Competitive energy industry still possible

A worker fixes a transformer to provide power to households in northern Lai Chau Province. The PM has ordered a halt to the establishment of EVN’s Power Trading JSC. • VNA/VNS Photo Ngoc Ha

But it questions just how competitive the market would be due in part to a shortage of electricity sources and a lack of marketing by suppliers.

The report – a review of a trial of the electricity market in January-March and April-July – was issued at a seminar in Ha Noi yesterday attended by representatives of Electricity of Viet Nam; the National Electricity Dispatching Centre and several power utilities.

The trials looked specifically at market regulations, competition, electricity security and financial effectiveness.

The report found that an effective market to entice independent power suppliers to set production schedules, cut costs and shorten maintenance time could be established.

On Tuesday, Prime Minister Nguyen Tan Dung rejected an Electricity of Viet Nam proposal for the establishment of a Power Trading Joint Stock Company to act as the middleman between the State-owned utility and independent power producers.

It means that Electricity of Viet Nam will remain the single electricity buyer and account separately for purchases and sales as a step towards a competitive wholesale market.

The Prime Minister’s decision, contained in document 1332/TTg-DMDN, went to the Trade and Industry and the Finance Ministries as well as Electricity of Viet Nam.

It orders a temporary stop to the equitisation of distribution companies that are subsidiaries of Electricity of Viet Nam.

It tells the Trade and Industry Ministry to make a thorough assessment of the equitisation process at Electricity of Viet Nam companies so as to plan for the restructure and a change of ownership of the subsidiaries by 2010.

The work is to be done in co-operation with the finance, and planning and investment ministries and submitted to the Prime Minister before the end of the year.

The proposal by Electricity of Viet Nam for the establishment of a Power Trading Joint Stock Company to act as the middleman between the State-owned utility and independent power producers was made to the Prime Minister in document 462/TTf-EVN-HDQT.

It drew mixed responses from ministries and other organisations.

World Bank Viet Nam warned that the proposal would create "substantial conflict interest" among electricity suppliers that might increase the cost of power.

The Internal Affairs, Planning and Investment and Finance Ministries also argued against the proposal.

Some suggested the creation of an independent company and a suitable mechanism to govern price subsidies to prevent losses as an alternative.

The former Industry Ministry – now Trade and Industry – said a joint-stock Power Trading Company with its shareholders representing both sellers and buyers would contravene Government Decision 26 for the creation of a competitive electricity market.

Further, a Power Trading Company structured as a joint stock company could create unfairness and inequality in purchasing power in power companies that were not its shareholders.

The Electricity Law was passed by the National Assembly in 2004 and Government Decision No 26/2006/QD-TTf approves a plan and conditions for development of an electricity market in Viet Nam.

The decision has the market working from 2009.

Government Decision No 276/2006-TTg would deregulate the price of electricity from 2010 when the retail price would be allowed to float. • VNS

(Sources: Vietnam News)

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