Vietnam Electricity group (EVN), the sole power distributor, has taken the first step to end its monopoly by opening a pilot competitive generating market on Friday, as the country faces acute electricity shortages that hit manufacturers hard.
This is seen as an attempt to encourage a free power market that could help boost supply, but it comes a day after the finance minister said it might delay a plan to have market-based electricity prices by a year to 2013 on fears that price hikes would worsen inflation.
"This is the first step in the roadmap to develop an electricity market in Vietnam," said Hoang Quoc Vuong, vice minister of trade and industry at a ceremony to open the market.
"It will encourage market competition in power generation, facilitate attraction of investment and contribute to a reliable, high-quality, competitive prices for supply of electricity."
The move will enhance the transparency of electricity providers and eliminate any discrimination of players in the market, said Vuong.
The move to open up the market will be done in phases. Vuong said 48 power plants of above 30 megawatts (MW) out of a total of 73 join the competitive market this month, with 5 percent of their power to be sold on a cost-based price on hour basis and the rest will be paid by contract.
The prime minister in early 2006 approved state utility EVN's master plan for the development of a three-step competitive power market by 2022.
"The final purpose of the competitive generation market is to allow the clients to have the highest quality and most reasonable price," a statement from the Ministry of Trade said. "This is the important step of Vietnam electricity to switch from the current mechanism to the market mechanism."
The Ministry of Trade said any further moves towards a full competitive market will depend on the success of the pilot project. "In a more developed electricity market, the consumers will be able to choose power suppliers," it added.