Vietnam’s Electricity Tariff Debate: The 2015 Consultation

Archive — September 2015. This article records a consultation on household electricity tariffs proposed for 2016–2017. All prices, forecasts and policy statements below belong to that discussion and are not current tariffs.

Purpose of the consultation

The 30 September workshop was the third consultation after events in Hanoi and Da Nang. EVN and its consultants described a restructuring intended to leave the average tariff and total industry revenue unchanged while reducing cross-subsidies and balancing the interests of customers, producers and the state.

Nguyen Tien Thoa, representing the tariff consultants, cited an average household price of VND 1,747/kWh and an overall retail average of VND 1,622/kWh for the four customer groups. He argued that increasing-block tariffs could encourage efficient use while maintaining access for lower-income households.

Household concerns

Duong Van Nhan of the Ho Chi Minh City Farmers’ Association said many users found the tariff difficult to understand. His proposal was to extend the first block to 100 kWh, provide support for households below 50 kWh and offset it through higher-use groups. This was a participant’s proposal, not an adopted rule.

Three options under discussion

1. Retain six consumption blocks.
2. Apply a single household price of VND 1,747/kWh.
3. Reduce the structure to three or four blocks, with five scenarios designed to preserve the household average.

The single-rate option was simpler but could increase bills for low-use households by about 14%, while reducing bills for households above 300 kWh, with a maximum reduction of around 33% above 500 kWh.

The consultants considered scenario five of option three comparatively promising, while acknowledging that no option would satisfy every group.

Consumption distribution cited

In 2014, household shares were 21.79% at up to 50 kWh/month, 25.02% at 51–100 kWh, 20.82% at 100–150 kWh, 12.81% at 150–200 kWh, nearly 11% at 200–300 kWh and nearly 9% above 300 kWh.

Supply and investment pressures

Dinh Quang Tri of EVN described installed capacity of about 35,000 MW, approximately 21 million customers and particular pressure during peak hours. At the workshop he said prices would not rise through the end of 2015 and the first half of 2016; this was a time-specific statement.

The discussion covered fuel costs, foreign-exchange exposure, power purchases and the generation mix. Goals included reducing losses from 8% to 5% by 2020, national-grid access for 98% of rural households, an estimated VND 33 trillion needed for the remainder, and annual investment needs of about USD 5 billion for generation and networks.

It also reported consumption growth of 12–13% annually and a historical supply mix of roughly 35–40% hydropower, 30% gas and 30% coal. Its description of review thresholds and six-month intervals belongs to the rules discussed at that time.

Next steps described then

EVN planned to consolidate feedback and submit the proposed structure to the Ministry of Industry and Trade and the Prime Minister in October, with implementation envisaged from 2016. Readers assessing present electricity costs should use the tariff applicable to their customer category and billing period.