Hanoi (VNS/VNA) - The Government should build a retail power price forindustrial production firms equal to households and adjust the electricitytariff to suit people’s living standards, experts have said.

The Ministry of Industry and Trade (MoIT) is proposing reducing power pricetiers from the current six to five levels.

Nguyen Anh Tuan, director of the ministry’s Electricity Regulatory Authority ofVietnam (ERAV), said the MoIT has provided four plans after collecting opinionsfrom agencies, businesses and experts. Accordingly, the revision would keep theaverage retail power price unchanged and adjust the structure to suitactual electricity consumption.

Tuan said figures of power consumption among households in the US, the Republicof Korea, Thailand and Laos showed the retail price at the highest tier was1.65 to 3 times higher than the lowest one. Therefore, the ministry proposedkeeping an ascending mechanism. However, the current six tiers would be reducedto five as it ensures all households with power consumption of less than 700kWh (98.2 percent of the total) would not be see increased power bills. Inaddition, the difference between the highest and lowest tiers would suit theworld’s trend.

In recent days, many households were surprised with surging power bill sin May.Some had bills five times higher than the previous month, leading to calls fortransparency in power prices to adjust electricity consumptioneffectively.

The ministry proposed increasing the power consumption gap between tiersto encourage electricity saving. At the same time, it is possible to limit thesurge of power bills in peak seasons.

“With the principle of 'use more, pay more', with this plan, electricity costsfor households having with consumption of more than 701 kWh (about 500,000households, accounting for 1.7 percent of the total) would be increased by 29,000VND (1.2 USD) per household per month,” he said.

Tran Viet Ngai, chairman of the Vietnam Energy Association (VEA), said thetiered pricing model is necessary to save energy. However, afteryears of application, it is time to have amendments to suit the current situation,especially with the number of households using less than 50 kWh per monthlower.

Economist Ngo Tri Long said when consumers only use 100 kWh per month, theelectricity price is very cheap. From tier 3 of more than 100 kWh, the pricesare too high.

According to market principles, the more consumers buy, the cheaper the priceis, but not in the electricity industry. When the tier pricing mechanism wasintroduced in 2014, many people found it unreasonable. But so far the price hasnot been revised, Long said.

Nguyen Tien Thoa, chairman of the Vietnam Valuation Association, said thecurrent shortcoming of electricity price is that the Government allowscross-subsidisation to encourage production.

For electricity production, over the years, low-price electricity has beenavailable at low hours to encourage production during off-peak hours and normalhours, restricting heavy electricity use during peak hours. This is stillnecessary, but power prices should not be sold less than production costs.

Tran Dinh Long, vice chairman of the Vietnam Electrical EngineeringAssociation, said the tier pricing mechanism adjustment must take into accountthat households in urban areas with minimum common usage will receivereasonable electricity prices. High rates would be applied only for a sharpincrease in usage.

The average electricity retail price is set for many groups of customersincluding production, business, administrative and non-business activities.Currently, households and business have to pay electricity prices higher thanthe average retail prices. Meanwhile, the retail power price for the industrialsector is lower, Long said.

According to figures in 2018, the industrial sector accounted for 54 percentof the country’s total power consumption while those of households andbusinesses were 35 percent and 9 percent respectively. This means users withless electricity had to pay a higher price to support those with higherconsumption - including a large number of much power consumption sectors suchas steel, cement and chemicals. Low electricity prices have not createdpressure to force manufacturers to change outdated technologies.

Long added that people’s incomes and lives have been improved, making theminimum electric equipment in families also increase. Currently, households’common power consumption is about 201-300 kWh per month. The price at theselevels should not be too high compared to the current average retail tariff.Prices of above 400 kWh could be very high because the consumers at this levelare well-off.

Statistics from the MoIT revealed that households with the power consumption ofless than 100 kWh per month accounted for 35.8 percent of the total 25.8million customers using electricity. Those with consumption of 101 to 300 kWhper month was 40 percent. Households with consumption of more than 300 and 400kWh per month were 15 percent and 7 percent respectively./.