From May 15, 2024, shall the electricity price in Vietnam be increased when the average electricity price is increased by 3% or more compared to the current average electricity price?
- Shall the electricity price in Vietnam be increased when the average electricity price is increased by 3% or more compared to the current average electricity price?
- What is the mechanism for adjustment of the annual average electricity price in Vietnam?
- What is the mechanism for adjustment of average electricity price in the year in Vietnam?
Shall the electricity price in Vietnam be increased when the average electricity price is increased by 3% or more compared to the current average electricity price?
On March 26, 2024, the Government of Vietnam issued Decision 05/2024/QD-TTg to provide for the mechanism for adjustment of average retail electricity prices.
In Article 3, Decision 05/2024/QD-TTg, the principles for adjustment of electricity prices are specified as follows:
Principles of adjustment of average retail electricity prices
1. Upon the annual inspection of the electricity production and business costs in year N-2 of the Vietnam Electricity (EVN), the average electricity price in year N shall be considered and adjusted according to the unforeseen change in input parameters of all phases (including generation, transmission, distribution - retail, load dispatching, regulation of electricity market transactions, ancillary services for power system and administration) and other costs not yet included in the electricity price.
2. The average electricity price shall be considered and adjusted in the year by way of updating costs of electricity generation and payments for purchase of electricity from power plants providing ancillary services according to the basic input parameters in electricity generation and other costs not yet included in the electricity price.
3. When the average electricity price is reduced by 1% or more, compared to the current average electricity price, the electricity price can be reduced correspondingly.
4. When the average electricity price is increased by 3% or more, compared to the current average electricity price, the electricity price can be increased correspondingly.
5. The average electricity price may be adjusted after a period of at least 03 months as from the latest adjustment thereof.
6. The average retail electricity price is calculated as prescribed in Article 4 of this Decision. In case the calculated average electricity price is outside the price bracket, it shall only be considered and adjusted within the price bracket as prescribed by the Prime Minister. EVN is entitled to increase or reduce the average retail electricity price within the price bracket according to the mechanism specified in Articles 5 and 6 of this Decision.
If the average electricity price needs to be increased by 10% or more, compared to the current average electricity price or the increase impacts the macroeconomic status, the Ministry of Industry and Trade shall preside over and cooperate with related Ministries and agencies in carrying out inspection and review, and submitting a report thereon to the Prime Minister for his consideration and opinions. Where necessary, the Ministry of Industry and Trade shall cooperate with related Ministries and agencies in submitting a report to the Price Administration Steering Committee before submitting it to the Prime Minister.
7. The adjustment of the average electricity price must be transparent and disclosed to the public.
Thus, electricity prices will be increased over 3 months instead of 6 months as specified in Clause 5, Article 3, Decision 24/2017/QD-TTg when the average electricity price is increased by 3% or more compared to the average electricity price at the time of adjustment consideration.
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What is the mechanism for adjustment of the annual average electricity price in Vietnam?
Under Clause 1, Article 5, Decision 05/2024/QD-TTg, based on the plan for power supply and power system operation in the year N promulgated by the Ministry of Industry and Trade, the result of inspection of electricity production and business costs in the year N-2 as prescribed in Article 7 herein, and estimated result of electricity production and business in the year N-1 (in case the result of inspection of electricity production costs is unavailable), before January 25 of the year N, EVN shall calculate the average electricity price according to the formula mentioned in clause 2 Article 4 herein and comply with the documentation requirements specified under clause 2 of this Article:
- Where the calculated average electricity price is reduced by 1% or more, compared to the current average electricity price, EVN shall reduce the average electricity price correspondingly.
Within 05 working days from the date of the reduction, EVN shall compile a dossier and report to the Ministry of Industry and Trade, which will preside over and cooperate with related Ministries and agencies for inspection and supervision.
- Where the average electricity price needs to be increased by 3% to less than 5%, compared to the current average electricity price, EVN shall decide to increase the average electricity price correspondingly.
Within 05 working days from the date of the increase, EVN shall compile a dossier and report to the Ministry of Industry and Trade, which will preside over and cooperate with related Ministries and agencies for inspection and supervision.
- Where the average electricity price needs to be increased by 5% to less than 10%, compared to the current average electricity price, EVN is permitted to increase the average electricity price correspondingly after submitting a report to and obtaining approval from the Ministry of Industry and Trade.
Within 15 working days from the date of receiving sufficient electricity pricing planning documentation submitted by EVN, the Ministry of Industry and Trade shall give a written response to EVN for implementation thereof. Within 05 working days from the date of the increase, EVN shall submit a report to the Ministry of Industry and Trade.
- Where the average electricity price needs to be increased by 10% or more, compared to the current average electricity price or impacts the macroeconomic status, the Ministry of Industry and Trade shall, according to the electricity pricing planning documentation submitted by EVN, preside over inspection and review of the documentation, and send it to the Ministry of Finance and related Ministries and agencies to seek their opinions.
According to the opinions of the Ministry of Finance and related Ministries and agencies, the Ministry of Industry and Trade shall consolidate them and report to the Prime Minister for his consideration and opinions.
Where necessary, the Ministry of Industry and Trade shall cooperate with related Ministries and agencies in submitting a report to the Price Administration Steering Committee before submitting it to the Prime Minister.
What is the mechanism for adjustment of average electricity price in the year in Vietnam?
Under Clause 1, Article 6, Decision 05/2024/QD-TTg, before 25th of the first month of the 2nd, 3rd, and 4th Quarter, EVN shall:
- Determine the actual commercial electricity generation of the previous quarter, and total commercial electricity generation accrued from the beginning of year, estimated total commercial electricity generation of the remaining months in the year;
- Determine the cost of electricity generation of the immediately preceding quarter, the cost of electricity generation accrued from the beginning of year (including the payments for purchase of electricity from power plants providing ancillary services), estimated cost of electricity generation of the remaining months in the year according to the basic input parameters in electricity generation, and update other costs not included in the electricity price so as to calculate the average electricity price by adopting the formula prescribed in clause 2 Article 4 herein (other parameters remain unchanged)
- Comply with the documentation requirements specified in Clause 2, Article 6, Decision 05/2024/QD-TTg:
+ Where the calculated average electricity price is 1% or more lower than the current average electricity price after calculation, EVN shall reduce the average electricity price correspondingly.
Within 05 working days from the date of the reduction, EVN shall compile a dossier and report to the Ministry of Industry and Trade, which will preside over and cooperate with related Ministries and agencies for inspection and supervision.
+ Where the average electricity price needs to be increased by 3% to less than 5%, compared to the current average electricity price after calculation, EVN shall decide to increase the average electricity price correspondingly.
Within 05 working days from the date of the increase, EVN shall compile a dossier and report to the Ministry of Industry and Trade, which will preside over and cooperate with related Ministries and agencies for inspection and supervision.
+ Where the average electricity price needs to be increased by 5% to less than 10%, compared to the current average electricity price after calculation, EVN is permitted to increase the average electricity price correspondingly after submitting a report to and obtaining approval from the Ministry of Industry and Trade.
Within 15 working days from the date of receiving sufficient electricity pricing planning documentation submitted by EVN, the Ministry of Industry and Trade shall give a written response to EVN for implementation thereof. Within 05 working days from the date of the increase, EVN shall submit a report to the Ministry of Industry and Trade.
- Where the average electricity price, after calculation, needs to be increased by 10% or more, compared to the current average electricity price or impacts the macroeconomic status, the Ministry of Industry and Trade shall, according to the electricity pricing planning documentation submitted by EVN, preside over inspection and review of the documentation, and send it to the Ministry of Finance and related Ministries and agencies to seek their opinions.
According to the opinions of the Ministry of Finance and related Ministries and agencies, the Ministry of Industry and Trade shall consolidate them and report to the Prime Minister for his consideration and opinions.
Where necessary, the Ministry of Industry and Trade shall cooperate with related Ministries and agencies in submitting a report to the Price Administration Steering Committee before submitting it to the Prime Minister.
Decision 05/2024/QD-TTg will come into force on May 15, 2024.
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