Power Sector Reforms and the Poor in Vietnam

The high level of electricity access across Vietnam means that large numbers of the poor have connections and therefore have the potential to be impacted by changes to tariffs and service levels. An estimated 98 percent of households were electrified by 2008, including 99 percent in urban and 97 percent in rural areas. Access to electricity is high even among Vietnam’s poorest households: in 1998, less than half of the poorest ten percent of households (bottom decile) used electricity, compared with 88 percent in 2008. While most of the poor in Vietnam are low consumers of electricity, so are many of the non-poor. In 2008, 65 percent of all households consumed less than 100 kWh/month, including 91 percent of poor urban households and 99 percent of poor rural households. Thus most of the electricity consumed by the poor was subsidized under the pre-2009 IBT lifeline. But so was the consumption of many of the non-poor: in 2008, only 14 percent of households in Vietnam lived below the poverty line. Moving to a lower lifeline threshold reduces leakages albeit at some cost to the poor: 30 percent of households consume less than 50 kWh/month, including 60 percent of poor urban households and 78 percent poor rural households. Despite the tariff increases, electricity remains remarkably affordable to residential consumers in Vietnam. In 2008, households in poorest 10% of the population paid on average 2.9 percent of total cash expenditures for electricity. In contrast, the wealthiest 10 percent of households paid 3.6 percent. And the share of total household spending taken by electricity has been falling in recent years despite rising consumption; the real price of electricity (adjusted for inflation) has been falling.