Vietnam to Raise Power Prices by 15%

Vietnam recently announced that the government has decided to raise the country’s power price by a record 15.3 percent, up from the current VND1,077 per kw/h to VND1,241 per kw/h, starting March 1, 2011.

The government said it had made the price hike as small as possible after considering both the cost factor in production and the impact on people’s living standards. Although the price growth rate this time almost doubled compared to last year’s 8.9 percent, it did not meet the 18 percent to 30.3 percent increase goal the Ministry of Industry and Trade (MIT) set.
The state-owned utility, Electricity of Vietnam (EVN), who expected an even higher growth rate increase of between 20 percent and 40 percent, claims that it is already suffering significant losses and will continue to even after the price hike. EVN also worries that it is difficult to meet the ever-increasing domestic demand for power use if the current low price maintains unattractive to foreign investment in new power plants.

Experts, on the other hand, expressed concerns over the issue, warning the new power price lift may make it harder for the government to curb domestic inflation, which is currently at a rate of around 12 percent.

Economist Pham Chi Lan believes the fresh electricity price hike, the recent 8.5 percent devaluation of the Vietnamese dong, as well as a possible gasoline price raise “will make it very difficult for the government to realize the goal of stabilizing the macro economy and curbing inflation under 7 percent.”

Lan also commented on the EVN’s announcement stating its financial loss position. He pointed out that asking for a price hike is not the only way to turn a profit. The utility needs to implement a more transparent financial management system regarding its own costs and losses.

With regards to the possible impact the price hike will bring to ordinary people and businesses, Ta Van Huong, head of the Energy Department at the MIT, predicted that household consumers will face a larger price increase than businesses. Lan mentioned the same issue as part of his concern. He said the price increase will affect basic livelihoods, especially those of the poor, and it will also increase the cost of doing business in the country

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