Starting May 10, Vietnam officially raised its average retail electricity price by 4.8%, increasing from VND 2,103.12/kWh to approximately VND 2,204.07/kWh (excluding VAT).

However, the disparity in electricity pricing between customer groups remains stark, with the highest rate for business users reaching VND 5,422/kWh, while manufacturing rates top out at just VND 3,640/kWh.

Under the new pricing framework issued by the Ministry of Industry and Trade on May 9, electricity prices vary significantly across user categories.

For households, residential electricity is divided into six pricing tiers. The lowest tier is VND 1,984/kWh, while the sixth and highest tier is VND 3,460/kWh.

Manufacturing electricity prices are categorized into four voltage levels and vary based on usage time: off-peak, normal, and peak hours. Remarkably, the lowest electricity price for manufacturers is VND 1,146/kWh - applicable during off-peak hours at voltages of 110 kV and above. This is VND 838/kWh lower than the lowest residential rate.

At the other end, the highest manufacturing rate is VND 3,640/kWh (for peak hours at voltages below 6 kV), which is VND 180/kWh higher than the highest household rate, yet still VND 1,782/kWh lower than the peak business rate.

Business customers are subject to the highest electricity rates of all groups. Retail electricity for commercial use is divided into three voltage levels, with rates varying depending on time of use. The lowest business rate is VND 1,829/kWh (for off-peak hours at voltages between 6 kV and 22 kV), which is VND 683/kWh higher than the lowest manufacturing rate and just VND 155/kWh below the lowest residential rate.

Conversely, the highest electricity rate in the commercial group is VND 5,422/kWh - VND 1,962/kWh above the highest residential tier and VND 1,782/kWh higher than the top manufacturing rate.

Overall, electricity for manufacturing is priced significantly lower than for business or residential use - a reflection of the government’s policy to prioritize industrial sectors. However, this has exposed structural limitations within the current pricing mechanism.

At a recent forum, former Director of the Price Management Department Nguyen Tien Thoa highlighted several systemic issues in the current electricity pricing scheme. Chief among them is the lack of a market-based pricing model and the presence of overlapping policy objectives.

Thoa particularly criticized the long-standing cross-subsidization embedded in Vietnam’s electricity tariffs. He pointed out that households subsidize each other, as do households and manufacturers, and even regions subsidize one another through price differentials.

“This outdated mechanism prevents us from implementing a true market-based electricity pricing system,” he said.

As a result, the electricity sector is operating at a loss, as current prices do not reflect the true cost of producing a kilowatt-hour. The price structure is still heavily subsidized, which weakens investment incentives in the power industry.

Thoa warned that the power sector is consistently cash flow negative, meaning it cannot balance its finances - making it difficult to reinvest and sustainably develop. This, in turn, threatens Vietnam’s long-term energy security.

He emphasized the need to move toward a transparent, market-driven pricing system by accurately calculating and fully recovering the cost of electricity and overhauling the current price structure.

The revised Electricity Law, passed by the National Assembly late last year, also sets out the goal of gradually phasing out cross-subsidization between customer groups that do not participate in the competitive retail electricity market. It also aims to eliminate regional price disparities in line with the market’s development level.

Tam An