Thuy was addressing a conference, held by the Academy of Finance in Hanoi on Wednesday to discuss management and control of electricity price in a market economy.

Thuy said although the management policy was that electricity pricing had to be market oriented, clarification was needed because the industry was monopolistic and competitiveness was not clear.

This had led to unresolved disputes over the years in negotiations on electricity prices between independent power plants and Electricity of Vietnam (EVN), he said.

It was completely unreasonable to apply competitive price policies to a monopolistic market, and in contrast impose price policies that did not apply in a competitive market, Thuy said.

Nguyen Thi Tuyet Anh said that although the electricity price had been gradually adjusted, following a routine, it had not reflected the overall increases in production costs and costs involved in operating the business efficiently.

Other participants at the conference said there was a need for transparency in electricity price management operating in a market economy.

They agreed that price increases were needed to cover increased costs, but they urged for a detailed plan.

Nguyen Thi Lan from the Academy of Finance said the fact that one big enterprise was controlling most of the generating, transferring, distributing and selling was one of the reasons electricity pricing was opaque, which had made the operation of the electricity sector less effective.

To solve this, the electricity price should be managed under free-market principles, which also could provide a foundation for later restructuring, she said.

Adjustment schedule

The Electricity Regulatory Authority of Vietnam said it had not received a proposal of Electricity of Vietnam (EVN) to hike electricity prices.

Authority director Dang Duy Cuong said the government was considering adjusting electricity prices every three months basing on production and operating costs.

"This is the minimum time for each adjustment. However, the final decision will be determined by the government after referring to the Ministry of Industry and Trade and the Ministry of Finance." Cuong said.

Cuong's remarks followed EVN's announcement that it was considering an increase in electricity prices due to rising production costs.

EVN last month targeted reducing its production costs by 1.8 trillion vietnam dong (US$85.7 million) this year. The cost-cutting measure was included in an agreement embracing their efforts to save electricity and reduce power losses.

Vietnam Investment Review - March 16, 2012