Competitive electricity market to officially function next year

Competitive electricity generation market program will be fully operated from January 1 next year, opening chances for more businesses to invest in the field and offer competitive, reasonable and practical wholesale prices.

A hydropower reservoir (Photo: SGGP)
A hydropower reservoir (Photo: SGGP)

Mr. Nguyen Anh Tuan, head of the Electricity Regulatory Authority of Vietnam (ERAV) under the Ministry of Industry and Trade said, the program was approved by the Prime Minister and started pilot operation on July 1, 2012.

As of September this year, the country has had 87 power plants attending competitive electricity wholesale network with the total capacity reaching 22,946MW, up 2.8 times compared to that six years ago when there was only 31 plants.

Currently, the program has only been applied in wholesale channel. Products of power plants that offer prices lower than other suppliers will be bought first to meet production and trading demand.

Despite creating a mechanism for electricity producers to compete equally, the program has more benefited hydropower plants than thermal power plants according to some experts.

Thermal power plants have paid high input cost which continuously fluctuates so they must offer prices according to material prices, they say.

Mr. Phung Van Sinh, deputy director general of Power Generation Corporation 1 (Genco 1), said that hydropower plants also have their own difficulties. For instance, they have to depend on water source and weather conditions.

Rainfall has been unusual in recent years so it has been difficult for hydropower plants to conduct their production plans.

The Ministry of Industry and Trade said that after six years of pilot operation, the program had created a relatively competitive mechanism. Power sale contracts have based on prices offered from low to high by many suppliers.

However, businesses still concern about electricity prices. Specifically, ceiling price has been too high while floor price has been too low with only VND1 a kWh. This has caused average price in the market always lower than prices in contracts.

Average price in the market is only around VND1,100 a kWh during peak time in the dry season.

Hence, businesses have proposed the Ministry of Industry and Trade to suitably calculate ceiling price in the market to rightly reflect supply-demand rule.

Professor Dr. Dinh Trong Thinh from Financial Institution said that implementation of competitive electricity generation market has showed some problems. There are many suppliers but only one buyer who is Vietnam Electricity (EVN), resulting in price squeeze and monopoly sometimes.

He proposed to reduce the monopoly of EVN through restructuring because the program’s purpose is to benefit consumers.

If there is only competition in purchase and sale prices among businesses without impact on retail price, consumers still stand outside the program and are unaware of electricity price constituents, the program will fail to obtain its target.

Competitive electricity generation program implementation alone will not create low prices for consumers. That requires to reduce monopoly to ensure fair competition.