Restructuring Vietnam’s Electricity Market: The Politics of Pricing

On 1 November, Vietnam Electricity (EVN), the state utility, cut average retail power prices by 2 per cent. The cut followed an instruction from Deputy Prime Minister Nguyen Van Thang to find savings and lower prices, a month after Prime Minister Le Minh Hung ruled out increases to contain inflation. Vietnam manages electricity prices with one eye on the investment needed to keep the lights on and the other on inflation and public opinion. The latter often wins.

This sits awkwardly with the government’s plan to restructure EVN, which owns the national grid and sells most of the country’s power. As both player and referee, EVN competes with other power plants while owning the wires they need and buying most of their output. Separating the grid and retail sales from EVN would let rivals reach customers on fair terms. Fairer competition, in turn, should attract the investment needed to meet rising demand. But the companies carved out of EVN, including a national grid company and local retailers, will have to pay their own way, even for public services such as supplying electrical power to remote islands. Restructuring EVN, therefore, requires clear rules on who pays when prices fall short of costs.

The need for investment is pressing. Between 2021 and 2024, electricity sales increased by nearly 23 per cent, while Vietnam’s installed generating capacity expanded by only about 7.5 per cent. Hanoi expects demand to rise by 12–14 per cent a year in 2026-2030 to support double-digit economic growth. Its revised power plan estimates that generation and transmission will require USD136.3 billion of investment over that period. EVN’s plan, worth USD32 billion, amounts to less than a quarter of that sum. The balance has to come from other state firms and private developers.

Vietnam’s power system has four components. Power plants generate electricity; a high-voltage grid carries it across the country; local networks distribute it to homes and factories, and retailers sell it to customers (Figure 1). Since 2012, power plants have been competing to sell power. As of the end of 2025, EVN’s share of generating capacity had fallen to 37 per cent. In 2024, the function of the system operator, the grid’s “air-traffic controller” that decides which plants run, was moved from EVN to the Ministry of Industry and Trade (MOIT), the sector’s regulator. But EVN still owns the grid company (the National Power Transmission Corporation, EVNNPT) and five power corporations that handle distribution and retail. It also buys most of the plants’ output, including its own, while negotiating contracts with generators it competes against. That gives EVN incentives to favour its own power plants when buying electricity.

Figure 1. How Vietnam’s power sector is organised and the proposed restructuring

In proposals debated in early October, the industry ministry wants the grid company spun off from EVN as a separate state enterprise. The aim is to put rival generators on an equal footing when the company decides which plants to connect and which lines to upgrade first. EVN also wants to split the five power corporations’ two functions (distribution and retail), so that companies running local wires no longer sell electricity. Rival retailers could then compete using the same wires, as they have in Singapore since 2019. Vietnam’s 2024 Electricity Law requires such a separation.

The Ministry of Finance (MOF), exercising ownership rights over EVN, supports the restructuring but wants to go more slowly. It prefers to keep the grid company within EVN for now and delay creating separate retail subsidiaries until after 2030. The grid company’s liabilities are already close to three times its equity, the threshold for state firms. On its own, MOF estimates it would need USD1.6 billion in fresh capital to finance grid expansion. Separation also raises a legal problem. Under long-term contracts with some power plants, EVN promises that the grid will be available to carry their output. If the grid belongs to another company, EVN can no longer keep that promise on its own, so the contracts would have to be renegotiated.

… political intervention in pricing should be made accountable. Protecting households and keeping costs competitive are legitimate goals. But if a freeze or cut leaves costs unrecovered, the state should make up the difference.

The disagreement comes down to money, which in turn is related to prices. Within EVN, profits in one business can cover losses in another. Once separated, each must survive on its own revenue: the grid company on fees for using its lines, and retailers on customers’ bills. The government controls both, and faces political pressure to keep them low. Without clear rules on who covers any shortfall, these financial concerns could become a permanent excuse to delay competition.

EVN’s recent past shows the cost of that pressure. In 2019, a tariff rise provoked such public anger that the prime minister ordered a government inspection. Average prices then stayed frozen for four years, despite soaring fuel costs in 2022. In 2023, EVN sold electricity at about 6.5 per cent below cost. The group’s accumulated losses reached USD1.5 billion by the end of 2024.

Tariff increases since then helped EVN to turn its fortunes around and book a consolidated profit of around USD2 billion in 2025. But the recovery also owed much to record hydropower output and stable fuel prices, conditions that may not last.

Since May 2024, EVN has been able to adjust average tariffs as often as every three months, subject to government reviews. Yet prices rose only twice, in October 2024 and May 2025, then held steady until this month’s cut. The government’s orders to freeze then cut prices show that rules on paper have not taken pricing out of politics.

Two lessons apply here. First, restructuring EVN requires a timetable backed by capital commitments, agreed changes to contracts and network charges that cover each company’s costs. The plan must specify which companies inherit public-service duties and how these will be funded. That would reconcile the industry ministry’s push for competition with the finance ministry’s concern for solvency.

Second, political intervention in pricing should be made accountable. Protecting households and keeping costs competitive are legitimate goals. But if a freeze or cut leaves costs unrecovered, the state should make up the difference. The draft Electricity Law amendment proposes such compensation, but it should specify whether the budget will cover the shortfall or tariffs will rise later on a predictable schedule. Published cost reviews should reduce waste and pass savings on to consumers. Targeted support for vulnerable households should come from the budget, not from higher bills for other customers.

Restructuring EVN can make competition credible and attract more private capital into the power sector. But its success depends on the harder politics of pricing. If Hanoi wants cheap power, it must be prepared to pay for it.

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