According to Deputy Minister of Industry and Trade Hoang Quoc Vuong, this is the average increase in electricity price which has been approved by the Prime Minister to minimize the impact of increased electricity price on the economy.

Thus, from March 1st, the average price of electricity will increase from 1,077vnd/kWh to 1.242vnd/kWh, equivalent to a 15.28% increase. With this increase, many of EVN’s costs shall continue to be kept from being allocated to the price, the rate of return on state capital of EVN is zero and coal price has not risen in the electricity price structure.

Electricity price increased by 165VND/kWh

"With the increase rate above, actually, the average price of electricity has increased by 165VND/kWh (compared to the 194VND/kWh increase of the 18% plan proposed by the Ministry of Industry and Trade). This is the optimal price increase which the Government has considered thoroughly so as not to cause significant impacts on the growth rate of consumer price index, affecting economic growth and people's lives. Also, this is also a measure to reduce difficulties for EVN due to the increase of input prices"- said Mr. Vuong.

Thus, compared to the plan to increase electricity price by 18% proposed earlier by the Ministry of Industry and Trade, the Government also agreed not to increase the price of coal in 2011, continue to apply the coal price of 2010; not to allocate most costs arising from expensive electricity generation in 2010 to electricity price of 2011, including expenses for receiving low voltage grid in rural areas... Also, with the proposal of the Ministry of Industry and Trade, the rate of return on state capital of the stages of generation, transmission and distribution shall only be 1%, then with the newly applied electricity price, the rate of return on capital of EVN will be zero.

Talking to reporters of Labour newspaper soon after receiving information on the 15.28% adjustment of electricity price in 2011 allowed by the Government, Mr Dinh Quang Tri - Deputy General Manager of Finance of EVN said: In 2010, prices of many inputs varied, increasing the costs of EVN. Only the difference in exchange rate has increased the cost by VND 17,000 billion, the cost of receiving the rural low voltage grid through 2010 was VND 1,500 billion, not to mention the cost of VND 8,000 billion for purchasing and producing electricity from expensive sources to ensure electricity supply for the economy ... "We propose to allocate at least VND 400 billion to the price due to  the increase of input costs ... If costs are not allocated, they will still be suspended, while profits will be zero"- complained Mr Tri.

Poor families shall be subsidized 40% of electricity price

Director of Electricity Regulatory Authority of Vietnam - Mr. Pham Manh Thang – has recently affirmed that the current price of electricity in Vietnam is very low compared to the region. Excluding the exchange rate adjustment, the price is about 5.3 UScent/kWh, while it is just around 4UScent/kWh including the exchange rate. Meanwhile, the average price of electricity imported from China is 6 UScent/kWh (in 2011, the Chinese have been charging 6.2 UScent/kWh). There was the time that price of electricity purchased from independent power plants, like Ca Mau thermal power plant, Nhon Trach 1,was up to 8UScent/kWh ... Having to buy high, sell low with the obligation to ensure the demand for power of the economy has caused serious difficulties to the financial situation of EVN.

With a low rate of return (only 1-2% annually), the current price of electricity is not enough for EVN to re-invest in expanding the electric system. Electricity price can not attract investors to invest in power. Since 1997, except for BOT projects which the Government committed to apply electricity prices under the market mechanism, most independent power projects have been unable to call for investment capital. If no investors invest in power, there can not be enough electricity.

Many economists have also supposed that the electricity price is now in conflict with the strongly growing demand for electricity. In 2011, the input costs for electricity production will continue to rise, the proportion of cheap hydroelectric power is declining and that of new power sources with high prices is rising. Meanwhile, demand for investment in grid power resource has greatly increased to ensure a stable supply of electricity to meet the rapidly increasing demand for power. However, the ability to stand the power price of the economy does not increase correspondingly. Therefore, along with the adjustment of electricity price and construction of the schedule for implementing electricity price under the market mechanism, that will be the key to ensure sufficient power for the economy, thus, supporting the development of the economy, controlling the price increase rate at the macro level.

About social policies, according to the Ministry of Industry and Trade, with the new electricity price, the government has planned to support poor households. Households still pay for electricity by the kWh used, but shall be reimbursed from the funds of social policies. EVN representative also said that specific electricity tariffs for each subject are still being calculated, but the principle is, poor households will be subsidized by 40% in the first 50kWh. EVN will transfer this amount of money directly to the policy units of the Ministry of Labour - Invalids - Social Affairs to pay for supported households.

By M.D