Assoc insists on power price hike despite protests

HCMC – The Vietnam Energy Association steadfastly stands by its proposal to raise the power price to eight U.S. cents a kWh despite strong criticism from market watchers and despite handsome profits reported by several power stations.

Tran Viet Ngai, chairman of the association, has defended the proposal submitted to the Government last week, saying only a power price hike to the suggested level would help ensure sufficient energy for the economy in the years to come. Otherwise, the country will see the chronic shortage or electricity continue, as seen in frequent power outages in this year’s dry season.

Ngai told the Daily on Monday that power should have been raised to eight U.S. cents a kWh several years ago rather than staying at the current level of five cents.

“The association’s proposal for increasing the power price should have been made five or seven years ago. It’s too late to make this proposal by now,” he said. “I think our proposal for increasing the power price to some 8 U.S. cents per kilowatt hour should not be viewed as shocking.”

“If the economy faces an even more critical power shortage in the near future, that rather than our proposal will be a real shock,” he added.

Early last week, the association sent a proposal to the Government suggesting an average power price of around 8 U.S. cents per kilowatt hour, which immediately triggered protests.

The association reasoned that the suggested power price would pave the way for establishing a competitive power market and would also help lure more investors by promising them a profit when investing into the country’s power projects.

Ngai is confident that if the power price is raised to 8 U.S. cents per kilowatt hour from 2011, the progress of many sluggish power projects will be hastened, and the current severe power shortage will be definitely addressed in the next two or three years.     

The association chairman said that under the national power scheme No. 6, which is in fact the master plan for the country’s electricity development till 2015, there would be 13 coal-fired power projects with total designed output of 13,800MW. However, only two out of these thermo-electric projects have started construction, while the remaining projects are still on paper because of financial constraints while each of these projects needs billions of U.S. dollars.

He also noted that Vietnam and other ASEAN countries would have a common regional grid in the years to come, so harmonized power prices would also facilitate this integration as the power price in neighboring countries is currently higher than Vietnam’s.

However, several experts have objected to the association’s proposal, saying a pricing scheme should take into account the real input costs and should be incremental. Even a small price increase will generate a big revenue for electricity companies, several of which are still enjoying an increasing profit.

“The power price in Vietnam can be higher or lower than those in neighboring countries, but it will remain reasonable as long as it corresponds to the input costs,” said Ngo Tuan Kiet, head of the Institute of Energy Science under Vietnam’s Institute of Science and Technology.

“What is more important now is that we should have a far-flung energy development plan, which should specify the need for energy as well as the suggested power price for each period,” Kiet said in Tuoi Tre.

He explained that investors would rely on the master plan to see if they can earn a profit at a suggested price in the near and long terms. The absence of such a road map, Kiet said, makes it impossible for investors to calculate their profits.

He also rejected the suggested price, saying an increase of VND500 per kWh would be a burden for power consumers and great profits for investors. For an increase of VND100 per kWh, so to say, the power industry will see their revenue surge by VND10 trillion, or some US$550 million, according to him.