Despite local resistance, analysts expect electricity costs in Vietnam to be raised from $0.054/kWh to $0.07/kWh in 2000. The Asian Development Bank and the World Bank insist prices must rise if Vietnam is to contribute 30 per cent of the cost of building new capacity, Dow Jones reports.
Electricity of Vietnam officials say the deadline cannot be met. However, the utility has a new director who is more sympathetic to the need to raise prices. Reducing transmission losses and theft, estimated at 20 per cent of generated power, will also help. With average per capita income only $300 per year, most people will find it hard to pay higher prices. However, electricity consumers are generally from richer urban areas. Many rural villages are not connected to the grid.
Vietnam has suffered power cuts this year, aggravated by a late arrival of annual rains, depleting levels in the reservoir of the Hoa Binh hydropower plant, which produces over 30 per cent of the nation’s power.
New capacity cannot be built without cash. The obvious source is the internatioal money markets, but donors and foreign investors argue that international financing will be impossible to secure if new capacity cannot pay for itself. To achieve this, tariffs must rise.
Negotiations over a $360 million, 300 MWe power station for the northern province of Quang Ninh have stalled, partly as a result of a disagreement with over tariffs. Prices have also been the stumbling block in a planned $1.5 billion gas project to supply fuel for power plants.