MoIT urges EVN to swiftly implement two-tier electricity pricing

Workers of Power Transmission Company No.1 check substation equipment. — VNA/VNS Photo Huy Hùng

HÀ NỘI — The Ministry of Industry and Trade (MoIT) has issued a directive to Vietnam Electricity (EVN) urging the swift establishment of a two-tier electricity pricing mechanism.

As per the ministry’s request, EVN is tasked with developing a roadmap and proposing customer categories for the application of two-tier electricity pricing, aligning with the ministry’s Decision 249/QD-BCT issued on November 8, 2023.

EVN will compare two-tier pricing with the current electricity pricing, informing proposals for the mechanism, customer groups, and assessing its impact on retail pricing and consumer groups.

The power company is required to present a comprehensive report, including suggestions for the two-tier electricity pricing mechanism, to the MoIT for further consideration and, ultimately, to the Prime Minister for a final decision.

The global trend of adopting the two-tier electricity pricing model is acknowledged, with benefits identified for both electricity producers and consumers. This model aims to optimise economic efficiency through the judicious allocation and use of resources. By incorporating capacity pricing (in VND/kWh or VND/kVA), customers are incentivised to use electricity efficiently, contributing to improved power factor and reduced electricity costs.

The advantages extend to reducing investment needs for power capacity and grid expansion, meeting customer electricity demand, and recovering investment costs for customers with underutilised capacities. Consequently, the two-tier pricing model, encompassing both capacity and energy prices, is viewed as advantageous for customers and ensures the recovery of the power industry’s investment costs.

In Việt Nam, EVN’s Power Corporations have already implemented electronic meters for most industrial and commercial customers under the time-of-use pricing mechanism. The application of capacity and energy pricing is crucial to align electricity prices with accurate, cost-effective signals to customers, ensuring fair pricing based on power factor. The existing combination of two-tier electricity pricing with time-of-use regulations aids in balancing the system load chart, reducing the need for additional investments in power sources and grids during peak hours.

While the new two-tier electricity pricing mechanism is currently in the experimental calculation phase, focusing on assessing its computational nature and feasibility, customers will not experience immediate changes in their electricity bills. The ongoing experimental phase utilises data from electronic meters and aims to evaluate the cost difference between the current and two-tier pricing, providing vital information for regulatory agencies to design and implement the two-tier pricing mechanism at an opportune time. Moreover, the results of this phase will inform customers, encouraging considerations and adjustments to their electricity usage behaviours for savings and efficiency. — VNS