Deputy Prime Minister Vuong Dinh Hue has asked the Ministry of Industry and Trade (MoIT) to calculate retail power price adjustments every six months instead of three as it proposed.

In a draft revision of a Government decision on power price adjustment, the MoIT proposed an adjustment period of every three months instead of the six months implemented since 2013. However, after discussions with involved parties, the Deputy PM asked to maintain the current adjustment mechanism to ensure macro-economic stability.

The Deputy PM asked the MoIT to team up with the Ministry of Finance and Viet Nam Electricity Corporation (EVN) to review and finish the draft on average electricity retail prices and submit it to the Prime Minister next month.

Earlier, the Deputy PM asked the MoIT and EVN to draft a report, including production and business activities, expenses, production costs and selling price in 2016, as well as a plan for 2017. He requested them to submit their proposals by March 25.

But a power rate hike for consumers appears likely in the coming months, given that there was no adjustment in 2016 and the last power tariff hike was in March 2015, when it increased 7.5 per cent.

An EVN representative told media that the power retail price would depend on the price of coal the company buys. The Government has asked the Finance Ministry to negotiate with the Viet Nam National Coal and Mineral Industries Group (Vinacomin) over the coal prices sold for electricity production. The negotiation results must be submitted to the Government by the end of this month.

Dang Hoang An, EVN’s general director, said the input cost for electricity production had increased since 2015, with coal prices up 7 per cent since December 24, 2016, and electricity production costs surging by over VND4.7 trillion (US$206 million).

However, the increase had not been included in the current power retail tariffs.

Nguyen Ngoc Hung from the Energy Institute told news site Vietnamnet.vn that the electricity demand and material prices could affect power tariffs this year. Hung said the higher power retail prices were due to increasing demand, which rises 11-12 per cent a year. In addition, the country had seen development of thermo-hydropower and gas turbine power plants instead of hydropower plants – the cheapest electricity resource.

"That is the reason a rate hike is unavoidable," he said.

Coal prices have a major effect on power tariffs as thermo-power plants account for the biggest chunk of the country’s supply.

EVN said its power output bought from power plants in the last quarter of 2016 included 26 per cent of hydropower, 40 per cent of thermo-power and 31 per cent of gas turbine power and other.

Hung said it was estimated that if coal prices for electricity production rose by 10 per cent, the power generation cost would increase by 3-4 per cent. — VNS