Decision No. 05/2024/QD-TTg dated March 26, 2024 on prescribing mechanism for adjustment of average retail electricity prices

DECISION

PRESCRIBING MECHANISM FOR ADJUSTMENT OF AVERAGE RETAIL ELECTRICITY PRICES

Pursuant to the Law on Government Organization dated June 19, 2015; Pursuant to the Law dated November 22, 2019 on Amendments to some Articles of the Law on Government Organization and Law on Local Government Organization;

Pursuant to the Law on Electricity dated December 03, 2004; the Law dated November 20, 2012 on amendments to the Law on Electricity; Law January 11, 2022 on amendments to certain Articles of the Law on Public Investment, the Law on Public-Private Partnership Investment, the Law on Investment, the Law on Housing, the Law on Bidding, the Law on Electricity, the Law on Enterprises, the Law on Special Excise Duties and the Law on Civil Judgment Enforcement;

Pursuant to the Law on Prices dated June 20, 2012;

Pursuant to the Government’s Decree No. 137/2013/ND-CP dated October 21, 2013 elaborating a number of Articles of the Law on Electricity and the Law on amendments to the Law on Electricity;

Pursuant to the Government’s Decree No. 177/2013/ND-CP dated November 14, 2013 on elaboration and guidelines for the implementation of certain Articles of the Law on Prices; the Government’s Decree No. 149/2016/ND-CP dated November 11, 2016 on amendments to the Government’s Decree No. 177/2013/ND-CP dated November 14, 2013 on elaboration and guidelines for the implementation of certain Articles of the Law on Prices;

At the request of the Minister of Industry and Trade;

The Prime Minister hereby promulgates a Decision to provide for the mechanism for adjustment of average retail electricity prices.

Article 1. Scope and regulated entities

1. This Decision introduces the mechanism for adjustment of average retail electricity prices.

2. This Decision applies to organizations and individuals who participate in electricity-related activities and use of electricity.

Article 2. Definitions

For the purposes of this Decision, the terms below shall be construed as follows:

1. “average electricity price” means an average retail price of electricity within the bracket of average retail electricity price defined by the Prime Minister.

2. “current average electricity price” means the average price of electricity applied at the time when adjustment of electricity price is under consideration.

3. “electricity purchasers” are Vietnam Electricity and power corporations.

4. “electricity seller” means any electricity generation unit, organization or individual executing power purchase agreements that sign a power purchase agreement with the electricity purchaser.

5. “year N” means the year in which the average electricity price is set as prescribed in this Decision.

6. “bracket of electricity price” means the range of average retail electricity prices between the minimum price and the maximum price stipulated by the Prime Minister.

7. “basic input parameters in electricity generation” mean the factors that directly impact the cost of electricity generation beyond the control of an electric utility, including: fuel prices, exchange rates, structure of the production of electricity delivered and payments for purchase of electricity in the electricity market. The payments for purchase of electricity in the electricity market mean the payments made to electric utilities participating in the electricity market according to regulations on electricity market operation promulgated by the Ministry of Industry and Trade.

Article 3. 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.

Article 4. Methods of setting average electricity prices

1. The average electricity price shall be set according to costs of electricity generation, costs of purchase of services for electricity transmission,  electricity distribution - retail, load dispatching and regulation of electricity market transactions of the power system, costs of ancillary services for power system, administrative costs and other costs, and inclusive of costs directly serving the electricity production and supply by EVN in order to ensure the operation and supply of electricity and meet investment needs under the approved plans, in which deductions must be taken into account when calculating the cost of each phase.

2. The average electricity price in the year N (G_BQ) shall be determined using the following formula:

Where:

a) C_PD: Total cost of electricity generation in year N (VND), which is determined according to the following formula:

C_PD = C_TTD + C_DMT + C_BOT + C_TDN + C_NLTT + C_NK

Where:

C_TTD: Total payment for purchase of electricity in the year N from the power plants that directly or indirectly participate in the electricity market (VND);

C_DMT: Total payment for purchase of electricity and target profit in the year N from multi-purpose and financially dependent hydroelectric plants (VND);

C_BOT: Total payment for purchase of electricity in the year N from BOT power plants (VND);

C_TDN: Total payment for purchase of electricity in the year N from small hydroelectric plants (VND);

C_NLTT: Total payment for purchase of electricity in the year N from power plants using renewable energy and new energy (VND);

C_NK: Total payment for electricity purchase in the year N with regard to imported electricity (VND);

b) C_DVPT: Total costs of power plants providing ancillary services for power system in the year N, including costs of trial operation of such power plants (VND);

c) C_TT: Total cost of purchase of electricity transmission service in the year N (VND);

d) C_PP-BL: Total cost of purchase of electricity distribution - retail service in the year N (VND);

dd) C_chung: Total administrative costs and target profit in the year N (VND);

e) C_DD: Total cost of purchase of services for load dispatching and regulation of electricity market transactions in the year N (VND);

g) C_khac: Total amount of other costs which are not included in the electricity price and are permitted to be included but not yet included in the electricity price, including undistributed exchange differences calculated and included in the average electricity price in the year N (VND);

h) A_TP: Estimated total commercial electricity generation output in the year N (kWh)

3. Payments for purchase of electricity from the electricity seller shall be calculated according to the regulation on level-based operation of electricity market brought into force by the Ministry of Industry and Trade and according to the power purchase agreement signed between the electricity seller and electricity purchaser.

4. Costs of purchase of services for electricity transmission, electricity distribution - retail, load dispatching and regulation of electricity market transactions, costs of power plants providing ancillary services, costs of power plants providing ancillary services for the power system and administrative costs shall be determined according to the costs plus target profit from the phases of electricity transmission, electricity distribution - retail, load dispatching and regulation of electricity market transactions, power plants providing ancillary services for the power system and administration of EVN under regulations adopted by the Ministry of Industry and Trade. Deductions from the costs shall be determined according to the data in the audited financial statement.

Article 5. Mechanism for adjustment of annual average electricity price

1. 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:

a) 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.

b) 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.

c) 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.

d) 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 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.

2. Annual average electricity pricing planning documentation of EVN consists of:

a) An Official Dispatch on the annual average electricity pricing planning documentation of EVN, including analysis and assessment of electricity production and business costs in all phases;

b) Details of the Official Dispatch on the annual average electricity pricing planning documentation of EVN encompass principles of calculating cost of each phase (electricity generation, transmission, distribution - retail, load dispatching, regulation of electricity market transactions, administration), including the principle of anticipating such input parameters as foreign exchange rates, domestic fuel prices and imported fuel prices, prices of power plants expected to be put into operation in the year of calculation but in the presence of a power purchase agreement; table of summary of costs of each phase; table of detailed calculations of each phase; documents used as a basis for the calculation; description of cost norms and unit prices used to calculate estimated costs of the year N of each phase (if any); description of electricity production and business costs that have not been included in the electricity price but have been included in the electricity production price and the remaining balance expected to be included in the average electricity price in the year N; a report on assessment of impacts of electricity price adjustment on payments for electricity purchase of electricity users.

c) Average electricity pricing planning documentation shall be stored in a data storage device sent together with the report on annual electricity pricing planning documentation of EVN.

Article 6. Mechanism for adjustment of average electricity price in the year

1. Before 25^th of the first month of 1^st, 3^rd and 4^th 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) and comply with the documentation requirements specified in clause 2 of this Article:

a) 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.

b) 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.

c) 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.

d) 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 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.

2. Average electricity pricing planning documentation in the year of EVN consists of:

a) An Official Dispatch on the average electricity pricing planning documentation in the year of EVN, including analysis and assessment of costs of electricity generation of the immediately preceding quarter;

b) Details of the Official Dispatch on the annual average electricity pricing planning documentation of EVN encompass principles of calculating cost of each phase (electricity generation, transmission, distribution - retail, load dispatching, regulation of electricity market transactions, administration), including the principle of anticipating such input parameters as foreign exchange rates, domestic fuel prices and imported fuel prices, prices of power plants expected to be put into operation in the year of calculation but in the presence of a power purchase agreement; table of summary of costs of each phase; table of detailed calculations of each phase; documents used as a basis for the calculation; description of cost norms and unit prices used to calculate estimated costs of the year N of each phase (if any); description of electricity production and business costs that have not been included in the electricity price but have been included in the electricity production price and the remaining balance expected to be included in the average electricity price in the year N; a report on assessment of impacts of electricity price adjustment on payments for electricity purchase of electricity users.

c) Average electricity pricing planning documentation in the year shall be stored in a data storage device sent together with the report on annual electricity pricing planning documentation of EVN.

Article 7. Inspection and supervision

1. Inspection of annual electricity production and business costs

a) EVN shall submit to the Ministry of Industry and Trade an annual report on electricity production and business costs audited by an independent audit firm. According to the report on electricity production and business costs and financial statements of EVN and its subsidiaries audited by the independent audit firm as prescribed, the Ministry of Industry and Trade shall preside over and cooperate with the Ministry of Finance in inspecting the electricity production and business costs with the participation of the Commission for the Management of State Capital at Enterprises, Vietnamese Fatherland Front’s Central Committee, Vietnam Chamber of Commerce and Industry, regulatory bodies and related associations. Where necessary, the Ministry of Industry and Trade shall request EVN to hire an independent consultancy to verify the report on electricity production and business costs of EVN and its subsidiaries;

b) Within 30 days from the end of the inspection, the Ministry of Industry and Trade shall disclose the inspection result. The inspection result shall be disclosed on the website of the Ministry of Industry and Trade;

c) Contents of the inspection, supervision and disclosure shall encompass actual costs of all phases (electricity generation, transmission and distribution - retail, load dispatching, regulation of electricity market transactions, administration) and other costs specified in clause 2 Article 4 of this Decision; realized average electricity retail price of EVN; profit and loss regarding electricity production and business by EVN; costs not yet included in the electricity price from the latest adjustment but included in the electricity production price of EVN.

2. Inspection of adjustment of electricity prices

a) In case EVN makes a decision on adjustment of the average electricity price under regulations in points a and b clause 1 Article 5, and points a and d clause 1 Article 6 of this Decision or EVN submits electricity pricing planning documentation to the Ministry of Industry and Trade under regulations in point d clause 1 Article 5 and point d clause 1 Article 6 of this Decision, the Ministry of Industry and Trade shall preside over and cooperate with related Ministries and relevant agencies to consider and verify reports and/or calculations by EVN;

b) If EVN fails to reduce the average electricity price in case it needs to be lowered, the Ministry of Industry and Trade shall request EVN to reduce the average electricity price. EVN shall comply with the request of the Ministry of Industry and Trade within 05 working days from the date of receiving the request;

c) In case of discovering any error in the calculation of the electricity price as prescribed in points a and b clause 1 Article 5 and points a and b clause 1 Article 6 of this Decision, the Ministry of Industry and Trade shall request EVN to suspend the adjustment or re-adjust the average electricity price. EVN shall comply with the request of the Ministry of Industry and Trade within 05 working days from the date of receiving the request.

Article 8. Organizing implementation

1. The Ministry of Industry and Trade shall:

a) Instruct EVN to calculate average electricity prices under regulations in Article 4 of this Decision;

b) Adjust electricity prices as specified in Articles 5 and 6 of this Decision;

c) Preside over inspection and supervision as prescribed in Article 7 of this Decision.

2. Ministries and relevant agencies concerned:

a) The Ministry of Finance shall cooperate with the Ministry of Industry and Trade in implementing this Decision as a price authority;

b) Ministries and relevant agencies shall comment on and cooperate with each other in the issues they are assigned to manage under their authority and regulations of law;

3. The General Statistics Office of Vietnam shall assess the impacts of adjustment of electricity prices on the macroeconomic status.

4. EVN shall:

a) Calculate average electricity prices under regulations in Articles 4, 5 and 6 of this Decision and set 01 set of electricity pricing planning documentation to the Ministry of Industry and Trade;

b) Adjust average electricity prices and submit reports to competent authorities in order for them to carry out inspection and supervision as specified in Articles 5 and 6 of this Decision;

c) Provide related date so as for the General Statistics Office of Vietnam to assess the impacts of adjustment of electricity prices on the macroeconomic status;

d) Submit the report on electricity production and business costs as prescribed in Article 7 of this Decision.

Article 9. Effect

1. This Decision comes into force from May 15, 2024 and supersedes the Prime Minister’s Decision No. 24/2017/QD-TTg dated June 30, 2017.

2. Ministers, heads of ministerial agencies, heads of Governmental agencies, Chairpersons of People’s Committees of provinces and central-affiliated cities, EVN, relevant organizations and individuals are responsible for the implementation of this Decision./.