MoIT consider single pricing model for power tariff

Wednesday, Aug 12, 2020 15:42

A Vietnam Electricity (EVN) worker checks on a power hub in Ha Noi. — VNA Photo

The Ministry of Industry and Trade (MoIT) is considering new models to calculate electricity price including one that eliminates its current step pricing, which industry experts have claimed to be outdated and deeply unpopular among consumers.

Consumers would have the option to choose between the traditional step pricing model, which consist of five tiers based on electricity consumption and one single price model.

The step pricing model sets tier 1 price at 90 per cent of the average price per unit, which is set at VND1,864.44 (US$ 0.08) for 1kWh, tier 2 at 108 per cent, tier 3 at 141 per cent, tier 4 at 160 per cent and tier 5 at 274 per cent.

The single price model has just one price per unit for the first 700kWh, which the ministry argue most low and middle-income households' consumption will not exceed. Consumers who choose this model will pay at 145% of the average price per unit, roughly around the same rate with tier 3 in the step pricing model.

The ministry also circulates another similar scheme, in which tier 5 is set at 185 per cent, lower compared against 274 per cent in the previous scheme. Single price per unit is, however, set higher at 155 per cent of the average price per unit.

For example, a household that consumed under 99kWh a month would pay VND166,000 under step pricing and VND267,000 under the single price. The option to choose between the two model presents the household an opportunity to save VND100,000 on electricity bill.

A household that consumed 800kWh a month would pay VND2.3 million under step pricing and VND2.162 million under a single price, resulting in a potential saving of VND138,000. The amount of potential saving would likely become even larger as consumption spike up past 800kWh per month.

Speaking on the new models, Tran Dinh Long, vice president of the Vietnam Electrical Engineering Association, said the price per unit under the single price schemes remained too high at 145 per cent and 155 per cent.

He said the ministry may also consider reducing to three tiers instead of five before implementing the single price calculation.

Nguyen Manh Hung, president of the Vietnam Standard and Consumers Association, said the new models would benefit up to 30 per cent of consumers with high electricity consumption. Consumers must decide what model pricing that fit their needs and give them higher savings.

Vu Vinh Phu, former president of Ha Noi Supermarkets Association and Nguyen Tien Thoa, former head of MoIT's department of price management, said while it may be easier to apply the single pricing model, the step pricing model may encourage people to be more efficient and less wasteful with electricity consumption. — VNS

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