Ministry of Industry and Trade: Adjusts electricity prices every two months to follow the market

In the draft Decree on the mechanism to adjust the average retail price of electricity that is being consulted, the Ministry of Industry and Trade proposes to shorten the time to adjust the average retail price of electricity from the current 3 months to 2 months, from most recent change. The price adjustment will be made by the authorities when electricity production costs fluctuate by 2% or more, lower than the current 3% regulation.

At the regular press conference of the Ministry of Industry and Trade on the afternoon of January 7, Mr. Nguyen Quang Minh, Head of the Electricity Market Department of the Electricity Regulatory Authority, said that the proposal to shorten the time to adjust the average retail price will be implemented according to the roadmap to electricity price according to the market.

“The draft is collecting unit opinions and assessing the impact,” Mr. Minh said, adding that this is necessary to adjust the cycle to a shorter period. The management agency will carefully evaluate the impact and propose the most appropriate plan.

According to Deputy Minister Nguyen Sinh Nhat Tan, the development of a decree to implement the amended Electricity Law was approved by the National Assembly at the end of November 2024. “This is to ensure the market nature of electricity prices,” Mr. Tan added.

Specifically, the Law stipulates that retail electricity prices are reflected and adjusted promptly according to actual fluctuations in inputs. This helps offset costs with reasonable profits for businesses to preserve and develop business capital.

Explaining previously, the operator also said that this regulation is in accordance with the direction of the Standing Government on “avoiding jerkiness in operating electricity prices, which can be adjusted many times a year”. On the other hand, currently input parameters for electricity production (oil, gas, coal…) fluctuate quite significantly in a short time. According to the Ministry of Industry and Trade, these changes need to be reflected promptly to limit affects the level of selling price adjustment.

However, analysts believe that the expected adjustment of electricity prices every two months may make it difficult for businesses to estimate and balance costs. Because normally, electricity accounts for 4-10% of a business’s cost of goods sold structure, depending on size and field.

In the long term, experts believe that in order for electricity prices to follow the market, operators need to soon apply the two-component price mechanism, instead of adjusting up or down during the year. According to this calculation, customers will pay separately for each kW of capacity they subscribe to each month with the supplier. When not in use, they still have to pay this cost, instead of the electricity industry paying it and recovering it through price adjustment like today. This is to be transparent, not to cross-subsidize between subjects and to help the electricity industry calculate correct and complete costs.

Regarding the two-component price mechanism, leaders of the Electricity Regulatory Authority said that they and relevant units research and develop a mechanism to serve as a basis for consideration and submission to competent authorities. However, this is a new policy that has a big impact on customers, so operators need to evaluate the impact carefully. “This also follows a roadmap, applies to each customer, not all at once,” he said.