Prime Minister Nguyen Tan Dung has approved the increase of 15.28 percent, to take effect next month, following price hikes of about seven percent last year and nine percent in 2008, Vietnam News said.

"The ratcheting up of the electricity price should help the industry to mobilise investment for new power plants to meet the country's burgeoning power demands," the newspaper quoted Ta Van Huong, head of the energy department at the Ministry of Industry and Trade, as saying.

The government says electricity prices in Vietnam are lower than those in other countries in the region, while power demand is expected to increase by at least 16 percent in 2011.

In a presentation made in December to a forum of World Bank and local officials, the European Chamber of Commerce in Vietnam (Eurocham) said the current energy price was too low to attract investors to the sector.

Eurocham cited estimates that Vietnam needs $40-$50 billion in energy infrastructure investment over the next five to 10 years.

Vietnam draws more than one-third of its electricity from hydropower, which leaves the system vulnerable to droughts that lead to blackouts.

"This year the country will face a terrible shortage of electricity," Vietnam News quoted Phuong Hoang Kim, a deputy director in the science ministry, as saying this month.

Vietnam is trying to diversify its power sources. In October it signed a deal worth an estimated $5.6 billion with Russia for its first nuclear power facility.

The government says it will provide subsidies to low-income people to mitigate the impact of the latest electricity price rise.

Inflation in Vietnam has accelerated every month since August 2010, hitting 12.17 percent year-on-year in January, far higher than its neighbours.