The Ministry of Industry and Trade has proposed a hike in electricity prices this year after pushing it up 7.5% last year to narrow down the loss of national utility Vietnam Electricity (EVN).
The ministry eyes increasing prices in May this year to cover rising costs and help the state-owned EVN to pay for power generators. Vietnam allows an electricity price hike once every six months if production costs rise 3% or more. The last increase was in November last year, and before that, May.
EVN recorded a combined loss of VND37 trillion ($1.5 billion) in 2022 and 2023. It also has VND14 trillion in debt incurred from previous years due to currency exchange rate changes.
Last year, prices were raised 7.5% to VND2,092.78 per kilowatt-hour after years of staying flat.
Analysts of Vietcobank Securities have recently anticipated an electricity price hike as the El Nino effect causes low water level at northern hydropower plants.
Dinh Trong Thinh, an analyst from the Academy of Finance, said that raising prices was necessary to cover increasing costs but EVN needed to be transparent in its financial situation to avoid raising controversy among the public.
Analyst Ngo Duc Lam, former head of the Energy Institution under the Ministry of Industry and Trade, said that Vietnam needed to be “very cautious” in raising electricity prices as it would push up the prices of transport and many essential goods.
Phan The Cong, an analyst from Thuongmai University, said that two hikes last year have already had an impact on the economy and inflation, and therefore the timing of another hike needs to be considered carefully.
Thinh added that in the long run electricity retail price needs to be regulated under market principles, which means it will rise when costs increase and fall when costs decrease. Changes in retail price therefore will become a normal part of people’s lives and will not have a major impact.