Việt Nam Electricity (EVN) has proposed to the Government to increase retail electricity prices to ensure a balance in its production and business operations, just three months after the first increase in May.

According to EVN, if electricity payments are made in accordance with the contracts, it will face cash flow shortages from July to December 2023. To ensure cash flow for purchasing coal, oil, and gas for electricity production, EVN has taken out debts from power generation units.

There is a possibility that EVN may not have sufficient funds to pay for electricity purchases from power generation units, which could impact the continuous operations of power plants and consequently affect the supply of electricity.

EVN suggested the Government consider amending or replacing the Prime Minister’s Decision No 24/2017/QD-TTg which regulates the mechanism for adjusting the average retail electricity prices.

It also proposed the Government instruct the State Bank of Việt Nam to provide interest-free loans for EVN to pay electricity bills to power generation units, thus ensuring the timely purchase of raw materials for power generation.

The Government suggested EVN make temporary payments for electricity purchases at a suitable level based on the firm's financial capacity until retail electricity prices are adjusted to fully reflect all costs.

The average electricity retail price was increased by 3 per cent to VNĐ1,920 per kWh from May 4, which helped EVN boost revenue by VNĐ8 trillion, but this is still not enough to make up for the increase of 9.27 per cent in the electricity production cost in 2022.

A report of EVN in June showed the firm lost VNĐ36.3 trillion from electricity production in the first five months of this year. If the prices of inputs remained unchanged and electricity retail prices were not adjusted properly, EVN anticipated a loss of more than VNĐ51 trillion this year, meaning a loss of nearly VNĐ78 trillion for the 2022-23 period.

EVN said that it would face a shortage of around VNĐ22 trillion by the end of 2023.

Đinh Trọng Thịnh from the Academy of Finance said that any increases in electricity prices must be studied carefully, especially in the context that firms are striving to recover production and business.

Thịnh stressed that EVN must be transparent in its electricity production and business costs.

In a recent draft on amending the mechanism for electricity price adjustment, the Ministry of Industry and Trade has proposed the average retail price of electricity be reviewed for adjustment every three months instead of six at present.

Adjustments of 3 to below 5 per cent would go to EVN while an increase from 5 per cent to below 10 per cent would be decided by the Ministry of Industry and Trade and by 10 per cent or higher by the Prime Minister. — VNS