Obstacles to Competitive Electricity Market

Though the competitive power market has been in operation in Vietnam for some eight months, in practice EVN still holds a monopoly over the market.

The current market has 45 power plants, a number that may increase to 67 in the future. The sole buyer of the electricity they produce is Vietnam Electricity Group (EVN), which is also a power trading company. Many people expressed concern that expanding the market will only make it easier for EVN to buy electricity at low prices and sell it at high prices.

Last year, the Ministry of Industry and Trade gave the green light for EVN to establish three power generation companies, called Genco. These firms will eventually take over EVN’s electricity generating plants and then separate from EVN by 2015. By that time the rate of EVN’s power generation will be reduced to just 17-18%.

However, EVN said that at present these three companies are still in too weak financial position to separate. Their debts to equity ratios are all too high to access credit. EVN officials have stated that the company will continue to access credit on the behalf of the Gencos and make sure their projects continue uninterrupted.

“We will only have true competitive power generation market when the Gencos separate from EVN,” said Tran Dinh Long, Deputy Chairman of the Vietnam Electricity Power Association.

According to the development plan, two phases planned for a competitive market for power generation, the 2005-2014 period and from 2014-2022, it will start the wholesale electricity market plan, the retail electricity market will follow after 2022.

Many experts disagreed with the plan, saying it would need only five years for implementation, not 17. Long said that in order to create a truly competitive market a number of reforms and enterprise restructuring would be needed, in addition to modern technology and equipment.

However, the aim to begin a wholesale electricity market in 2014 seems impractical when the first phrase has not been considered a success.

“Enterprises who have monopolised the market for so long will not give up their profits easily. We need to speed up the restructuring process or we will not be able to meet our goals,” Long said.

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