Tuesday, October 25 2016


Power sector must explain just why it runs at a loss

Update: July, 08/2015 - 09:17

Nguyen Van Nam, former director of Trade Research Institute speak with Hai Quan (Customs) newspaper about the sudden rise in power bills.

Many people have been complaining about a sudden jump in their power bills. What do you think is the main reason for this increase?

In my opinion, there are three main reasons for this increase. Firstly, it's because the power tariff has gone up. When I look up my family's power bill, I see that the new tariff has increased about 8 per cent compared with the previous rate, without adding ten per cent value added tax.

Thus, the actual power tariff is higher than that announced by the government (7.5 per cent). Despite the fact that the difference is small (less than one per cent), it reflects the dishonesty of the power sector.

Secondly, the power bill has increased because of hot weather, which forces the people to use their cooling systems. Consumers have to pay progressive tariffs for electricity. Under this pricing method, the more electricity they use, the higher their bills are.

Thirdly, there are doubts about the accuracy of the recording and calculation of consumers' power usages. This needs to be examined by inspectors.

I think the second reason is the most important one. If people use around 100 units of electricity, the price is low. But, if they consume between 300-400 units, the price is one and a half times higher than the lowest level of usage.

The difference between the lowest and highest power price is around VND1,000 (US$0.04).

What is your comment on the current power tariff rate?

As we have discussed a lot of time, power tariff is vague in Viet Nam. The current tariff rate has been initiated by the power sector and approved by a competent agency. It does not follow a market-based mechanism.

There has been a lack of transparency in the power sector. Half of Viet Nam's electricity is hydroelectricity.

If power tariff increases due to a hike in expenditure, we should examine whether the expenditure is reasonable or not. The power sector enjoys a monopoly and its business is not open to the public, so most residents do not fully understand how their power tariffs are calculated, while in other countries, the power tariff system is transparent.

What are the solutions to convince people when power tariff goes up, especially when the hike is significant?

In the short term, as this sector does not have a competitive power market, informing the public about power tariffs is essential, especially about how much hydropower or thermal power the sector has used and what is the production cost.

In the long term, it's necessary to establish a competitive power market because it will not only create competitiveness in power generation but also in power transmission and distribution.

Many people have proposed that the Government should adjust the current power tariff rate, but it's very difficult to make a proposal on increasing or decreasing power tariff rates because we don't know how power generation costs are calculated.

The power sector has often said it has to face high expenditures and runs at a loss. It's necessary to clarify the reasons for the sector's loss-making performance. If it's due to a high salary payment of staff or high electricity losses, the sector should not burden consumers for its weaknesses. — VNS

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