Vietnam power monopoly reveals price calculations, doubts linger

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State-owned utility Electricity of Vietnam has finally published its price calculations after years of criticism for lack of transparency. However, doubts are still heavy.

The Ministry of Industry and Trade reported EVN's 2012 prices at a press conference on Friday, following an order by Prime Minister Nguyen Tan Dung.

Dang Huy Cuong, chief of the ministry's Department for Electricity Adjustment, said it is the obligation of EVN, which produces 70 percent of the electricity in Vietnam and is the country's sole distributor, to make its prices public, and it is also a foundation for future price adjustments.

Since December 2011, EVN has increased power prices five times, claiming the hikes were necessary to cover the increasing costs of inputs like coal and gas. But its claims caused skepticism among consumers and economists due to the lack of transparency in its price calculations and business performance.

Dinh The Phuc, deputy head of the department, told the press that last year electricity's cost price was VND1,322.55 dong per kWh, including the costs of production, transmission, distribution, and management.

It was an increase of three percent from 2011 due to rises in coal prices.

Electricity was sold at VND1,364.31 dong per kWh in 2012, and EVN earned VND4.4 trillion (US$207.5 million) in profits from electricity business that year.

Dinh Quang Tri, deputy director general of EVN, said they estimated this year's profits to be over VND4 trillion, but will spend VND4 trillion offsetting losses it made in 2010 and 2011.

EVN's accumulative losses were over VND19.8 trillion ($933 million) as of 2012, Tri said.

Fair enough?

In its report to the State Audit Office of Vietnam, EVN said its 2012 cost price was VND1,308 dong per kWh, lower than the price announced at the press conference.

Asked about the difference, Tri said "it is not a big problem," because under accounting rules, if errors are detected in accounts this year, they can be adjusted later next year.

He also said his company is still working with the state audit.

Vu Gia Phan, a representative of the Vietnam Association for Consumer Protection, said all figures reported at the press conference were based on EVN's reports, so it was difficult to verify the figures' accuracy.

An economist who wished to stay unnamed also raised his doubts in an interview with Thanh Nien, saying that many costs accounted for by EVN were "unreasonable."

He was also concerned about the difference between the figure announced at the press conference and the one reported with the state audit.

He said EVN made big profits, because their prices were higher than input costs, but they still increased prices two times in 2012, which was "unfair" to consumers

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In the meantime, economist Ngo Tri Long told Tuoi Tre (youth) newspaper that EVN might have earned as much as VND22 trillion ($1.03 billion) in profits last year.

He said that in 2011 the company reported accumulative losses of VND38 trillion ($1.8 billion) but the losses had been reduced to VND19.8 trillion in 2012, meaning that it must have earned much more than the reported VND4.4 trillion to be able to make such reductions.

Perhaps EVN's leaders did not want to announce the real profits for fear that it would cause negative reactions from the public, Long said.

Last month the government allowed EVN to increase its prices by 7-10 percent, up from the current 5 percent, starting January 10 next year.

The new regulation stipulates that when changes in fuel prices and exchange rates make basic prices higher than current prices, EVN can increase the latter correspondingly.

However, the company must wait six months between price hikes, instead of three months like now.

EVN can decrease retail prices correspondingly when basic prices fall.

Vietnamese power now costs VND1,508.85 (7.1 cents) per kWh, after the latest adjustment on August 1 this year.

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