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

Overview

The Ministry of Industry and Trade (MOIT) has proposed a mechanism to gradually allocate accumulated electricity production costs that have not been fully reflected in retail prices, aiming to resolve the losses of state-owned Vietnam Electricity Group (EVN). The proposal, part of amendments to the Electricity Law, seeks to avoid sudden price shocks to consumers and businesses while ensuring cost recovery for power companies.

Key Facts

• EVN reported accumulated losses of approximately VND 50,029 trillion in 2022-2023 due to input costs not being fully passed through to retail prices.
• By end-2024, EVN’s parent company accumulated losses had reduced to about VND 44,792 trillion after returning to profitability.
• As of May 14, 2025, EVN updated that its parent company accumulated losses had further declined to approximately VND 5,611 trillion by end-2025.
• MOIT proposes that production and supply costs not fully accounted for in a single price adjustment be accumulated and allocated over subsequent price increases.
• The mechanism also applies to costs incurred before the new law takes effect, which will be spread across future price changes.
• In 2022, retail electricity prices were kept unchanged despite surging coal and gas prices due to the Russia-Ukraine conflict, to support economic recovery.
• A similar proposal was made in 2023 during amendments to Decree 72 on average retail electricity prices, but lacked legal basis at the time.

What Happened

In documents submitted to the Ministry of Justice for appraisal of the revised Electricity Law, MOIT stated that retail electricity prices need to closely track input cost fluctuations to ensure power companies can maintain profitability and preserve capital. The ministry proposed that any production and supply costs not fully recovered in a single price adjustment be accumulated and allocated across subsequent increases.

MOIT emphasized that the allocation would be done in small increments, either in full or partially, depending on timing, to avoid sudden impacts on households and businesses. Under favorable conditions, such as abundant hydropower reducing generation costs, the allocation of accumulated costs may not lead to higher retail prices.

Market Context

EVN, as the dominant state-owned power utility, operates under government-regulated retail electricity prices, which have historically lagged behind rising input costs. The company’s losses in 2022-2023 were driven by surging global coal and gas prices, while retail prices were held flat to support economic recovery. The proposed mechanism is a regulatory response to address this structural issue, providing a clearer framework for cost recovery. EVN is not listed on any exchange, but its financial health directly impacts the broader energy sector and listed power generation companies such as PV Power (POW) on HOSE and others.

Strategic Significance

The proposal represents a shift toward cost-reflective pricing in Vietnam’s electricity sector, which is critical for attracting private investment in power generation and grid infrastructure. By formalizing the mechanism to gradually pass through accumulated costs, the government aims to improve EVN’s financial sustainability without causing abrupt price spikes that could fuel inflation or public discontent. For investors in listed power companies, clearer cost recovery rules could reduce regulatory uncertainty and support more predictable earnings, especially for thermal power generators sensitive to fuel price volatility.

What to Watch

• Progress of the revised Electricity Law through the National Assembly and its final provisions on cost allocation.
• MOIT’s subsequent decisions on the timing and magnitude of retail electricity price adjustments.
• EVN’s financial reports for 2025 and 2026 to track the reduction of accumulated losses.
• Impact on inflation and industrial competitiveness, which may influence the pace of price adjustments.
• Reactions from consumer groups and business associations to the proposed mechanism.