Very low electricity price set for basic need: new research

Jan 10, 2017

Ha Noi 10 January 2017 – “For the first 30kWh per month, a minimal price should be set for all electricity users per month and cash transfer should be eliminated”, recommends a policy discussion paper launched today by the Centre for Analysis and Forecasting of Viet Nam Academy of Social Sciences (CAF/VASS) in collaboration with the United Nations Development Programme in Viet Nam (UNDP) and the British Embassy in Ha Noi.

The paper also recommends another option for the concessional first 30 kWh per month, a freezing of the current tariff and a radical simplification of the cash transfer – merging it into other transfers – and abolishing the usage requirement.

The paper, “Ensuring social equity in Viet Nam’s power sector reforms”, argues that an increase in power tariffs in 2017 and later seems inevitable but current mitigation measures to protect low-income groups against these rises cannot be justified on both efficiency and equity grounds. It points out a number of shortcomings of the current measures and suggests a new mechanism of mitigation measures to ensure social equity in the transition toward a full retail power market and low carbon economy.

According to UNDP Deputy Country Director in Viet Nam Akiko Fujii, today’s workshop presents the fourth and final research outputs of a joint programme between UNDP and a host of national partners  that started in 2010 to support the Government in reforming fossil fuel fiscal policies in Viet Nam.

“The measures proposed today for changes to the tariff structure and electricity cash transfer, do not re-impose a social responsibility on the Electricity of Viet Nam (EVN) but rather they re-shape the charging system to maximize welfare and redistribute costs between users,” Ms Akiko Fujii emphasized. “They offer the basis of a socioeconomically and environmentally sustainable charging system – both protecting the poor and incentivizing energy efficiency”.  

For small and medium enterprises, the paper urges Government to assist and incentivize firms to adopt energy efficient practices and new technologies, so that they can benefit rapidly from tariff changes and ease the transition.

‘’Price changes should be carefully discussed with stakeholders and effectively communicated with enterprises and households in a timely manner to reach consensus in the society’’, said VASS Vice President Phạm Văn Đức.

The paper also highlights the need to explore the possibility of scaling up the production of alternative forms of energy such as wind and solar power. “Technological breakthroughs have led to low cost power plans and the possibility of ‘distributed’ (local) power production through which consumers can reduce their electricity bills and local mini-grids can help remote communities and islands access energy,” the paper says.

“The future will be low carbon,” said Ambassador Giles Lever of the British Embassy in Viet Nam. “The Paris Agreement sent a clear signal on this. The UK has already reduced its emissions by 29% compared with 1990 and we will have reduced our emissions by 52% by 2028. In Vietnam, we are committed to working, along with other international partners, to show that cleaner, lower-carbon growth is not just technically possible, but can lead to a more prosperous and sustainable future”.  

The paper is based on two major research studies – quantitative and qualitative – by the CAF/VASS and the Central Institute for Economic Management with support from UNDP; the UK Foreign and Commonwealth Office and the British Embassy in Viet Nam.

For more information, please read UNDP speech; Policy Brief; the discussion paper

Contact information

Ms Vu Thi Van Ngoc, VASS Center for Analysis and Forecasting. Tel: 84-4-62730475. Email: vanngoc206@gmail.com; or
Nguyen Viet Lan, UNDP Communication. Tel: 84-4-38500158. Email: nguyen.viet.lan@undp.org