Vietnam Proposes Gradual Allocation of EVN's Losses into Electricity Prices

Overview

The Ministry of Industry and Trade (MOIT) has proposed a mechanism to gradually allocate the accumulated losses of state-owned electricity utility EVN into retail electricity prices. This aims to ensure cost recovery and create a legal basis for handling the backlog, which stood at VND 44,792 billion as of 2024. The proposal is part of the revised Electricity Law being submitted to the Ministry of Justice.

Key Facts

• EVN’s accumulated losses reached approximately VND 50,029 billion in the 2022-2023 period.
• As of 2024, the parent company EVN’s accumulated losses had reduced to about VND 44,792 billion.
• By the end of 2025, EVN expects accumulated losses to fall to only VND 5,611 billion due to improved operations.
• The MOIT proposes that costs not fully recovered in one price adjustment be accumulated and allocated over subsequent adjustments.
• The mechanism would also apply to costs incurred before the new law takes effect.
• The proposal aims to avoid sudden price impacts on consumers and businesses by using small increments.
• In favorable conditions (e.g., good hydropower), the allocation may not increase electricity prices.

What Happened

In a dossier sent to the Ministry of Justice for appraisal of the revised Electricity Law, the Ministry of Industry and Trade stated that retail electricity prices need to closely follow input cost fluctuations to ensure enterprises can make a profit. The MOIT proposed that production and supply costs not fully accounted for in a single price adjustment be accumulated and allocated into subsequent price increases. Additionally, costs not included in prices before the new law takes effect would also be spread out over future adjustments.

This mechanism was previously raised in 2023 during amendments to Decree 72 on average retail electricity prices, but faced opposition due to lack of legal and practical basis. The MOIT now argues that the mechanism provides the legal foundation to resolve EVN’s backlog.

Market Context

EVN is the dominant state-owned electricity utility in Vietnam, operating under the Ministry of Industry and Trade. The company’s financial health is critical for the stability of Vietnam’s power sector. The proposal comes after EVN reported significant losses in 2022-2023 due to rising input costs (coal, gas) while retail prices were kept stable to support economic recovery. In 2024, EVN returned to profitability, reducing its accumulated losses. The mechanism is seen as a way to gradually recover costs without causing sharp price hikes that could fuel inflation or hurt economic competitiveness.

Strategic Significance

For long-term investors, the proposal signals a shift toward cost-reflective electricity pricing in Vietnam, which is essential for the financial sustainability of the power sector. If implemented, it would reduce the risk of large state-owned enterprises like EVN accumulating unsustainable losses, thereby improving their creditworthiness and ability to invest in new generation capacity. However, the gradual allocation may still lead to periodic price increases, which could affect inflation and the operating costs of listed industrial companies. The mechanism also provides a clearer regulatory framework for future electricity price adjustments.

What to Watch

• Approval of the revised Electricity Law by the National Assembly, expected in late 2025.
• The specific timeline and magnitude of price adjustments once the mechanism is enacted.
• EVN’s financial reports for 2025 to confirm the reduction in accumulated losses.
• Impact on inflation and industrial production costs, especially for energy-intensive sectors.
• Any opposition from consumer groups or businesses regarding the price increases.