VCN - Modifying the mechanism of adjusting the average electricity retail price is being reviewed by the Ministry of Industry and Trade for ministries, branches and units. There are many views that, in the process of supplementing and amendment it is necessary to make clear and transparent the cost of calculating electricity prices as well as announcing the price increase plan.
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Clarifying the expenditure in calculating electricity prices
The Ministry of Industry and Trade is seeking opinions on the Draft of Decision on Amending and Supplementing a Number of Articles of the Prime Minister's Decision No. 24/2017/QD-TTg dated June 30, 2017 on the mechanism of adjusting the average retail electricity price.
The calculation of electricity price is mentioned as follows: "The average annual electricity selling price is established on the basis of the cost of electricity generation, transmission, distribution - electricity retail, administration - industry management, other allocated costs and normalised profits of the Electricity of Vietnam (EVN) to ensure the ability to operate, supply electricity and meet the needs of planned investment issued by State authority". The Draft also stated: "The total of other costs not yet included in the current average selling price is calculated to be allocated to the annual electricity price, including the difference made under the electricity purchase and sale contract of power generation units and other reasonable and valid expenses according to current regulations”.
In the written comments on this content, the Vietnam Chamber of Commerce and Industry (VCCI) said that "other reasonable and valid expenses under current regulations" mentioned herein are what costs? Which rules will be implemented?
VCCI’s analysis: It is not easy to determine which costs are calculated or not included in the electricity price, because EVN has a lot of spending on various activities. In the process of checking electricity production and business costs, there has been a case of debate among members of the inspection team about what costs are included. In order to avoid the extra costs of serving electricity production, VCCI requests that the drafting agency clarify the principle that only expenses for production and electricity supply will be charged to the electricity price. Expenses for activities that do not affect the short-term and long-term operation and supply of electricity need to be excluded from the price.
VCCI also said that comments from enterprises agree with VCCI about the current electricity price including the cost of propaganda to save electricity for customers. The power companies, which are both the electricity sellers and undertakers of propaganda to save electricity for users, are showing signs of a conflict of interests. The inclusion of this cost in electricity prices is also inconsistent with the principle that "electricity prices only cover the costs of producing and supplying electricity". "Therefore, it is recommended that the drafting agency consider eliminating or minimizing the cost of propaganda to save electricity for users in electricity prices. However, the cost of electricity saving in production, transmission and distribution, retail is still included in the electricity price".
Publicizing electricity prices at least 10 days in advance
In addition to the cost of electricity, there is interest in the process of supplementing and amending the mechanism of adjusting the average retail price of electricity with the publicity of price adjustment plans.
Electricity price plans are considered confidential documents before being announced. Normally, the increase in electricity price is only widely announced at the time when the decision to increase prices takes effect. This makes many power users face difficulties in making business and financial plans.
According to VCCI, it is possible that the plan to put the price of state-controlled commodities into confidential information which may stem from concerns about speculation and stocking before a price change. However, speculation and hoarding for electrical goods is almost impossible. VCCI cited the latest increase of electricity price on March 20, was widely announced earlier on March 5. People and electricity-using enterprises are aware of the electricity price plan increase for 15 days and it has not recorded any major incidents to the electricity system. VCCI requested the drafting agency to supplement regulations on publicizing electricity price plan increases. Specifically, electricity price plan adjustments are publicized at least 10 days before being issued. Increased electricity prices are only valid after at least 15 days from the date of issuance.
Representatives of some enterprises expressed their views: According to Article 7.1a of Decision 24, related associations should be invited in the inspection of annual electricity production and business costs. In recent years, the inspection team has had the participation of the Association of Consumer Rights Protection and Vietnam Electricity Association, but it hasn’t had the participation of representative businesse associations for high volume customers: metallurgy, construction materials, food processing, chemicals and textiles. Therefore, the enterprises requested the drafting agency to amend Article 7.1a of Decision 24 towards the participatory inspection team including associations that use a high volume of electricity.
Mr. Nguyen Anh Tuan - Director of Electricity Regulatory Department (Ministry of Industry and Trade) said: Every year, EVN employs independent auditing units to check the costs of electricity business and production. Only costs related to the expenditure of production and trading of electricity are calculated into the cost of electricity production. Costs not included in the production and business lines will not be included in the cost price. "This result must be verified by independent auditing units. The Ministry of Industry and Trade then established a working group consisting of representatives of related ministries and agencies such as the Ministry of Finance, the Ministry of Labor, War Invalids and Social Affairs, along with external units such as VCCI and the Association Protecting consumers' interests to check the reports of the independent auditors. After receiving the results, the Ministry of Industry and Trade conducted a press conference to publicise the cost of electricity production" Mr Tuan said.
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Referring to electricity supply in general and electricity prices in particular, from another perspective, economist Can Van Luc raised the view: One of the factors that both businesses and people are interested in is to reduce power loss. The electricity industry has made many improvements recently and the loss rate has decreased but more effort is needed on this, it is necessary to review the power supply structure to have the most reasonable development strategy in the long term, ensuring national energy security.
By Thanh Nguyen/ Quynh lan