The average retail electricity prices are to be adjusted no more than every three months starting from May 15.

That was the ruling from the government in Decision No. 05/2024/QD-TTg, signed by Deputy Prime Minister Lê Minh Khái yesterday, to regulate the country's electricity price adjustment system.

The decision allows the adjustment of the average retail prices in the event of changes in the prices of its input costs including production, transmission, distribution, management and support services among others.

If input costs fall by 1 per cent than the in-effect average retail price, it must be adjusted down. In the event the input costs rise by more than 3 per cent, it can be adjusted up, with a minimum waiting period of three months between each adjustment. 

The minimum waiting period between price adjustments was six months previously. 

Vietnam Electricity (EVN) will be given autonomy to implement a price increase within the range of 3-5 per cent. Within five working days since the beginning of an adjustment, EVN must report to the Ministry of Industry and Trade (MoIT), among other ministries and governmental agencies, to form a schedule for inspection and supervision during the period. 

In the event that the EVN proposes a price increase within the range of 5-10 per cent, the EVN must report to the MoIT. Within 15 working days, the ministry, in turn, must provide the EVN with an answer.

Suppose the EVN proposes a price increase greater than 10 per cent. In that case, the MoIT is charged with the task of submitting a report, after a period of co-consulting with other ministries and governmental agencies, to the central government and the Prime Minister for review. 

The ministry is tasked by the Prime Minister to provide the EVN with a framework to calculate the average retail prices of electricity, implement and adjust the prices and oversee the periods.

In addition, the MoIT, with the support of the Ministry of Finance, among other ministries and governmental agencies, reports to the Steering Committee for Price Management and the Prime Minister. 

Economist Trần Đình Long said a shorter price period will help bring electricity prices closer to the market price. However, it is still very important to expedite the implementation of a competitive electricity market to ensure that electricity prices truly follow market principles.

Nguyễn Tiến Thỏa, chairman of the Vietnam Valuation Association, said a shorter price period will allow EVN to more quickly respond to changes in input costs. 

"The longer they have to wait, the greater their financial losses and the chance of a shock increase," he said. 

Trần Việt Hòa, director of the Electricity Regulation Department under the MoIT, said just because theoretically the EVN can submit a proposal every three months doesn't mean they will do so. Many other aspects, including the potential impacts on macroeconomic factors and the input costs, will be considered.

Economists have long suggested that shortening the time for price adjustments is a necessary preparation step towards a competitive electricity market. VNS