What are grounds for establishing and adjusting electricity prices from February 1, 2025 according to the Law on Electricity in 2024 in Vietnam?

On November 30, 2024, the National Assembly of Vietnam officially passed the Law on Electricity in 2024.

Law on Electricity in 2024 will take effect from February 1, 2025.

Provisions on electricity prices in Vietnam from February 1, 2025

The electricity price in Vietnam from February 1, 2025, is stipulated in Article 50 of the Law on Electricity in 2024 as follows:

- Retail electricity prices are stipulated as follows:

+ Retail electricity prices are formulated by electricity retailers based on electricity pricing policies, the average retail electricity price range, mechanisms for adjusting average retail electricity prices, and the structure of retail electricity tariffs;

+ Retail electricity prices are detailed for each customer group using electricity suitable to the socio-economic conditions of each period and the competitive electricity market level, including production, business, public service, and residential use.

Retail electricity pricing based on usage time during the day is applicable to eligible electricity users, including peak, off-peak, and normal retail electricity prices.

For residential electricity users, a progressive tiered retail electricity price is applied for customers who are ineligible or do not participate in the competitive electricity market.

- Wholesale electricity prices under electricity purchase agreements are negotiated by power units, ensuring the right to independently determine purchase and sale prices without exceeding the price range and retail electricity tariff structure set by the State;

- The authority to establish, submit, approve, and decide on electricity prices is stipulated as follows:

+ The Government of Vietnam stipulates mechanisms and timelines for adjusting the average retail electricity price;

+ The Prime Minister of the Government of Vietnam stipulates the retail electricity tariff structure and the average retail electricity price range;

+ The Ministry of Industry and Trade formulates, submits to the Government of Vietnam and the Prime Minister of Vietnam the stipulations of the aforementioned two contents; submits to the Prime Minister of Vietnam decisions on electricity prices in rural, mountainous, border, and island areas not connected to the national power grid, suitable to the competitive electricity market level; the roadmap for reducing cross-subsidies in electricity prices stipulated in Clause 12, Article 5 of the Law on Electricity in 2024; the roadmap for improving the retail electricity tariff structure, including multi-component retail electricity prices with at least two components such as capacity price, energy price, fixed price, variable price, or other price components (if any) applicable to customer groups when technical conditions allow; appropriate electricity pricing mechanisms for customer groups using electricity as specified in Clause 12, Article 5 of the Law on Electricity in 2024;

+ The Minister of Industry and Trade stipulates the method for determining wholesale electricity prices and the method, sequence, and procedure for approving the wholesale electricity price range.

Grounds for establishing and adjusting electricity prices from February 1, 2025 according to the Law on Electricity in 2024 in Vietnam

According to Article 52 of the Law on Electricity in 2024, the grounds for establishing and adjusting electricity prices from February 1, 2025, include:

(1) Electricity pricing policy;

(2) The country's socio-economic development conditions;

(3) Electricity supply and demand relationship;

(4) Reasonable production, business costs, and reasonable profits of the power unit;

(5) Competitive electricity market level;

(6) Annual audited financial statements of the power unit.

- The adjustment of the average retail electricity price is regulated as follows:

+ Retail electricity prices are reflected and adjusted promptly according to actual input variable fluctuations, covering reasonable and valid costs with reasonable profits to preserve and develop the business capital of the enterprise in line with the socio-economic conditions of each period and the competitive electricity market level;

+ When the retail electricity market operates, retail electricity prices are implemented based on market mechanisms;

- The power unit is responsible for preparing and publicly announcing annually electricity production and business costs. The form and content of disclosure are conducted as prescribed by law.

- The basis for adjusting the electricity generation service price in signed electricity purchase agreements includes:

+ Changes in policies and laws issued by competent state agencies adversely affecting the legitimate interests of the electricity seller or buyer;

+ Implementing requests for reviewing and adjusting the electricity generation service price by competent state agencies;

+ The electricity seller is assigned to invest in constructing, upgrading, and renovating items (beyond the investment management scope of the power generation unit under a signed electricity purchase agreement) to implement planning or meet new technical standards and regulations as prescribed by law;

+ Optimizing management processes, production, technology changes, and innovative activities in electricity production.

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