VietNamNet Bridge – World Bank Acting Country Director in Vietnam Martin Rama has expressed his concern about the suggested model of the power trading company (PTC), while Electricity of Vietnam’s Director General Dao Van Hung has rejected his fears, saying that the World Bank’s worries would not come true. Power-trading company to kick off competitive power market  | | Martin Rama (right) and Richard Spencer answer reporters’ questions at an interview | Mr Rama said that the World Bank (WB) and Asian Development Bank (ADB) both had agreed that it was necessary to draw up a roadmap for the establishment of an independent PTC and a competitive power market. Under the economic laws, the selling prices must comprise production costs plus profit for producer. However, the situation is quite different in Vietnam: the selling price is just high enough to cover production costs. Therefore, donors have a reason to ask Vietnam to raise the selling power price to a higher level, so that producers can make profit and have money for re-investment in power generating systems. Though agreeing on the necessity of having independent power trading companies, WB opposes the model of the PTC suggested by the Electricity of Vietnam (EVN). The PTC should represent the Government and act as the intermediary between the seller and buyer. Meanwhile, EVN suggests setting up a joint stock company in which power generators are the shareholders. This will provide the opportunity for the PTC to do the things to make more profit. In order to do that, the PTC will either lower purchasing prices or raise selling prices. In fact, according to Mr Rama, the model of PTC suggested by EVN has never been seen elsewhere in the world. Such a company may lead to a monopoly, which would cause uncontrollable electricity price increases. “The model suggested by EVN is quite different from what we imagined,” said Mr Rama. In principle, high selling prices encourage investors to inject money in power projects, but this does not apply to this case. It is because the high selling price is obtained by the monopoly, not the actual value. Investors will not join the market if they find out that the electricity seller is the representative of the producers, not the intermediary between the seller and the buyer. Richard Spencer, WB’s senior energy expert, has pointed out that with the suggested model, EVN would still be the real owner. Though EVN said it had sold stakes to outside investors, the sold stakes prove to be very small. When asked to give advice on the model of the PTC, Mr Spencer said that it would better if the company belonged to the state, and not controlled by power generating companies. This means that electricity generating companies must not hold shares in the PTC in order to avoid benefit conflicts. | Dao Van Hung, EVN Director General: WB’s worries will not come true  | | EVN’s Director General Dao Van Hung | The worries about abnormally high electricity prices will not come true as the state will still control the electricity price for the next few years. The Ministry of Industry will submit to the Government plans on raising power prices, and the price increases will only be applied after getting the nod from the Government. The PTC will not play any role in defining power prices. However, the company will still get the profit of 5-10% per annum, or VND50-100bil from restructuring profit among power generators. Any plans by the PTC to raise selling prices must get the approval of the company’s supervision board to be implemented. The supervision board will include representatives of the Price Control Department, the Ministry of Finance, the Ministry of Industry’s Power Regulatory Agency, and the Consumers’ Association. I don’t think there will be benefit conflicts as WB fears. When negotiating purchasing prices from with a producer that has shares in the PTC, this producer-shareholder will not be allowed to get involved in the negotiations. The PTC will buy electricity from those who offer the lowest prices. The producers which offer overly high prices will have to wait or temporarily shut down if the trading company has bought enough electricity already. I don’t think that the establishment of the PTC would make production costs higher as WB has warned. Regarding the establishment of a company managed by a state agency as suggested by WB, which will cover many activities, including trade, transmission and distribution, this proves to be unfeasible, as it will be very big in scale. In order to do that, in our estimates, we will need VND4-5tril ($312.5mil) of investment capital. About the worries by WB that the members of the only power purchasing company may collude with each other in bidding for providing new power sources, I can say that this will not happen as the companies will have to respect Vietnamese law. | (Source: Viet Nam Net) | 
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