In a draft proposal to amend Decree 72 on the average retail electricity price adjustment mechanism, the Ministry of Industry and Trade has suggested incorporating uncompensated electricity production and supply costs from 2022 onwards into the electricity price.
Vietnam Electricity (EVN) will propose a plan for allocating these costs to the Ministry of Industry and Trade for review. The ministry will consult with the Ministry of Finance if necessary.
The ministry also proposed including unallocated and unpaid exchange rate differences from revaluation in the electricity price, as agreed upon in power purchase agreements with power plants.
This proposal comes after EVN reported to the Ministry of Industry and Trade, requesting that accumulated losses up to the end of 2024 be factored into the average retail electricity price.
According to EVN, geopolitical events and high electricity purchase costs between 2022 and 2023 have created difficulties for their business operations. Accumulated losses during these two years amount to 50,029 billion VND. The parent company, EVN, alone faced losses of approximately 44,792 billion VND by the end of 2024. Additionally, losses from exchange rate differences in power purchase agreements from 2019 to 2023 reached 18,032 billion VND.
This means over 62,820 billion VND in losses and exchange rate differences are currently outstanding and haven't been incorporated into the electricity price.
EVN stated these are direct costs for electricity production and supply that haven't been fully compensated in the average retail electricity price. In effect, they have been selling electricity below production cost during this period.
According to a 2023 report on electricity production costs by the Ministry of Industry and Trade, EVN's total production cost was over 528,600 billion VND. This translates to a production cost of 2,088.9 VND per kWh, a 2.79% increase compared to 2022. Revenues from the liquidation and sale of fixed assets, recovered materials, and electricity pole rentals have already been deducted.
In 2023, the retail electricity price was adjusted twice (3% in May and 4.5% in November). These adjustments raised the retail price to 1,920.3 VND and 2,006.79 VND per kWh respectively (excluding VAT). This means, despite the price adjustments, EVN still incurred losses of 82.1-168.6 VND per kWh sold.
"These accumulated losses have reduced state capital invested in EVN, failing to preserve this capital flow," EVN's report stated. Therefore, the corporation believes these losses should be factored into the electricity price to recoup the reduction in state investment from previous years.
The average retail electricity price adjustment mechanism is stipulated in Decree 72. According to the Ministry of Industry and Trade, EVN's adherence to this decree has allowed for more timely and flexible price adjustments compared to the past.
However, the ministry acknowledges the need to review and amend this regulation in accordance with the 2024 Law on Electricity. This is to ensure accurate and complete accounting of reasonable and legitimate costs when determining and adjusting retail electricity prices, thereby preserving and developing the enterprise's capital.
Currently, the average retail electricity price is 2,204.07 VND per kWh (excluding VAT), following a 4.8% increase on 10/5.
Phuong Dung
