as POW, PGV or leading renewable energy enterprises REE, GEX, HDG and BCG will be able to benefit from this mechanism.
Electricity supply in 2024
Regarding electricity supply in the summer months, MoiT deputy minister Nguyễn Sinh Nhật Tân said that "the electricity shortage situation will not repeat not only this year, but also in coming years."
Although the electricity supply in the first quarter of this year increased by over 11 per cent compared to the forecast, the ministry has coordinated with relevant parties to actively deploy solutions on ensuring power supply, especially in the summer.
Of which, the solution proposed by the ministry is to focus resources to complete power, grid and transmission projects, and ensure enough coal and gas fuel supply for thermal power plants.
At the same time, the ministry is strengthening monitoring and inspection for operations in power plants and troubleshooting of problems. It regulates operation of hydropower plants, strengthen the review of power transmission lines, and has propaganda on electricity saving.
The management of power supply also has innovations in planning, operating and dispatching the power system.
In particular, the ministry has issued a separate electricity supply plan for the dry season months. From April to July, the power supply situation will be monitored monthly to have timely adjustments. — VNS