group asm - evn case

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Question 4: Is EVN a natural monopoly? Explain your conclusion, include any data and evidence if necessary. According to Investopedia, a natural monopoly occurs when there are significant economies of scale in production, making a firm can serve all the market at a lower cost than multiple other firms. Therefore, natural monopolies are often found in industries that require large fixed costs and extensive infrastructure, such as water, gas, and electricity. However, as per the case of EVN, this is not a natural monopoly, but rather a state-owned one.

1. EVN’s dependence on other power suppliers In particular, EVN’s monopoly is most evident in the electricity transmission and distribution sectors, owning and operating all the transmission lines and substations in the country (Thu & Ha, 2023). However, this also means that EVN is the sole buyer of electricity from private power plants, or in other words, EVN does not have a monopoly in electricity production. In particular, EVN only accounts, either directly or indirectly, 37.6% of the 80,000 megawatts installed capacity of the country, while the remaining provided by other sources such as Petrovietnam, Vinacomin, etc. Therefore, even though it is still monopoly in transmission and distribution, this dependence on other power supplies to meet the demand, making it not a natural monopoly.

2. EVN is rather a state-owned monopoly The monopoly of EVN is not natural - not based on cost advantages or technological superiority, but rather on government’s policies and regulations, granting it the exclusive rights and privileges in the electricity market. Particularly, in order to guarantee national energy supplies and prevent private businesses raising up costs, the government needs to maintain a monopoly over transmission and control retails prices. This will ensure affordability for the public, and availability of electricity in remote areas where private firms are reluctant to invest due to low profits. As a result, EVN retains a monopoly in electricity transmission and distribution due to government’s objectives and interests, making it rather a state-owned monopoly.

In general, EVN is not a natural monopoly, but rather a state-owned monopoly, as of government policies and regulations.

https://www.investopedia.com/terms/n/natural_monopoly.asp