Decision No. 05/2024/QĐ-TTg on the mechanism for adjusting the average retail electricity price

 

DECISION

On the mechanism for adjusting the average retail electricity price level

                                                                                                          –––––––      

Pursuant to the Law on the Organization of the Government dated June 19, 2015; the Law Amending and Supplementing Certain Provisions of the Law on the Organization of the Government and the Law on the Organization of Local Administration dated November 22, 2019;

Pursuant to the Electricity Law dated December 3, 2004; the Law Amending and Supplementing Certain Provisions of the Electricity Law dated November 20, 2012; the Law Amending and Supplementing Certain Provisions of the Public Investment Law, the Public-Private Partnership Investment Law, the Investment Law, the Housing Law, the Bidding Law, the Electricity Law, the Enterprise Law, the Special Consumption Tax Law, and the Civil Enforcement Law dated January 11, 2022;

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

Based on Decree No. 137/2013/NĐ-CP dated October 21, 2013, issued by the Government, detailing the implementation of certain provisions of the Electricity Law and the Law Amending and Supplementing Certain Provisions of the Electricity Law;

Pursuant to Decree No. 177/2013/ND-CP dated November 14, 2013 of the Government detailing and guiding the implementation of certain provisions of the Price Law; Decree No. 149/2016/NĐ-CP dated November 11, 2016 of the Government amending and supplementing certain provisions of Decree No. 177/2013/ND-CP dated November 14, 2013 of the Government detailing and guiding the implementation of certain provisions of the Price Law;

At the proposal of the Minister of Industry and Trade;

The Prime Minister promulgates this Decision on the mechanism for adjusting the average retail electricity price level.

 

Article 1. Scope of Regulation and Applicability

1. This Decision stipulates the mechanism for adjusting the average retail electricity price level.

2. This Decision applies to organizations and individuals participating in the electricity sector and using electricity.

Article 2. Interpretation of Terms

In this Decision, the following terms shall be understood as follows:

1. Average retail electricity price is the average retail electricity price within the range of the average retail electricity price ceiling set forth by

2. Average retail electricity price currently in force is the average retail electricity price being applied at the time of considering the adjustment of electricity prices.

3. The buyer of electricity is Vietnam Electricity Group and the Electricity Corporations.

4. The seller of electricity are power generation units, organizations, and individuals implementing power purchase and sale contracts with the power purchaser.

5. Year N is the year in which the average retail electricity price is established according to this Decision.

6. Price ceiling is the range between the minimum price and the maximum price of the average retail electricity price set forth by

7. Basic input parameters in the power generation phase are factors directly affecting power generation costs that the electricity corporation cannot control, including fuel prices, foreign exchange rates, production structure, and electricity purchase costs on the electricity market, where electricity purchase costs on the electricity market are the costs paid to power generation units participating in the electricity market according to the operation rules of the electricity market issued by the Ministry of Industry and Trade.

Article 3. Principles for Adjusting the Average Retail Electricity Price

1. Annually, after reviewing the production and business costs of Vietnam Electricity Group for year N-2, the average retail electricity price for year N shall be reviewed and adjusted based on the objective changes in input parameters for all phases (power generation, transmission, distribution-retail, system dispatch and trading management, ancillary services, and industry management).

2. During the year, the average retail electricity price may be reviewed and adjusted based on updated power generation costs, electricity purchase costs from power plants providing ancillary services according to basic input parameters in the power generation phase, and other costs not included in the electricity price.

3. When the average retail electricity price decreases by 1% or more compared to the current average retail electricity price, the electricity price may be reduced accordingly.

4. When the average retail electricity price increases by 3% or more compared to the current average retail electricity price, the electricity price may be increased.

5. The minimum period for adjusting the average retail electricity price is three months from the last electricity price adjustment.

6. The average retail electricity price shall be calculated according to Article 4 of this Decision. If the calculated average retail electricity price falls outside the price ceiling, it can only be considered for adjustment within the price ceiling specified by the Prime Minister. Vietnam Electricity Group may adjust the average retail electricity price up or down within the price ceiling according to the mechanisms stipulated in Articles 5 and 6 of this Decision.

In cases where the average retail electricity price needs to be adjusted higher than the current average retail electricity price by 10% or more or affects macroeconomic conditions, the Ministry of Industry and Trade shall take the lead, coordinate with relevant ministries and agencies to review and report to the Prime Minister for consideration and comments. If necessary, the Ministry of Industry and Trade shall coordinate with relevant ministries and agencies to report to the Price Management Steering Committee before reporting to the Prime Minister.

7. Adjustments to the average retail electricity price must be conducted openly and transparently.

Article 4. Method for Establishing the Average Selling Price of Electricity

1. The average selling price of electricity is established based on the costs of the power generation stage, the cost of purchasing transmission services, distribution-retail electricity services, system dispatching and market operation management, system ancillary service costs, industry operation-management costs, and other costs allocated, only including those costs directly serving the production and supply of electricity by the Vietnam Electricity Corporation to ensure operational capacity, supply of electricity, and investment needs according to approved plans, among which costs at each stage take into account deductions from cost prices as prescribed.

2. The average selling price of electricity in year N (G):_BQVL

Where:

: Total cost of electricity purchase for the year (VND) from direct and indirect power plants participating in the electricity market, as specified in Clause 2 of this Article;_{= C}: Total power generation costs in year N (VND), determined according to the following formula:

C_{= C} TTĐ_{+ C} ĐMT_BOT ĐMT_TTN ĐMT_{from direct and indirect power plants participating in the electricity market (in dong), is determined according to the provisions of Clause 2 of this Article;} ĐMT_NK ĐMT_{a) C}

Where:

 C_{+ C}b) C N ||| from direct and indirect power plants participating in the electricity market (VND);

C_BOT(VND) from BOT power plants, as specified in Clause 2 of this Article; N ||| from strategic multi-purpose hydropower plants and dependent accounting units (VND);

C_TTNb) C N ||| from BOT power plants (VND);

C_{from direct and indirect power plants participating in the electricity market (in dong), is determined according to the provisions of Clause 2 of this Article;}b) C N ||| from small hydropower plants (VND);

C_NKb) C N ||| from renewable energy and new energy power plants (VND);

 C_{a) C}b) C N ||| from imported electricity (VND);

c) C_DVPT: Total cost of purchasing transmission services for the year N |||, including trial run costs of power plants (VND);

(VND) from small renewable energy power plants, as specified in Clause 2 of this Article;_No.: Total cost of distribution-retail electricity and regulated profit margin for the year N ||| including costs of mobilizing customer-owned backup power sources to supplement national grid supply in emergency situations threatening serious disruption of power supply;

(VND) from power plants using renewable and new energy including storage systems, as specified in Clause 2 of this Article;_PP-BL: Total cost of purchasing distribution-retail electricity services in year N ||| including costs of mobilizing customer-owned backup power sources to supplement national grid supply in emergency situations threatening serious disruption of power supply;

(VND) from imported electricity, as specified in Clause 2 of this Article._{) are determined according to the following formula:}: Other costs not included in the electricity price, which are allowable costs not yet included in the electricity price, including revaluation exchange rate differences not allocated, exchange rate differences not recorded and paid to power plants under power purchase agreements, calculated and allocated into the average retail electricity price for the year N ||| including costs of mobilizing customer-owned backup power sources to supplement national grid supply in emergency situations threatening serious disruption of power supply;

a) Power plant production volume: as stipulated in Article 3 of this Circular;_{) is the total allowable dispatching and operation revenue for the System Operation Unit and the electricity market in year}: Total cost of purchasing system dispatching and market operation management services in year N ||| including costs of mobilizing customer-owned backup power sources to supplement national grid supply in emergency situations threatening serious disruption of power supply;

g) Cother: Total other costs not included in the electricity price, including allowable costs not yet included in the electricity price, including exchange rate differences not yet allocated, calculated and allocated into the average selling price of electricity in year N ||| including costs of mobilizing customer-owned backup power sources to supplement national grid supply in emergency situations threatening serious disruption of power supply;

(kWh)._TP3. Costs of purchasing electricity from the electricity seller shall be carried out in accordance with the rules of electricity market operations at each level issued by the Ministry of Industry and Trade and the Power Purchase Agreement signed between the electricity seller and the electricity buyer. N ||| 4. Costs of purchasing transmission services, costs of purchasing distribution-retail electricity services, costs of purchasing system operation and dispatch services, costs of power plants providing system ancillary services, industry management and operation costs are determined based on costs plus regulated profit margins of the transmission, distribution-retail electricity, system operation and dispatch, and industry management and operation stages of the Vietnam Electricity Corporation according to levels of the electricity market as prescribed by the Ministry of Industry and Trade. Cost reductions are determined based on data from audited financial reports.

3. The cost of purchasing electricity from the seller is carried out according to the rules for operating the electricity market at each level issued by the Ministry of Industry and Trade and according to the Power Purchase Agreement signed between the seller and the buyer.

4. The cost of purchasing transmission services, the cost of purchasing distribution-retail electricity services, the cost of purchasing system dispatching and market operation management services, the cost of power plants providing system ancillary services, and industry operation-management costs are determined based on the combined costs and fixed profit margins of the transmission, distribution-retail, system dispatching, and market operation management stages, power plants providing system ancillary services, and industry operation-management of the Vietnam Electricity Corporation as prescribed by the Ministry of Industry and Trade. Cost deductions are determined based on audited financial report data.

Article 5. Mechanism for Adjusting the Annual Average Selling Price of Electricity

1. Based on the annual power supply plan and system operation plan issued by the Ministry of Industry and Trade, the production and business costs of Vietnam Electricity for the year, and the estimated results of production and business activities for the year (in cases where the production and business costs for the year have not yet been announced), N ||| issued by the Ministry of Industry and Trade, the results of the cost inspection of electricity production and business operations in , excluding abnormal one-off costs in year as stipulated in Article 7 of this Decision, the estimated results of electricity production and business operations in N-1 (in cases where there are no results of the cost inspection of electricity production and business operations in N-1c) In the case where the annual average retail electricity price needs to be adjusted upwards by 5% to less than 10% compared to the current annual average retail electricity price, Vietnam Electricity may adjust the annual average retail electricity price accordingly after reporting and obtaining approval from the Ministry of Industry and Trade. Within fifteen working days from the date of receipt of the annual average retail electricity pricing plan report from Vietnam Electricity, the Ministry of Industry and Trade shall respond in writing to allow Vietnam Electricity to implement. Within five working days from the date of adjustment implementation, Vietnam Electricity shall be responsible for reporting to the Ministry of Industry and Trade for monitoring; N ||| The Vietnam Electricity Corporation calculates the average selling price of electricity according to the formula prescribed in Clause 2 of Article 4 of this Decision and implements the requirements regarding documentation as stipulated in Clause 2 of this Article:

a) In cases where the calculated average selling price of electricity decreases by 1% or more compared to the current average selling price of electricity, the Vietnam Electricity Corporation is responsible for reducing the average selling price of electricity accordingly. Within five working days from the date of adjustment implementation, the Vietnam Electricity Corporation is responsible for preparing a report to be submitted to the Ministry of Industry and Trade, coordinating with relevant ministries and agencies for inspection and supervision.

b) In cases where the average selling price of electricity needs to be adjusted upwards by 3% to less than 5% compared to the current average selling price of electricity, the Vietnam Electricity Corporation decides to increase the average selling price of electricity accordingly. Within five working days from the date of adjustment implementation, the Vietnam Electricity Corporation prepares a report to be submitted to the Ministry of Industry and Trade, coordinating with relevant ministries and agencies for inspection and supervision.

c) In cases where the average selling price of electricity needs to be adjusted upwards by 5% to less than 10% compared to the current average selling price of electricity, the Vietnam Electricity Corporation is permitted to increase the average selling price of electricity accordingly after reporting and obtaining approval from the Ministry of Industry and Trade. Within fifteen working days from the date of receiving complete pricing plan documentation from the Vietnam Electricity Corporation, the Ministry of Industry and Trade is responsible for responding in writing to allow the Vietnam Electricity Corporation to implement it. Within five working days from the date of adjustment implementation, the Vietnam Electricity Corporation is responsible for reporting to the Ministry of Industry and Trade.

d) In cases where the average selling price of electricity needs to be adjusted upwards by 10% or more compared to the current average selling price of electricity or affecting macroeconomic conditions, based on the pricing plan documentation submitted by the Vietnam Electricity Corporation, the Ministry of Industry and Trade takes the lead in inspecting and reviewing, seeking opinions from the Ministry of Finance and relevant ministries and agencies. Based on the comments from the Ministry of Finance and relevant ministries and agencies, the Ministry of Industry and Trade compiles and reports to the Prime Minister for consideration and opinion. If necessary, the Ministry of Industry and Trade coordinates with relevant ministries and agencies to report to the Steering Committee for Price Management before reporting to the Prime Minister.

2. Documentation for the Vietnam Electricity Corporation's annual average selling price plan includes:

a) A letter reporting on the Vietnam Electricity Corporation's annual average selling price plan, including analyses and evaluations of the situation of costs in each stage of electricity production and business operations.

b) The contents accompanying the letter reporting the plan for the annual average electricity selling price of Vietnam Electricity Group include: principles for calculating costs at each stage (generation, transmission, distribution-retail, system operation and power market transaction management, industry management and operation), including principles for estimating input parameters such as foreign exchange rates, domestic fuel prices, imported fuel prices, and prices of power plants expected to be put into operation during the calculation year but without power purchase contracts; a summary table of cost calculation results at each stage; a detailed data table for cost calculations at each stage; documents and texts used as bases and grounds for calculations; explanations of cost standards and unit prices used in the forecasted cost calculation for the year (if any); explanations of production and business costs not included in the electricity selling price but allocated to the production and business cost structure and the remaining balance expected to be allocated to the annual average electricity selling price. N ||| c) The entire file on the plan for the annual average electricity selling price is stored on a data storage device and sent along with the report on the plan for the annual average electricity selling price of Vietnam Electricity Group. N |||of the generation stage (if applicable); explanations of production and business costs not included in the retail electricity price but allocated to the production and business cost structure and the remaining balance expected to be allocated to the average retail electricity price for the year

Article 6. Mechanism for Adjusting the Annual Average Electricity Selling Price

1. Before the first day of the second, third, and fourth quarters, Vietnam Electricity Group shall determine the actual electricity sales volume of the previous quarter and the cumulative electricity sales volume from the beginning of the year; estimate the remaining monthly electricity sales volume for the year; determine the generation cost of the immediately preceding quarter and the cumulative generation cost from the beginning of the year (including the cost of purchasing electricity from auxiliary service providers); estimate the generation cost for the remaining months of the year based on basic input parameters in the generation stage; update other costs not included in the electricity price for recalculating the annual average electricity selling price according to the formula prescribed in Clause 2, Article 4 of this Decision (other parameters remain unchanged); and comply with the requirements for documentation as stipulated in Clause 2 of this Article:

a) In case the recalculated annual average electricity selling price is lower than the current annual average electricity selling price by 1% or more, Vietnam Electricity Group shall be responsible for adjusting the annual average electricity selling price accordingly. Within five working days from the date of adjustment, Vietnam Electricity Group shall prepare a report and submit it to the Ministry of Industry and Trade for coordination with relevant ministries and agencies to monitor and supervise.

b) In case the recalculated annual average electricity selling price needs to be adjusted higher than the current annual average electricity selling price by 3% to less than 5%, Vietnam Electricity Group shall decide to increase the annual average electricity selling price accordingly. Within five working days from the date of adjustment, Vietnam Electricity Group shall prepare a report and submit it to the Ministry of Industry and Trade for coordination with relevant ministries and agencies to monitor and supervise.

c) In case the recalculated annual average electricity selling price needs to be adjusted higher than the current annual average electricity selling price by 5% to less than 10%, Vietnam Electricity Group may adjust the annual average electricity selling price accordingly after reporting and obtaining approval from the Ministry of Industry and Trade. Within fifteen working days from the date of receipt of the full price plan file from Vietnam Electricity Group, the Ministry of Industry and Trade shall provide a written response for Vietnam Electricity Group to implement. Within five working days from the date of adjustment, Vietnam Electricity Group shall report to the Ministry of Industry and Trade.

d) In case the recalculated annual average electricity selling price needs to be adjusted higher than the current annual average electricity selling price by 10% or more, or if it affects the macroeconomic situation, based on the price plan file submitted by Vietnam Electricity Group, the Ministry of Industry and Trade shall take the lead in reviewing and seeking opinions from the Ministry of Finance and relevant ministries and agencies. Based on the comments from the Ministry of Finance and relevant ministries and agencies, the Ministry of Industry and Trade shall compile and report to the Prime Minister for consideration and opinion. If necessary, the Ministry of Industry and Trade shall coordinate with relevant ministries and agencies to report to the Price Management Steering Committee before reporting to the Prime Minister.

2. The file on the annual average electricity selling price plan of Vietnam Electricity Group includes:

a) A letter reporting the plan for the annual average electricity selling price of Vietnam Electricity Group, which includes an analysis and evaluation of the implementation of generation stage costs in the immediately preceding quarter;

b) The contents accompanying the letter reporting the plan for the annual average electricity selling price of Vietnam Electricity Group include: principles for updating generation stage cost calculations, including principles for estimating input parameters such as foreign exchange rates, domestic fuel prices, imported fuel prices, and prices of power plants expected to be put into operation during the calculation year but without power purchase contracts; a summary table of calculation results and a detailed data table for generation stage cost calculations; documents and texts used as bases and grounds for calculations; explanations of cost standards and unit prices used in the forecasted cost calculation for year N of the generation stage (if any); explanations of production and business costs not included in the electricity selling price but allocated to the production and business cost structure and the remaining balance expected to be allocated to the annual average electricity selling price for year N; a report evaluating the impact of electricity price adjustments on customers' electricity purchase costs.

c) The entire file on the annual average electricity selling price plan is stored on a data storage device and sent along with the report on the plan for the annual average electricity selling price of Vietnam Electricity Group.

c) The entire dossier on the annual average electricity sales price scheme shall be stored in the data storage device attached to the report on the annual average electricity sales price scheme of the Vietnam Electricity Corporation.

Article 7. Inspection and Supervision

1. Annual production and business cost inspection

a) Annually, the Vietnam Electricity Corporation shall be responsible for submitting to the Ministry of Industry and Trade the Report on production and business costs for electricity which has been audited by an independent auditing entity. Based on the Report on production and business costs for electricity, the financial statements of the Vietnam Electricity Corporation and its affiliated entities that have been audited by an independent auditing entity in accordance with regulations, the Ministry of Industry and Trade shall take the lead, coordinate with the Ministry of Finance to inspect the production and business costs for electricity, with the participation of the State Capital Management Committee, the Central Committee of the Vietnam Fatherland Front, the Vietnam Chamber of Commerce and Industry, relevant state agencies, and related associations. In case of necessity, the Ministry of Industry and Trade may request the Vietnam Electricity Corporation to hire an independent consultant to review the Report on production and business costs for electricity of the Vietnam Electricity Corporation and its affiliated entities;

b) Within thirty days after the completion of the inspection, the Ministry of Industry and Trade shall publicly announce the results of the inspection. The inspection results shall be publicly announced on the Ministry of Industry and Trade's electronic information website;

c) The contents of inspection, supervision, and public announcement include: actual costs incurred at each stage (power generation, power transmission, distribution-retail electricity, system dispatching and market transaction management, industry management), and other costs as stipulated in Clause 2, Article 4 of this Decision; the average retail electricity price implemented by the Vietnam Electricity Corporation; the profit or loss results from the production and business activities of electricity of the Vietnam Electricity Corporation; costs not included in the electricity price from the most recent adjustment but recorded in the production and business cost of the Vietnam Electricity Corporation; costs not included in the production and business cost of the Vietnam Electricity Corporation.

2. Electricity price adjustment inspection

a) In cases where the Vietnam Electricity Corporation decides to adjust the average retail electricity price according to point a, point b of Clause 1, Article 5 and point a, point b of Clause 1, Article 6 of this Decision, or in cases where the Vietnam Electricity Corporation submits to the Ministry of Industry and Trade the dossier of the electricity pricing plan according to point d of Clause 1, Article 5 and point d of Clause 1, Article 6 of this Decision, the Ministry of Industry and Trade shall take the lead, coordinate with the Ministry of Finance and relevant ministries and agencies to examine and inspect the reports and calculations of the Vietnam Electricity Corporation;

b) In cases where the average retail electricity price needs to be adjusted downward but the Vietnam Electricity Corporation does not adjust it downward, the Ministry of Industry and Trade shall be responsible for requesting the Vietnam Electricity Corporation to adjust the average retail electricity price downward. The Vietnam Electricity Corporation shall be responsible for implementing the request of the Ministry of Industry and Trade within five working days from the date of receipt of the request;

c) If errors are found in the calculation of the electricity price according to point a, point b of Clause 1, Article 5 and point a, point b of Clause 1, Article 6 of this Decision, the Ministry of Industry and Trade shall be responsible for requesting the Vietnam Electricity Corporation to stop adjusting or re-adjust the average retail electricity price. The Vietnam Electricity Corporation shall be responsible for implementing the request of the Ministry of Industry and Trade within five working days from the date of receipt of the request.

Article 8. Implementation organization

1. The Ministry of Industry and Trade shall be responsible for:

a) Guiding the Vietnam Electricity Corporation to calculate the average retail electricity price according to Article 4 of this Decision;

b) Implementing the adjustment of electricity prices according to Articles 5 and 6 of this Decision;

c) Taking the lead in conducting inspections and supervision according to Article 7 of this Decision.

2. Relevant ministries and agencies shall be responsible for:

a) The Ministry of Finance shall cooperate with the Ministry of Industry and Trade to implement this Decision in the role of the state management agency for prices;

b) Relevant ministries and agencies shall provide opinions and cooperate on related matters within their assigned management functions and tasks and in accordance with the law;

3. The General Statistics Office shall be responsible for evaluating the impact of electricity price adjustments on the macro-economy.

4. The Vietnam Electricity Corporation shall be responsible for:

a) Implementing the calculation of the average retail electricity price according to Articles 4, 5, and 6 of this Decision and submitting one set of report dossier on the pricing plan for the average retail electricity price to the Ministry of Industry and Trade;

b) Implementing the adjustment of the average retail electricity price, submitting reports for inspection and supervision by competent authorities according to Articles 5 and 6 of this Decision;

c) Providing relevant data for the General Statistics Office to evaluate the impact of electricity price adjustments on the macro-economy;

d) Submitting the Report on production and business costs for electricity according to Article 7 of this Decision.

Article 9. Effective Date

1. This Decision shall take effect from May 15, 2024, replacing Decision No. 24/2017/QĐ-TTg dated June 30, 2017 of the Prime Minister regarding the mechanism for adjusting the average retail electricity price.

2. Ministers, heads of ministerial-level agencies, heads of agencies under the Government, Chairpersons of provincial People's Committees directly under the central government, the Vietnam Electricity Corporation, and related organizations and individuals shall be responsible for implementing this Decision./.