Vietnam to review power prices on June 1: deputy minister

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The Vietnamese government will review electricity prices at the start of June and may make another adjustment following a double-digit increase in March, a senior official said on Tuesday.

"The government will review power prices on June 1st as part of the policy to review power prices every three months. If the inputs prices increase 5 percent, it's allowed to increase the power price," Pham Hung, Deputy Minister of Trade and Industry, told reporters.

Vietnam raised average prices of electricity by more than 15 percent at the beginning of March in a step that industry officials said was necessary to help trim losses at state power monopoly Vietnam Electricity (EVN), which is forced to sell at artificially low prices.

Demand for electricity has exploded alongside Vietnam's fast-paced economic climb, outstripping supply and leading to frequent blackouts. Hung said the country would have to add an average of 4,600 megawatts of power a year between 2011 and 2015, and 5,400 megawatts between 2016 and 2020.

Vietnam will need to build power plants with a total capacity of more than 50,000 megawatts through 2020, he said.

The power shortfall underscores Vietnam's development challenges, as economists say the March power price hike increase exacerbated already soaring inflation.

The hike contributed to a 13.89 percent year-on-year inflation rate in March. Annual inflation hit a 28-month high in April of 17.51 percent.

Vietnam will put forward policies to encourage investors to help build more power plants, Hung said.

However, industry officials say low electricity prices and insufficient government guarantees were hampering efforts to attract private investment in power generation.

Last month Prime Minister Nguyen Tan Dung approved a plan that would allow EVN to adjust power prices once a quarter, instead of once a year as has been the practice.

EVN would be able to adjust electricity prices if input costs or foreign exchange rates change, and if there are changes in the country's electricity output, according to the plan.

To raise prices by up to 5 percent it would need permission from the Ministry of Industry and Trade. If EVN wanted to increase prices by more than 5 percent it is also required to submit its plan to the Finance Ministry for approval.

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