The Ministry of Industry and Trade maintains the viewpoint of adding losses to electricity prices

10/09/2023
10/09/2023

The Ministry of Industry and Trade has just submitted to the Prime Minister a draft decision to replace Decision 24/2017 on the Mechanism for Adjusting the Average Retail Price of Electricity, after evaluation by the Ministry of Justice.

According to the proposal, foreign exchange differences, production, and operating losses are always added to the formula for calculating the average retail price of electricity.

During the legal assessment of the draft, the Ministry of Justice requested the Ministry of Industry and Trade and the Ministry of Finance to review the regulations on the mechanism for adjusting the average retail price of electricity, ensuring compliance with the Price Law and the Electricity Law. Additionally, this agency also proposed clarification on how the costs of electricity generation, based on the basic input parameters in the electricity generation process, impact the total cost of purchasing electricity.

As explained by the Ministry of Industry and Trade, the cost of electricity production is determined on the basis of the prices of fuels (coal, oil, gas) of power plants. The price of these fuels follows the market mechanism, so significant fluctuations will affect the electricity generation costs of the power plants. This has a direct impact on the total purchase cost of electricity and the average retail price of EVN.

The Ministry of Finance proposed to remove this regulation from the draft decision to amend Decision 24 since the Law on the Management and Use of State Capital Invested in Production and Business in Enterprises, the policy documents do not stipulate plans for the distribution of production and business losses, and other costs not included in the electricity price.

Experts also suggested that adding losses and exchange rate differences requires an allocation roadmap to avoid electricity price hikes.

Công nhân Điện lực Hà Nội sửa chữa trên đường dây, đảm bảo điện mùa nắng nóng 2022. Ảnh: EVN

Electricity workers in Hanoi repairing power lines to ensure electricity supply during the 2022 hot season. Photo: EVN

The ministry also mentioned that electricity prices could be adjusted several times a year. To avoid bumps, the drafting agency proposed shortening the adjustment cycle from 6 months to 3 months. That is to say, every year there will be 4 price changes. Prices are updated quarterly based on electricity generation costs, which have not been included in electricity prices

From 2013 to today, when the competitive market for electricity generation is functioning, i.e. the nature of the market in transactions in the energy source increases, but the frequency of price adjustment is less.