Vietnam’s EVN ups electricity prices as costs rise

Vietnamese state-owned utility EVN has raised retail electricity prices by 3pc to partially offset generation costs, a move that could lift its overall finances and support prospects of Vietnam importing more thermal coal.

The average retail electricity price has been increased for the first time since 2019 to 1,920.37 Vietnamese dong/kWh (8¢/kWh) from VND1,864.44, excluding the value added tax, the utility said. The decision, which followed a government order after inter-ministerial discussions, came into effect on 4 May.

EVN said its "electricity production and business costs" rose by 9.27pc in 2022 from 2021, and the decision to increase retail prices by a relatively small margin has been taken to "ensure minimal impact on the economy and people's lives."

The move could help the utility financially as EVN incurred a loss of around VND31 trillion last year. EVN said in February it might incur a loss of up to VND64.9 trillion in 2023, bringing it close to a severe cash crunch if electricity prices are not increased.

The firm last year sought to increase retail electricity prices and introduce a policy that could let power suppliers adjust electricity rates in line with changes in input costs. EVN in February increased the average electricity floor price to VND1,826.22/kWh and ceiling price to VND2,444.09, an increase of VND220/kWh and VND538/kWh respectively, marking the first such revisions since 2017. Among other measures to offset costs, the utility has proposed increasing electricity transmission prices by nearly 4pc to VND79.09/kWh.

EVN's generation and other costs rose because of an increase in international thermal coal prices, prompting it to even shut down some of its power plants. The volatility in international coal prices also led to calls for an increase in domestic coal production and supplies in Vietnam. Indonesia and Australia are two key suppliers of thermal coal to Vietnam. Argus-assessed prices for Australian NAR 5,500 kcal/kg coal averaged $175.90/t fob Newcastle last year, up from $83.40/t in 2021. Indonesian GAR 4,200 kcal/kg coal price averaged $85.35/t compared with $66.04/t in 2021, according to Argus assessments.

The increase in electricity prices could also give EVN some financial headroom to raise thermal coal imports to meet the country's power demand, especially during the ongoing dry season. The power sector accounts for a large portion of the country's coal imports, according to market participants. Vietnamese coal imports fell by 14pc to 31.97mn t in 2022 from 36.38mn t in 2021, according to customs data.

Power consumption up

A unit of EVN, Ho Chi Minh City Power, said electricity consumption continued to increase in the region following an increase in temperatures. Power consumption in Ho Chi Minh rose to an all-time high of 94.8mn kWh. It was an increase of nearly 400,000 kWh compared to the previous peak, it added.

The increased electricity demand could lead to a power overload in some areas, potentially leading to automatic power cuts to ensure grid safety. It advised its customers to use cooling devices such as air conditioners rationally and to be efficient with overall electricity consumption as temperatures increase.

By Saurabh Chaturvedi

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