Recently, the Politburo of the Communist Party of Vietnam (VN) issued clear instructions to relevant departments to "expand retail electricity options" and promote Direct Power Purchase Agreements (DPPAs) nationwide in order to stimulate competition in the electricity market and attract private sector investment in energy. The implementation of this policy requires addressing the core pain points of the current electricity pricing mechanism. According to data from the Electricity of Vietnam (EVN), while approximately 7,700 customers (accounting for 40% of the country's total electricity consumption) are eligible for DPPAs, the current single electricity price system has become a key obstacle, and a more adaptable pricing system is urgently needed.
In response to the current issue of "a single electricity price failing to reflect actual power generation costs," Nguyen Anh Tuan, CEO of Electricity of Vietnam (EVN), clarified in a meeting on September 4th that the company is promoting an upgrade to its pricing mechanism. The core approach is to introduce a two-part electricity price system, whose design logic is highly aligned with the requirements of the DPPA:
The two-part price system splits the electricity bill into a "fixed component" and a "variable component," precisely matching the cost structure of power production and supply:
Fixed electricity charges: Based on the user's "registered capacity," primarily cover the fixed construction and operation and maintenance costs of grid infrastructure (such as transmission lines and substations), ensuring the fundamental guarantee of power supply;
Floating electricity charges: Based on the user's actual electricity consumption, they reflect variable costs on the power generation side (such as fuel procurement and unit operation and maintenance costs), achieving market-based pricing based on "pay as you go."
Compared to the current single electricity price, the two-part tariff directly addresses two core issues in the implementation of DPPAs:
Eliminating cross-subsidies: Under a single electricity price, costs for customers of different electricity consumption scales and types are mixed, leading to implicit cross-subsidies between high-energy-consuming enterprises and ordinary users, undermining their incentive to participate in DPPAs. A two-part tariff precisely splits costs, assigning corresponding costs to each type of customer, ensuring market fairness and providing transparent cost forecasts for DPPA participants.
Adapting to the needs of DPPA customers: Customers eligible for DPPAs are mostly large-scale industrial enterprises or energy investors, whose electricity demand is characterized by "stable capacity but fluctuating usage." In a two-part tariff, a fixed fee locks in base capacity costs, while a floating fee flexibly matches actual usage. This not only meets companies' need for cost controllability but also incentivizes them to optimize electricity efficiency, further aligning with the market-oriented cooperation logic of DPPAs.
It is understood that the pilot program for this power system reform will begin in 2026 and be implemented nationwide in 2027.
