Viet Nam's competitive energy market (CEM) was launched in Hanoi on July 1, with 48 of the country's 73 power plants with a capacity of more than 30MW already signing up to take part.

Speaking at the launch ceremony, Deputy Minister of Industry and Trade Hoang Quoc Vuong said CEM is expected to create an equal playing field by removing the monopoly that EVN holds over the market, leading to lower costs and ensuring a better balance between demand and supply.

Vuong said that four years of preparation have gone into the establishment of the market, which is expected to improve efficient use of power in the context of a market economy.

"Customers will have the opportunity to choose their own power suppliers and benefit from reasonable prices and reliability," Vuong said.

Dang Huy Cuong, head of the ministry's Electricity Regulatory Authority of Vietnam, said the market is part of the sector's long-term development strategy.

The market will be developed into a competitive market by 2014, a wholesale CEM from 2015-22, and a retail CEM after 2022, he added.

"The market will ensure transparency in the sector as well as attracting investment," Cuong said.

Director of the National Load Dispatch Centre Ngo Son Hai said the market would operate with cost based pricing.

Plants and suppliers will actively alter costs to remain competitive on the market based on various factors including water levels and input costs.

"Power plants will sell 95 percent of electricity to suppliers under contracts and receive the most up to date price for the remaining 5 percent," he said.

This payment will be reviewed and adjusted on an annual basis, taking into account the market's effectiveness.

CEM would not affect the management of existing power plants as the State will continue to manage electricity retail prices with the aim of ensuring economic targets and social security. EVN plants will be reorganised into independent generators to increase competitiveness.

EVN plants currently account for 61 percent of the sector's capacity.

"CEM is a new and complicated issue that required careful implementation. Its results will be a basis to supplement legal documents and infrastructure in order to minimise the risks of introducing the new mechanism," said EVN's deputy general director Duong Quang Thanh.

Hydropower plants such as Son La, Hoa Binh and Yaly will not participate in CEM as they are designed for social tasks such as flood prevention and drainage.

Pham Hong Khanh, deputy general director of the Vietnam Coal and Mineral Industries Group's Vinacomin Power Holding Corporation which has signed up to the CEM said they have prepared equipment, infrastructure and information for the operation.

"However, we have had to deal with difficulties due to a lack of experience in the sector. In addition, our plants have small capacities which makes it difficult to compete with larger plants," Khanh said.

He suggested a sliding scale dependent on capacity to make it possible for every plant to take part in CEM./.