Dear Sir, the current tariff is revealing many conflicts due to the ambiguous electricity production costs. Diagonal compensation in EVN makes the operating performance of many Power Plants not given proofs. Will ERAV introduce an optimal measure for electricity tariff establishment?
- ERAV project is being implemented with the counsel of KEMA (World Bank). The establishment of electricity tariff has undergone 2 workshops, and today, on November 15, there is the 3rd workshop on this matter in order to specify the method of electricity retail tariff, preparing for the competitive power market which is expected to be put into practice in the period of late 2009-early 2010.
From now to the end of 2009, electricity tariff will be carried out with the roadmap approved by the Government. Since July 1, 2008, average tariff will increase by 4.5%. At present, however, all phases ranging from generation, transmission, distribution are solely managed by EVN based on the internal wholesale tariff and allocation to Retail and Distribution Power Companies. Therefore, it is impossible to separate the phases to clarify the costs. And diagonal compensating accounting in EVN is self-allocated by EVN, so it is very difficult to define the diagonal compensation proportion of companies.
Whether tariff controlling reflects exactly practical costs or not is controversial. The method of establishing electricity retail tariff can only be carried out since 2010 along with the restructuring of power industry. Generating phase will be separated from transmission and distribution phases. Accordingly, transmission will be monopolized by the Government, and distribution companies will be the ultimate sellers collecting money. ERAV will set up different norms and offer the ceiling norm for each period of 3-5 years. Derived from these norms, Power Companies will estimate to recover the costs. If properly managed, the operating performance will be improved.
Norm managing is a story, but there’s another story in which power sector is still complaining about the fact that electricity tariff does not reflect precisely the input costs like that of gas and oil or petrol, and the output price can hardly rise. With the new method of calculating tariff in which the input data are automatically adjusted, is the tariff higher than at present?
- The problem is that it is essential to design a complete market mechanism enabling companies to compete with each other, which will lessen the power production costs. And the fuel price needs to be closed to market price. However, fuel price policy depends on the condition of each nation. For instance, Malaysian Government holds the gas price at a quite low level when there are many gas-fired power companies in this country, which leads to a fact that the tariff is low.
On the other hand, some countries like Thailand or Philippines set the gas price in accordance with the market price, so their tariff will reflect exactly the input costs. For Vietnam, fuel price should be liberalized and commercialized in order for equality for all companies. And the remaining problem is that enterprises must compete by their tariffs to be accepted by customers.
When equitizing, who among power companies will take the responsibility for poor areas?
- In fact, when equitizing, no power company will volunteer to take the responsibility of doing business in remote areas because they do not want to suffer from loss. Nevertheless, the new method of calculating tariff will help to clarify the practical tariff of each power company, then the Government will establish a public fund to transparently compensate.
Companies operating in urban areas with high population density and high average electricity tariff, generating profit will give their money to the public fund. And companies operating in the countryside and mountainous areas with high costs but low tariff will be compensated with favourable policies. Conversely, as a state-owned as well as an public enterprise that has to shoulder a heavy burden, EVN is still ironically considered to have poor operating performance.
Thank you very much.