State utility EVN proposes trial of two-tier electricity pricing model

State utility Vietnam Electricity (EVN) has proposed piloting a two-tier electricity pricing mechanism for some customer groups before it is expanded nationwide starting January 1, 2025.

In a recent proposal submitted to the Ministry of Industry and Trade (MoIT), EVN said the two-tier pricing model would combine the cost of capacity registered for use and actual energy consumption. At present, charges are levied only on the basis of electricity consumed.

The new mechanism will more accurately reflect the costs consumers impose on the electricity system and prompt more efficient use, it added.

Under the proposal, non-household customers would be subject to a two-tier pricing system that includes a capacity charge and an electricity consumption charge based on peak and off-peak use. This will apply to three main groups of customers: producers, non-manufacturing businesses, and administrative agencies.

The model will also apply to residential customers with high consumption (over 2,000 kWh per month) similar to non-household residential customers but with low-voltage electricity. There are approximately 56,000 such customers, and EVN acknowledges that equipping them with the necessary two-tier metering systems may not be feasible in the initial phase.

In the first stage, EVN does not plan to deploy this system among large residential customers. Instead, the mechanism will initially apply to households consuming less than 2,000 kWh per month, with a fixed-rate charge based on consumption and a uniform electricity rate of VND1,598 (6.3 U.S. cents) per kWh.

As this customer group includes households consuming less than 50 kWh per month, the government will continue to provide subsidies for these users.

The roadmap for the new pricing model consists of a trial phase, a transition phase, pilot application for selected customers, and official rollout in which the two-tier pricing structure will replace the current single-rate system.

During the trial phase, which will run through the end of 2024, EVN will collect real-time data and calculate electricity bills under both the proposed two-tier model and the existing system for regular customers.

After the trial phase, the state utility will finalize the two-tier pricing model and ensure that all legal and technical conditions are in place for full implementation. Once the transition phase concludes, the model will be expanded to all customers, replacing the current pricing system.

According to the sole electricity distributor, the goal is to implement the two-tier pricing system nationwide by January 1, 2025, with the proviso that the pilot phase is successful.

On October 11, EVN increased with immediate effect the average electricity retail price by 4.8% to VND2,103.1 (8.5 U.S. cents) per kWh, not including value-added tax (VAT).

It reported a loss of VND34,225 billion ($1.42 billion) last year for its power business, saying production costs were higher than selling prices.