From May 15, 2024, increase electricity prices when the average electricity selling price increases by 3% or more compared to the current average selling price, right?
Starting from May 15, 2024, will electricity prices increase when the average retail price of electricity increases from 3% or more compared to the current average retail price of electricity?
On March 26, 2024, the Government of Vietnam promulgated Decision 05/2024/QD-TTg regulating the mechanism for adjusting the average retail price of electricity.
Article 3 of Decision 05/2024/QD-TTg clearly stipulates the principle of adjusting the average retail price of electricity as follows:
Principle of adjusting the average retail price of electricity
Annually, after examining the production and business costs of electricity for year N-2 of the Vietnam Electricity Corporation, the average retail price of electricity for year N is considered and adjusted according to the objective fluctuations of input parameters of all stages (electricity generation, transmission, distribution - retail, system operation, and electric market transaction, auxiliary services of the electric system and operation - sector management) and the allocation of other costs not yet included in the electricity price.
During the year, the average retail price of electricity is considered for adjustment based on the updated costs of the generation stage, the cost of purchasing electricity from power plants providing auxiliary services according to the basic input parameters in the generation stage and other costs not yet included in the electricity price.
When the average retail price of electricity decreases by 1% or more compared to the current average retail price, the electricity price is allowed to be adjusted correspondingly.
When the average retail price of electricity increases by 3% or more compared to the current average retail price, the electricity price is allowed to be adjusted upward.
The minimum adjustment period for the average retail price of electricity is 03 months from the most recent price adjustment.
The average retail price of electricity is calculated according to the provisions of Article 4 of this Decision. In cases where the calculated average retail price of electricity is outside the price range, it is only considered for adjustment within the price range prescribed by the Prime Minister of the Government of Vietnam. The Vietnam Electricity Corporation is allowed to increase or decrease the average retail price of electricity within the price range according to the mechanism prescribed in Articles 5 and 6 of this Decision.
In cases where the required adjustment of the average retail price of electricity is 10% or more than the current average retail price or affects the macroeconomic situation, the Ministry of Industry and Trade shall preside, in cooperation with relevant ministries and agencies, to inspect, review, and report to the Prime Minister of the Government of Vietnam for consideration and opinion. If necessary, the Ministry of Industry and Trade shall cooperate with relevant ministries and agencies to report to the Price Steering Committee before reporting to the Prime Minister of the Government of Vietnam.
The adjustment of the average retail price of electricity must be conducted openly and transparently.
Thus, electricity prices will be adjusted every 3 months instead of every 6 months as per the current regulations (Clause 5, Article 3 of Decision 24/2017/QD-TTg) when the average retail price of electricity increases by 3% or more compared to the average retail price currently applied at the time the price adjustment is considered.
Starting from May 15, 2024, will electricity prices increase when the average retail price of electricity increases from 3% or more compared to the current average retail price of electricity? (Image from the Internet)
How is the mechanism for adjusting the average retail price of electricity annually?
Based on Clause 1, Article 5 of Decision 05/2024/QD-TTg, it is regulated on the basis of the power supply plan and operation of the power system for year N issued by the Ministry of Industry and Trade, the results of inspecting the production and business costs of electricity for year N-2 as stipulated in Article 7 of Decision 05/2024/QD-TTg, and the estimated results of production and business of electricity for year N-1 (in cases where the inspection results of the production and business costs of electricity for year N-1 are not yet available).
Before January 25 of year N, the Vietnam Electricity Corporation calculates the average retail price of electricity according to the formula regulated in Clause 2, Article 4 of Decision 05/2024/QD-TTg and complies with the dossier requirements as stipulated in Clause 2, Article 5 of Decision 05/2024/QD-TTg:
- In cases where the calculated average retail price of electricity decreases by 1% or more compared to the current average retail price, the Vietnam Electricity Corporation is responsible for reducing the average retail price of electricity at the corresponding rate.
Within 05 working days from the date of adjustment, the Vietnam Electricity Corporation has the responsibility to prepare a dossier and report to the Ministry of Industry and Trade as the lead agency, cooperating with relevant ministries and agencies to inspect and supervise.
- In cases where the calculated average retail price of electricity needs to be adjusted upward by 3% to less than 5% compared to the current average retail price, the Vietnam Electricity Corporation decides to adjust the average retail price of electricity upward at the corresponding rate.
Within 05 working days from the date of adjustment, the Vietnam Electricity Corporation prepares a dossier and reports to the Ministry of Industry and Trade as the lead agency, cooperating with relevant ministries and agencies to inspect and supervise.
- In cases where the calculated average retail price of electricity needs to be adjusted upward by 5% to less than 10% compared to the current average retail price, the Vietnam Electricity Corporation is allowed to adjust the average retail price of electricity upward at the corresponding rate after reporting and obtaining the consent of the Ministry of Industry and Trade.
Within 15 working days from the date of receiving the complete price scheme dossier from the Vietnam Electricity Corporation, the Ministry of Industry and Trade is responsible for providing a written response for the Vietnam Electricity Corporation to implement. Within 05 working days from the date of adjustment, the Vietnam Electricity Corporation has the responsibility to report to the Ministry of Industry and Trade.
- In cases where the calculated average retail price of electricity needs to be adjusted upward by 10% or more compared to the current average retail price or affects the macroeconomic situation, based on the price scheme dossier submitted by the Vietnam Electricity Corporation, the Ministry of Industry and Trade shall preside over the inspection, review, and consult the Ministry of Finance and relevant ministries and agencies. Based on the feedback from the Ministry of Finance and relevant ministries and agencies, the Ministry of Industry and Trade will aggregate and report to the Prime Minister of the Government of Vietnam for consideration and opinion.
If necessary, the Ministry of Industry and Trade shall cooperate with relevant ministries and agencies to report to the Price Steering Committee before reporting to the Prime Minister of the Government of Vietnam.
How is the mechanism for adjusting the average retail price of electricity during the year?
Based on Clause 1, Article 6 of Decision 05/2024/QD-TTg, before the 25th of the first month of Quarter II, Quarter III, and Quarter IV, the Vietnam Electricity Corporation shall:
- Determine the actual commercial electricity output of the previous quarter and the total cumulative commercial electricity output from the beginning of the year, estimate the commercial electricity output for the remaining months of the year;
- Determine the generation costs of the immediately preceding quarter, the cumulative generation costs from the beginning of the year (including the cost of purchasing electricity from power plants providing auxiliary services), estimate the generation costs for the remaining months of the year according to the basic input parameters in the generation stage and update other costs not yet included in the electricity price to recalculate the average retail price of electricity according to the formula stipulated in Clause 2, Article 4 of Decision 05/2024/QD-TTg (other parameters remain unchanged);
- Comply with the dossier requirements stipulated in Clause 2, Article 6 of Decision 05/2024/QD-TTg:
+ In cases where, after updating calculations, the calculated average retail price of electricity is 1% or more lower than the current average retail price, the Vietnam Electricity Corporation is responsible for reducing the average retail price of electricity at the corresponding rate.
Within 05 working days from the date of adjustment, the Vietnam Electricity Corporation has the responsibility to prepare a dossier and report to the Ministry of Industry and Trade as the lead agency, cooperating with relevant ministries and agencies to inspect and supervise.
+ In cases where, after updating calculations, the calculated average retail price of electricity needs to be adjusted upward by 3% to less than 5% compared to the current average retail price, the Vietnam Electricity Corporation decides to adjust the average retail price of electricity upward at the corresponding rate.
Within 05 working days from the date of adjustment, the Vietnam Electricity Corporation prepares a dossier and reports to the Ministry of Industry and Trade as the lead agency, cooperating with relevant ministries and agencies to inspect and supervise.
+ In cases where, after updating calculations, the calculated average retail price of electricity needs to be adjusted upward by 5% to less than 10% compared to the current average retail price, the Vietnam Electricity Corporation is allowed to adjust the average retail price of electricity upward at the corresponding rate after reporting and obtaining the consent of the Ministry of Industry and Trade.
Within 15 working days from the date of receiving the complete price scheme dossier from the Vietnam Electricity Corporation, the Ministry of Industry and Trade is responsible for providing a written response for the Vietnam Electricity Corporation to implement.
Within 05 working days from the date of adjustment, the Vietnam Electricity Corporation has the responsibility to report to the Ministry of Industry and Trade.
+ In cases where, after updating calculations, the calculated average retail price of electricity needs to be adjusted upward by 10% or more compared to the current average retail price or affects the macroeconomic situation, based on the price scheme dossier submitted by the Vietnam Electricity Corporation, the Ministry of Industry and Trade shall preside over the inspection, review, and consult the Ministry of Finance and relevant ministries and agencies.
Based on the feedback from the Ministry of Finance and relevant ministries and agencies, the Ministry of Industry and Trade will aggregate and report to the Prime Minister of the Government of Vietnam for consideration and opinion.
If necessary, the Ministry of Industry and Trade shall cooperate with relevant ministries and agencies to report to the Price Steering Committee before reporting to the Prime Minister of the Government of Vietnam.
Decision 05/2024/QD-TTg comes into effect from May 15, 2024.
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