There are still many concerns.

Accordingly, the Ministry of Industry and Trade has set out a roadmap for a pilot competitive electricity generation market to be put into operation in the second quarter of 2011. After about 6-8 months of trial operation by power plants, state management agencies will control, handle, and supplement regulations and procedures to suit the reality, in order to officially launch the competitive electricity generation market by the end of 2011.

Gradually eliminate EVN's monopoly position in electricity supply.

According to the plan, power plants with a capacity of 30MW or more connected to the national grid are required to participate in the competitive electricity generation market through the following forms: direct transactions (direct competitive bidding) and indirect transactions (bidding by other entities or publishing electricity output). For BOT power plants and multi-purpose hydropower plants, they do not directly participate in the market; instead, the electricity trading company will bid for BOT power plants, and the electricity market and system operator will publish hourly output for strategic multi-purpose hydropower plants.

When participating in the competitive electricity market, power plants will have to bid to the electricity system operator and the electricity market within a price range from floor to ceiling. The plant with the lowest bid price will be prioritized for operation. The electricity system operator and the electricity market are responsible for determining and publishing the floor and ceiling prices for electricity generation of each type of power plant and forecasting load. It is expected that in the first year of implementing the electricity market, the proportion of electricity sold through power purchase agreements will be set at 90-95% of the total electricity produced by the power generation company, with the remainder sold through the spot market. In subsequent years, the proportion sold through contracts will gradually decrease to increase competition in the power generation sector, but will not be less than 60%. Bidding will be supervised by the electricity regulatory authority. Experts hope that, with these principles, EVN's monopolistic position in electricity supply will no longer exist.

Electricity prices - need to be transparent and reasonable.

One of the current challenges is the unreasonable electricity pricing mechanism, which has not been adjusted for many years. The current average retail electricity price of approximately 5.3 cents/kWh is too low, failing to recover costs in the power generation, transmission, and distribution stages. Since input costs in power generation account for up to 70% of the electricity price, if input costs (including coal, gas, electricity, and exchange rates) change without adjusting output prices to balance revenue and expenses, businesses will incur losses. Furthermore, because electricity prices are not clearly separated according to production costs at each stage, it has not attracted investment into the power sector, significantly impacting the operation of the electricity market.

To control and regulate electricity prices, the Ministry of Industry and Trade announced it will introduce a ceiling and floor price framework based on detailed calculations of electricity generation costs for each type of power plant. Electricity price adjustments will fall within this framework, based on fluctuations in the base price. Mr. Pham Manh Thang, Director of the Electricity Regulatory Authority (ERAV), stated that ERAV is currently developing electricity pricing based on four stages: generation, transmission, distribution, and auxiliary operation. Annually, the average electricity selling price is determined based on ensuring the recovery of production and business costs corresponding to these four stages. Quarterly, fluctuations in input factors compared to the base parameters will be reviewed to adjust the average electricity selling price for the quarter. The model contract being developed already takes into account the operating modes of each type of power plant using its own technology. From now until the market becomes operational, state agencies will continue to issue detailed regulations and operating procedures, directing market participants (power plants, sole wholesale buyers, electricity system and market operators, service providers, etc.) to develop synchronous infrastructure to meet market participation requirements, and train personnel to operate the market.

There are still many concerns.

Experts believe that developing a competitive electricity market will benefit all three parties: the State will reduce its investment burden; electricity companies will increase their autonomy; and customers will benefit from the competitive mechanism. However, many still have concerns about the feasibility and transparency of this market. Firstly, there is no standard power plant model to serve as a basis for determining the price and price range for electricity generation. Secondly, currently, the transmission, distribution, and trading of electricity are still in the hands of EVN, so the market cannot be transparent. In other words, if EVN both sells, buys, and operates, objectivity cannot be guaranteed. Thirdly, implementing a competitive electricity market only creates pressure to force power generators to compete, while there are no constraints on transmission and distribution companies. It is projected that by 2015, the total national electricity capacity will be approximately 32,000 MW. Of this, EVN will account for 60%; PVN about 10%; TKV (Vietnam Coal and Mineral Group) holds 10%; the remainder is held by other domestic and foreign investors. Thus, as of 2015, if the electricity trading structure remains unchanged, EVN will still hold a monopoly on the market and electricity purchase prices. If this situation does not improve, building a truly competitive electricity market will be difficult. Furthermore, the State needs to strengthen control over electricity transmission and distribution, separating the electricity trading company and the National Power System Dispatch Center from EVN. Not to mention, the power generation capacity of gas-fired thermal power plants depends heavily on gas suppliers. If the gas supply is not guaranteed, these plants will not be able to participate in a competitive market.

However, Mr. Dao Van Hung, Chairman of the Board of Directors of EVN, believes that separating power generation from EVN requires cautious steps, because EVN is a corporation with relatively large investment capital, and even when it needs investment, it faces significant difficulties. Small, newly established companies cannot demonstrate their financial capacity and therefore cannot obtain loans. It is known that EVN has proposed a plan to establish a pilot power generation company separate from EVN, entrusting it with the operation of a few power plants. EVN will provide capital and human resources to streamline management, create competition in the market, and attract investors outside EVN to invest in power generation projects… All these plants will participate in equal bidding in the market. If this pilot model is successful, other power generation companies will be established. When the market moves towards perfect competition, EVN will reduce its control over these companies.