Retail power prices in Vietnam are now too low to attract investment, the Vietnam Energy Association has said in a letter to the government, asking for a 60 percent hike next year.
In a recent letter written to the government, the Vietnam Energy Association said current prices of around 5 US cents per kilowatt-hour are not attractive enough as profitability can only be secured at prices of 7-8 cents per kWh.
State-owned power utility Electricity of Vietnam posted a loss of more than VND3 trillion in the first six months this year because retail prices were set at a low level, it said.
"The government should raise electricity prices to 8 cents per kWh starting next year," the association said, adding that this new level would still be lower than regional prices.
The association suggested that the price subsidy system be revised as it was "a waste" to grant subsidies to middle or high income households. Power consumers in Vietnam are currently charged below cost, at VND600 per kWh, for the first 50 kWh they use monthly.
According to the Vietnam Energy Association, the subsidies should only be given to poor families and the program needs to be monitored by a subsidiary under Electricity of Vietnam.
Nguyen Tien Thoa, head of the Price Management Department at the Ministry of Finance, was quoted by news website VnExpress as saying Thursday that the proposal will have to be considered carefully to see whether it's reasonable.
"Right now we don't have an immediate plan for a price hike," he said.
Vietnam increased power prices by 6.8 percent in March based on higher input costs for power production. Before the hike, the Vietnam Energy Association had said the 6.8 percent increase would not be enough to ease the pressure of capital needs of the local power sector, and had proposed a 10.7 percent increase instead. The proposal was rejected.
The government only allows power prices to change once a year, Deputy Industry and Trade Minister Do Huu Hao said late February.