Circular No. 07/2024/TT-BCT stipulates the method for determining power generation prices and electricity purchase and sale contracts.

CIRCULAR

Specifies the method for determining power generation prices and electricity purchase and sale contracts.

 

Pursuant to the Electricity Law dated December 3, 2004 and the Law Amending and Supplementing Certain Provisions of the Electricity Law dated November 20, 2012;

Based on Decree No. 96/2022/NĐ-CP dated November 29, 2022 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Industry and Trade;

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;

At the proposal of the Director of the Electricity Regulatory Authority;

The Minister of Industry and Trade issues a Circular to specify the method for determining power generation prices and electricity purchase and sale contracts.

 

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation and Applicability

1. This Circular stipulates the method for determining power generation prices and electricity purchase and sale contracts for various types of power plants.

2. This Circular applies to the following entities:

a) Power plants operating within the territory of the Socialist Republic of Vietnam connected to the national power grid;

b) Other organizations and individuals related thereto.

3. The content regarding the method for determining power generation prices specified in this Circular does not apply to the following entities: strategic multi-purpose hydropower plants, small hydropower plants applying avoidable cost pricing, independent power plants invested under the Build-Operate-Transfer (BOT) model, power plants and units providing ancillary services; power plants applying electricity purchase price mechanisms as prescribed in relevant documents of competent authorities.

4. The content regarding the model electricity purchase and sale contract specified in Appendix 3 issued together with this Circular does not apply to the following entities: strategic multi-purpose hydropower plants, small hydropower plants applying avoidable cost pricing, independent power plants invested under the BOT model, power plants and units providing ancillary services, power plants applying electricity purchase price mechanisms as prescribed in relevant documents of competent authorities.

The content regarding the model electricity purchase and sale contract specified in Appendix 3 issued together with this Circular does not apply to solar and wind power plants, except in cases where they participate in competitive electricity markets.

5. Power plants without electricity purchase price mechanisms prescribed by the Government, Prime Minister, or the Ministry of Industry and Trade shall implement Article 9 of this Circular.

Article 2. Definitions

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

1. Seller is the Power Generation Unit owning the Power Plant.
2. Buyer is the Vietnam Electricity Corporation (or its representative according to delegated authority), Northern Electricity Corporation, Central Electricity Corporation, Southern Electricity Corporation, Hanoi Electricity Corporation, Ho Chi Minh City Electricity Corporation, large electricity consumers, and other bulk electricity purchasers as prescribed by the electricity market regulations.
3. Project sponsors is an organization or individual directly managing and using capital to carry out investment activities for power plant projects, construction of transmission lines and substations to load power from power plants.
4. Cost construction costs; connection is the cost of constructing transmission lines and substations from the power plant's distribution yard to the connection point and related costs of shared transmission lines allocated (if applicable).
5. Specific connection costs are costs (or allocated costs) incurred by the Investor to construct transmission lines and substations from the power plant's distribution yard or several power plants to load power from several power plants to the connection point when authorized by the competent state agency to invest in construction.
6. Connection point is the point defined in the connection agreement between the Investor and the grid management unit in accordance with the provisions of the law.
7. Delivered energy is all the energy delivered by the Seller to the Buyer for the purpose of electricity purchase and sale settlement between the Seller and the Buyer.
8. Power Generation Unit is an organization or individual as prescribed by Vietnamese law that owns one or more power plants.
9. System Operator and Market Operator National Power System Dispatch Center or other names depending on the level of development of the electricity market.
10. Liquefied Natural Gas (LNG) Storage, Regasification, and Distribution Contract are agreements between the Power Generation Unit or fuel trading entity and the LNG storage facility investor and manager for storing, regasifying, and distributing natural gas fuel to power plants, signed in accordance with current regulations, ensuring competitive and transparent prices.
11. Power Purchase Agreement (PPA) is a contract applied to the purchase and sale of electricity for each power plant.
12. Gas Supply Agreement (GSPA) is a contract between the gas seller and the gas field owner to supply domestically extracted natural gas to the gas buyer, which is a power plant using gas as fuel for power generation.
13. Fuel Purchase Contract are agreements between the Power Generation Unit and the fuel trading entity to provide fuel for power plants, signed in accordance with current regulations, ensuring legal fuel sources, competitive and transparent prices.
14. Fuel Transportation Contract are agreements between the Power Generation Unit or the fuel trading entity and the fuel transportation entity to transport fuel for power plants, signed in accordance with current regulations, ensuring competitive and transparent prices.
15. Base year is the total investment amount or adjusted total investment amount of the project used to calculate the approved power generation price.
16. New Power Plant is a power plant that has not yet signed its first electricity purchase and sale contract.
17. Net Heat Rate is the amount of heat consumed to produce one kWh of electrical energy at the point of energy delivery (BTU/kWh or kJ/kWh or kCal/kWh).
18.  Total investment cost is the entire construction investment cost of the project determined according to current laws, consistent with the basic design and other contents of the Feasibility Study Report for Investment Construction.
19. Adjusted Total Investment is the total investment adjusted in accordance with the effective construction laws at the time of negotiating the power generation price.
20. Finalized Investment Capital is the entire legitimate cost incurred during the investment process to put the project into operation. Legitimate costs are those carried out within the scope of the project, design, approved budget estimate; construction contracts signed in compliance with the law; including adjustments and supplements approved according to regulations and appropriate authority. The finalized investment capital must be within the limit of the approved total investment (or adjusted) in accordance with the law.

 

 

 

 

Chapter II

METHOD FOR DETERMINING POWER GENERATION PRICES

Section 1

METHOD FOR DETERMINING POWER GENERATION PRICES

FOR NEW POWER PLANTS

Article 3. Principles for Determining Power Generation Prices

1. The power generation price of a power plant is established based on:

a) Reasonable and legitimate expenses of the Investor throughout the economic life cycle of the project;

b) An internal rate of return (IRR) not exceeding 12%.

2. The power generation price of a power plant includes the following components:
   1. Electricity purchase and sale contract price: Agreed upon by the Seller and Buyer and determined according to the method prescribed in Article 4 of this Circular;
   2. Special interconnection price (if applicable): Agreed upon by the Seller and Buyer and determined according to the method prescribed in Article 8 of this Circular.
3. The power generation price does not include value-added tax, water resource tax, fees for granting water resource exploitation rights, forest environmental service fees, solid waste environmental protection fees, and industrial wastewater environmental protection fees (applicable to thermal power plants), and other taxes, fees, and monetary revenues as prescribed by competent state management agencies (excluding taxes and fees already included in the power generation pricing plan).
4. The electricity purchase and sale contract price for comparison with the base year power generation price range:

a) The electricity purchase and sale contract price of the base year must not exceed the power generation price range of the base year for the power plant issued by the Minister of Industry and Trade, wherein the electricity purchase and sale contract price of the power plant for comparison with the base year power generation price range is calculated based on corresponding cost components of the power generation price range;

b) In cases where the power plant has no base year power generation price range, the electricity purchase and sale contract price of the power plant is calculated and converted based on corresponding cost components for comparison with the power generation price range of the most recent year for that type of power plant.

Article 4. Method for Determining the Base Year Electricity Purchase and Sale Contract Price of a Power Plant

The base year electricity purchase and sale contract price P_C (VND/kWh) is determined according to the following formula:

"5. The pre-tax weighted average cost of capital i (%) is determined according to the formula below:_C x T^{GROUP OF FIELDS AND OCCUPATIONS} + P^BD

 

1. P^{GROUP OF FIELDS AND OCCUPATIONS} (VND/kWh) is the fixed base year price, determined according to the following formula:

"5. The pre-tax weighted average cost of capital i (%) is determined according to the formula below:^{GROUP OF FIELDS AND OCCUPATIONS} = FC + FOMC_b

Where:

2. P^BD (VND/kWh) is the variable base year price.

a) For thermal power plants, P^BD is determined according to the following formula:

"5. The pre-tax weighted average cost of capital i (%) is determined according to the formula below:^BD = + + +

Where:

b) For hydropower plants, solar power plants, and wind power plants: P^BD equals 0 (zero).

3. Testing, trial run, and acceptance inspection costs of the power plant: Payment for testing, trial run, and acceptance inspection costs incurred before the commercial operation date shall be agreed upon by the Seller and Buyer to ensure they are not duplicated in the approved total project investment amount.

Article 5. Method for Determining the Average Fixed Cost of Power Plants

1. The average fixed cost of power plants (FC) is determined based on financial analysis of the project according to Model 1 and Model 2 stipulated in Appendix II issued together with this Circular. Input parameters for establishing the average fixed cost of power plants (FC) are determined in accordance with Clause 2 of this Article.
2. Main input parameters used in calculating the average fixed cost of power plants (FC):

a) Investment costs: Investment costs are determined based on the Total Investment Amount (or Adjusted Total Investment Amount, Final Investment Settlement Amount) effective at the time of negotiating the electricity generation price, including all costs under the responsibility of the Seller up to the point of interconnection of the power plant, comprising items such as: power plant; infrastructure, wharf for the power plant, LNG import terminal (for LNG-fueled power plants), other related costs, and costs allocated to the project (if any).

Specifically, the special interconnection cost item used to calculate the special price is implemented in accordance with Article 8 of this Circular.

b) Economic life: As prescribed in Appendix I issued together with this Circular, except where there is a document from a competent state agency approving a different economic life for the project than that stipulated in this Circular, it shall be applied according to that document (years).

c) Average annual electricity generation at the delivery point (A_GN):

A_GN is converted and calculated as follows:

 

Where:

A_NM=P_{organize credit institutions, foreign bank branches are responsible for organizing the implementation of this Circular.} x (1 - kcs)_max

        For power plants not specified T_max, K_cs in Appendix I issued together with this Circular, these parameters are agreed upon by the Seller and Buyer;

In case A_GN cannot be determined according to the above formula, the Seller and Buyer determine it based on the valid basic design or technical design converted to the delivery point at the time of negotiation. If it cannot be determined according to the technical design or approved basic design, it is determined according to the document of a competent state agency. If it cannot be determined according to the document of a competent state agency, A_GN is agreed upon by the Seller and Buyer.

d) Depreciation period of each main category of fixed assets (years): Determined based on the depreciation period of each main category of fixed assets according to the depreciation period framework prescribed by the Ministry of Finance during each period or documents of competent state agencies allowing depreciation different from the regulations of the Ministry of Finance (if any).

f) Equity capital ratio, debt capital ratio, and investment funding phases in total investment amount: Determined based on the decision approving the investment project and the actual funding mobilization for the project at the time of negotiation, in compliance with regulations issued by competent state agencies. The minimum equity capital ratio is 15% of the total investment amount of the project.

e) Loan interest rate and loan repayment period during operation: Based on the loan agreement, documents, and materials between the Project Owner and lending credit institutions and banks.

In case the total loan amount in loan agreements or legally binding documents between the Project Owner and lending credit institutions is lower than the loan amount in the pricing calculation plan, the missing loan amount during the operation period is agreed upon by the Seller and Buyer, referring to the principle: The minimum loan repayment period is 10 years and the loan interest rate is defined as follows:

- The foreign currency loan interest rate is determined by adding the average SOFR (Secured Overnight Financing Rate) for a 180-day average term of the 36 consecutive months starting from the nearest March, June, September, or December of the negotiation year published by the Fed (Website: www.newyorkfed.org) to the average annual fee arrangement rate of the bank at 3%/year;

- The domestic currency loan interest rate is determined by adding the average interest rate of 12-month post-payment Vietnamese dong deposits for individual customers of the first day of the 60 consecutive months starting from the nearest March, June, September, or December of the negotiation year of four commercial banks (Vietnam Joint Stock Commercial Bank for Foreign Trade, Vietnam Joint Stock Commercial Bank for Industry and Trade, Vietnam Joint Stock Commercial Bank for Investment and Development, Vietnam Agricultural and Rural Development Bank or their legitimate successors) to the average annual service fee of the banks at 3%/year.

g) Corporate income tax rate, other types of taxes, and fees: Determined according to relevant laws.

Article 6. Method for Determining the Operating and Maintenance Cost of Power Plants

The operating and maintenance cost based on the base year FOMC (VND/kWh) is determined according to the following formula:_b FOMC

The operating and maintenance cost based on major repair costs and other expenses of the base year, as specified in Clause 1 of this Article (VND/kWh);_b = +

Where:

(VND/kWh)

: Applying the method of calculating total major repair costs and other expenses TC

Where:

scl_{at the base year according to the following formula:} =VĐT

Economic life of the power plant as specified in the Appendix attached to this Circular (years)._{at the base year according to the following formula:} XD+TB_cdk  k_{at the base year according to the following formula:} ĐMT_{Total construction costs and equipment costs are determined based on the total investment amount specified in Point a, Clause 2, Article 5 of this Circular (VND);}

Where:

Total labor costs at the base year include salary costs, social insurance costs, health insurance costs, unemployment insurance costs, trade union fees, and accompanying allowances (VND);

Total labor costs TC

Where:

Economic life of the power plant as specified in the Appendix attached to this Circular (years)._nc XD+TB_{XDomestic air passenger transport service on regular basic economy classAverage annual electricity generation at the delivery point between the Seller and Buyer and calculated according to the provisions in Point c, Clause 2, Article 5 of this Circular (kWh).}  k_nc

Where:

Article 7. Method for Determining the Variable Price of Thermal Power Plants

The variable price of the thermal power plant at the Base Year P (VND/kWh) shall be determined according to the following formula:^BD  (VND/kWh) is determined based on the following formula:

"5. The pre-tax weighted average cost of capital i (%) is determined according to the formula below:^BD = + + +

Where:

1. The component of the variable price adjusted according to the fluctuation of the main fuel cost of the power plant at the Base Year, shall be determined according to the following formula:

    (VND/kWh)

Where:

2. The component of the variable price adjusted according to the fluctuation of the auxiliary fuel cost of the power plant at the Base Year, shall be determined according to the following formula:

  (VND/kWh)

Where:

3. The component of the variable price adjusted according to other fluctuations of the power plant at the Base Year, shall be determined according to the following formula:

       (VND/kWh)

Where:

4. The transportation cost of the main fuel of the power plant at the Base Year shall be determined according to the following formula:

          (VND/kWh)

Where:

For fuel purchase and sale contracts where the main fuel price already includes the transportation cost of the main fuel, collection, transportation, distribution, storage, and regasification fees, the corresponding transportation cost of the main fuel shall be zero (nil).

Article 8. Method for Determining Special Grid Connection Tariff

1. The special grid connection tariff shall be determined to recover the special grid connection costs incurred by the Investor of the power plant through investment construction or allocated and agreed upon with the Buyer based on the capital investment, interest rate on borrowed funds during the operation period under the loan agreement, management, operation, maintenance costs, and other factors agreed upon by the Seller and the Buyer to ensure that the Investor of the power plant recovers construction, management, operation, and maintenance costs in accordance with the provisions of the law. The unit for determining this special grid connection tariff is VND/kWh, VND/kW, or VND/month.

2. After the special grid connection costs have been settled, the Seller and the Buyer shall re-calculate the special grid connection tariff according to the method prescribed in Clause 1 of this Article.

3. The special grid connection costs shall be considered reasonable and valid expenses and included in the electricity purchase cost in the calculation of the average retail electricity price plan of Vietnam Electricity Corporation.

Article 9. Method for Determining Power Generation Tariff and Purchase-Sale Contract for Power Plants Without Government Pricing Mechanism

Based on the principle of determining the power generation tariff stipulated in this Circular, the Buyer and the Seller shall develop a power generation tariff scheme and a purchase-sale contract suitable for the actual conditions of the power plant and report to the Ministry of Industry and Trade for examination and decision.

Article 10. Temporary Price

During the negotiation process, if the power generation tariff cannot be agreed upon, the Seller and the Buyer shall agree on a temporary price, report to the Ministry of Industry and Trade for approval, and apply it until the formal power generation tariff is agreed upon.

Article 11. Method for Determining Power Generation Tariff for Solar and Wind Power Plants That Have Signed Purchase-Sale Contracts with Vietnam Electricity Corporation But Do Not Yet Have Official Power Generation Tariffs

For solar power plants that signed purchase-sale contracts with Vietnam Electricity Corporation before January 1, 2021, and wind power plants that signed purchase-sale contracts with Vietnam Electricity Corporation before November 1, 2021 but do not meet the conditions for applying the purchase price mechanism as prescribed in Clause 1 and Clause 3 of Article 5 of Decision No. 13/2020/QD-TTg dated April 6, 2020 of the Prime Minister on mechanisms to encourage and develop solar power in Vietnam and Clause 7 of Article 1 of Decision No. 39/2018/QD-TTg dated September 10, 2018 of the Prime Minister amending and supplementing certain articles of Decision No. 37/2011/QD-TTg dated June 26, 2011 of the Prime Minister on mechanisms to encourage the development of wind power in Vietnam:

1. The Seller and the Buyer shall base on the principles of determining the power generation tariff stipulated in this Circular to develop the power generation tariff scheme for the power plant:

a) The basis year for negotiating the power generation tariff for the power plant is the commercial operation year of the power plant;

b) For the part of the power plant without a power generation tariff, the power generation tariff shall be determined based on the input parameters of the entire power plant.

2. The average annual power delivery volume shall be determined as follows:

a) Based on the basic design (or technical design when the basic design cannot be determined) approved by the competent state authority;

b) In case the determination cannot be made according to the provision at point a of this clause, the Seller and the Buyer shall agree uniformly based on the technical parameters in the basic design dossier or the technical design dossier used in the notification of the results of the approval by the competent state authority. If the annual power delivery volume is determined based on the basic design, the Total Investment Cost according to the basic design shall be used; if the annual power delivery volume is determined based on the technical design, the Total Investment Cost according to the corresponding technical design shall be used.

3. Operating and Maintenance Costs of the Power Plant in the Basis Year FOMC_b When

(VND/kWh)

Where:

: Total operating and maintenance costs of the power plant are calculated using the following formula: TC = VĐT × k

Where:

4. Other pricing calculation parameters shall be agreed upon by the Seller and the Buyer. Documents for negotiating the purchase-sale contract may refer to Clause 1 of Article 19 of this Circular.

Section 2

METHOD FOR DETERMINING THE POWER GENERATION TARIFF OF

OPERATING POWER PLANTS

Article 12. Method for Determining the Power Generation Price for Power Plants Whose Electricity Purchase and Sale Contracts Have Expired but Are Not Yet at the End of Their Economic Life

For power plants (excluding avoidable costs) whose electricity purchase and sale contracts have expired but are not yet at the end of their economic life, the seller and buyer shall agree on the power generation price applicable for subsequent years until the end of the economic life, ensuring that the average fixed price does not change from the level agreed upon by the seller and buyer.

Article 13. Method for Determining the Power Generation Price for Power Plants That Have Reached the End of Their Economic Life

1. The fixed price of power plants that have reached the end of their economic life shall be determined based on the principle of ensuring that the power plant recovers all costs related to its electricity production and business activities, with the pricing period following the major equipment repair cycle and agreeing on a reasonable profit margin. In cases where there is a document approved by the competent state authority specifying the pricing period, such document shall be applied.
2. The variable price of power plants that have reached the end of their economic life shall be determined according to the provisions of Article 7 of this Circular.
3. If a power plant has reached the end of its economic life and has undergone investment upgrades, the seller and buyer shall negotiate and discuss the electricity purchase and sale contract price of the power plant according to the provisions of Articles 4, 5, 6, and 7 of this Circular, and in accordance with the depreciation period of the upgraded main equipment.
4. The term of the contract for power plants that have reached the end of their economic life shall be agreed upon by the seller and buyer based on the major equipment repair cycle.

Article 14. Method for Determining the Power Generation Price for Hydropower Plants With Valid Electricity Purchase and Sale Contracts But Whose Power Generation Prices Have Expired Or Hydropower Plants Applying Avoidable Cost Tariffs Whose Electricity Purchase and Sale Contracts Have Expired

1. Shall be determined based on the principle of ensuring that the power plant recovers all investment costs (if any), production and business costs, and agreeing on a reasonable profit margin.

2. The pricing period for power generation shall be based on the remaining economic life of the power plant.

3. The average power generation volume shall be determined based on actual statistical data from previous operational years before the power generation price expired.

4. Operating and maintenance costs shall be agreed upon by the seller and buyer.

5. The total investment amount for calculating the power generation price shall be determined based on the residual value of the assets at the time the power generation price expired or the electricity purchase and sale contract expired.

Article 15. Method for Determining the Power Generation Price for Power Plants Negotiating Prices Based on Final Investment Settlement Capital

For power plants negotiating power generation prices based on final investment settlement capital as stipulated in Clause 2, Article 28 of this Circular:

1. After determining the final investment settlement capital, the seller shall be responsible for submitting relevant documents regarding the final investment settlement capital to the buyer.
2. The seller and buyer shall renegotiate the electricity price according to the following principles:
   1. The method for determining the electricity purchase and sale contract price as prescribed in Article 4 of this Circular;
   2. Calculation parameters for the electricity purchase and sale contract price as prescribed in Article 4 of this Circular, updated with input parameters at the time of determining the final investment settlement capital;
   3. The electricity purchase and sale contract price must not exceed the power generation price framework of the year when the final investment settlement capital was approved;
   4. The power generation price shall apply from the date of commercial operation of the power plant, with the fixed annual price implemented according to the provisions of Article 16 of this Circular, without adjusting the fixed annual price of previous years prior to the signing of the contract amendment and supplementary agreement based on the power generation price determined on the basis of the final investment settlement capital;

d) The base year for power plants negotiating power generation prices based on final investment settlement capital is the year when the final investment settlement capital was approved.

Section 3

METHOD FOR DETERMINING THE ELECTRICITY PURCHASE AND SALE CONTRACT PRICE

ON AN ANNUAL BASIS OF THE ELECTRICITY PURCHASE AND SALE CONTRACT

Article 16. Principles for Determining the Fixed Annual Price of Power Purchase Contracts

1. The Seller and Buyer have the right to apply the agreed average fixed price for each year during the term of the contract. In cases where the Seller and Buyer agree to convert the agreed average fixed price into a fixed annual price, the determination of these fixed prices must comply with the principles set forth in Clause 2 of this Article.

2. Based on actual borrowing conditions and the financial capacity of the project, the Seller and Buyer shall negotiate the average fixed price of the power plant into a fixed annual price (FC_{9. Travel distance is the distance traveled without using mechanical means (cars, motorcycles, motorboats) to reach locations for implementing technical forest management measures and patrolling to protect forests.} Year j price) under the condition that the average fixed price does not change from the level agreed upon by the Seller and Buyer and adheres to the following principles:

a) The discount rate applied when calculating the fixed annual price shall be agreed upon by the Seller and Buyer based on the internal rate of return (IRR) of the power plant;

b) The investor shall fulfill the obligation to repay loans for the construction of the power plant according to the loan repayment schedule.

 

 

Article 17. Principles for Adjusting the Annual Generation Price in Power Purchase Contracts

1. The components of the operation and maintenance costs of the power plant shall be adjusted according to the following principles:

a) The component of operation and maintenance costs based on major repair expenses and other costs shall be adjusted according to the average cost escalation rate specified in Appendix I issued together with this Circular. The Seller and Buyer shall study and propose a mechanism for adjusting the operation and maintenance cost component based on major repair expenses and other costs for items with foreign currency origins;

b) The component of operation and maintenance costs based on labor costs shall be adjusted according to changes in the minimum regional wage at the time of payment or according to the Consumer Price Index (CPI) published by the General Statistics Office, but not exceeding 2.5% per year.

2. Annually, based on the total foreign currency loan capital, the plan for repaying foreign currency loans, the actual principal repayment figures, the agreed exchange rate for pricing electricity generation, and the actual exchange rate implemented in the preceding year, the Seller and Buyer shall calculate and agree on the settlement plan for exchange rate differences. The exchange rate difference FED (USD) shall be calculated using the following formula:

 

Where:

m:        Number of foreign currencies in the electricity generation pricing plan agreed upon by the Seller and Buyer (types);

n:        Number of times the principal of foreign currency i is repaid in the calculation year (times);

Domestic air passenger transport service on regular basic economy class_i,j:      Actual principal debt of type i foreign currency repaid in period j of the calculation year;

:           Exchange rate at the time of payment j for type i foreign currency in the calculation year (.../VND);

:          Agreed exchange rate for type i foreign currency in the electricity generation pricing plan (.../VND).

Article 18. Method for Determining the Contract Price of Power Purchase for the Power Plant at the Time of Payment

The contract price of power purchase for the Power Plant at the time of payment for month t, year j P_C,j,t (VND/kWh) is determined according to the following formula:

 

Where:

:          Fixed price for year j determined according to Article 16 of this Circular (VND/kWh);

:      Operation and maintenance price for month t, year j determined according to the provisions of Clause 1 of this Article (VND/kWh);

 

:          Variable price for month t, year j determined according to Clause 2 of this Article (VND/kWh).

1. The operation and maintenance price for month t, year j is determined according to the following formula:

 

Where:

: Component of operation and maintenance price based on major repair expenses and other costs for year j (VND/kWh);

: Component of operation and maintenance price based on labor costs for month t, year j (VND/kWh).

a) The component of operation and maintenance price based on major repair expenses and other costs is determined according to the following formula:

 

Where:

: Operation and maintenance price based on major repair expenses and other costs for the base year is determined according to the method prescribed in Clause 1 of Article 6 of this Circular;

i:               Cost escalation rate for the component of operation and maintenance price based on major repair expenses and other costs as stipulated in Appendix I issued together with this Circular;

l:               Order number of the payment year counted from the base year (for the base year l=1).

b)  The component of operation and maintenance price based on labor costs for month t, year j ( ) is determined as follows:

- In cases where the calculated wage level in the pricing plan equals the minimum regional wage, the component of operation and maintenance price based on labor costs is determined according to the following formula:

 

Where:

: Operation and maintenance price based on labor costs for the base year is determined according to the method prescribed in Clause 2 of Article 6 of this Circular;

 

:      Minimum regional wage at the time of payment for month t, year j (VND/month);

:      Minimum regional wage for the base year (VND/month).

- In cases where the total labor cost TC_nc is calculated according to the ratio of investment in installation and equipment, the component of operation and maintenance price based on labor costs is determined according to the following formula (VND/kWh):

 

Where:

: Operation and maintenance price based on labor costs for the base year is determined according to the method prescribed in Clause 2 of Article 6 of this Circular;

:           Cost escalation rate for the component of operation and maintenance price based on labor costs, determined according to the consumer price index (CPI) ratio for year (j-1) compared to year (j-2) published by the General Statistics Office in December of year (j-1), but not exceeding 2.5% per year;

l:             Order number of the payment year counted from the base year (for the base year  l = 1, i₁ = 0).

2. The variable price of the thermal power plant for month t, year j ( ) (VND/kWh) is determined according to the following formula:

= + + +

Where:

:       Component of the variable price adjusted according to fluctuations in the main fuel cost of the power plant for month t, year j, determined according to point a of this clause (VND/kWh);

||| The adjustable price component adjusted for fluctuations in the main fuel auxiliary costs of the power plant in month t, year j, is determined according to point b of this clause (VND/kWh);

||| The adjustable price component adjusted for other fluctuations of the power plant in year j is determined according to point c of this clause (VND/kWh);

||| The main fuel transportation cost of the power plant in month t, year j, is determined according to point d of this clause (VND/kWh).

a) ||| The adjustable price component adjusted for fluctuations in the main fuel costs of the power plant in month t, year j is determined according to the following formula:

 

Where:

||| The average specific heat consumption rate is determined under Clause 1, Article 7 of this Circular;

k_HR||| The adjustment factor for the average specific heat consumption rate based on actual operating conditions such as cooling water temperature, ambient temperature, humidity, and load level agreed upon by the Seller and Buyer or based on actual conditions for each operating cycle;

k_HS||| The efficiency decline ratio in year j (%);

l||| The order number of the commercial operation year of the power plant;

||| The price of the main fuel for electricity generation at the time of payment in month t, year j, is calculated as the weighted average based on volume of invoices from purchase and sale fuel contracts during the period agreed upon by the Seller and Buyer.

b) ||| The adjustable price component adjusted for fluctuations in the auxiliary fuel costs of the power plant in month t, year j is determined according to the following formula:

 

Where:

||| The adjustable price component adjusted for fluctuations in the auxiliary fuel costs of the power plant in the base year is determined under Clause 2, Article 7 of this Circular;

k_HS||| The efficiency decline ratio in year j (%);

l||| The order number of the commercial operation year of the power plant (counting from the date of commercial operation of the power plant, the first commercial operation year of the power plant is counted from the date of commercial operation of the first unit);

||| The price of auxiliary fuel for electricity generation including transportation fees up to the power plant at the time of payment in month t, year j;

||| The price of auxiliary fuel for electricity generation in the base year is determined under Clause 2, Article 7 of this Circular.

c) ||| The adjustable price component adjusted for other fluctuations of the power plant in year j is determined according to the following formula:

 

Where:

||| The adjustable price component adjusted for other fluctuations of the power plant in the base year is determined under Clause 3, Article 7 of this Circular;

i: ||| The inflation rate of the adjustable price component adjusted for other fluctuations as prescribed in Appendix I attached to this Circular;

k_HS||| The efficiency decline ratio in year j (%);

l||| The order number of the commercial operation year of the power plant (counting from the date of commercial operation of the power plant, the first commercial operation year of the power plant is counted from the date of commercial operation of the first unit); l=1);

t s||| The order number of the payment year counting from the base year (for the base year); t s=1).

d) ||| The main fuel transportation cost of the power plant in month t, year j (VND/kWh) is determined according to the following formula:

 

Where:

||| The average specific heat consumption rate is determined under Clause 1, Article 7 of this Circular;

k_HR||| The adjustment factor for the average specific heat consumption rate based on actual operating conditions such as cooling water temperature, ambient temperature, humidity, and load level agreed upon by the Seller and Buyer (if applicable);

k_HS||| The efficiency decline ratio in year j (%);

l||| The order number of the commercial operation year of the power plant;

||| The main fuel transportation cost at the time of payment in month t, year j, is calculated as the weighted average based on volume of invoices from fuel transportation contracts and LNG storage, regasification, and gas distribution contracts (if applicable) (excluding VAT), specifically as follows:

• For coal-fired power plants: calculated as the weighted average based on coal transportation contracts;
• For natural gas-fired power plants: calculated as the weighted average based on approved collection, transportation, and distribution gas fees by competent state authorities;
• For LNG-fired power plants: calculated as the weighted average based on LNG transportation and storage, regasification, and gas distribution contracts (if applicable) approved by competent authorities;
• For waste-to-energy and biomass power plants: The transportation cost of the main fuel for power generation shall be agreed upon by the Seller and the Buyer based on the actual conditions of the power plant;

For fuel purchase and sale contracts that already include the main fuel transportation cost, the corresponding transportation cost component is 0 (zero).

3. The total start-up costs of the thermal power plant in month t (VND), is determined according to the following formula:

 

Where:

u: ||| The unit number of the power plant;

U: ||| The total number of units of the power plant;

f: ||| Fuel type (main fuel f = 1; auxiliary fuel f = 2);

s: ||| Start-up status of the unit;

S: ||| The total number of start-up statuses of the unit;

session number_u,f,s||| The number of times unit u starts using fuel f in start-up status s in the month;

Briefly describe technical improvements, production processes, raw materials, designs; new technology applications such as automation, digitalization, clean technology; management, marketing, distribution solutions; products winning awards or certifications related to innovation…):…_u,f,s||| The amount of fuel consumed (kg) for coal-fired power plants or the amount of heat consumed (BTU) for gas turbines for one start-up of unit u using fuel f in start-up status s;

Domestic air passenger transport service on regular basic economy class_u,f,s||| The unit price of fuel for one start-up of unit u using fuel f in start-up status s, calculated in VND/kg for coal and VND/BTU for gas;

||| The total additional costs for one start-up, calculated in VND.

The payment of start-up costs for thermal power plants is carried out according to the electricity market regulations issued by the Ministry of Industry and Trade.

For waste-to-energy and biomass power plants, the payment of start-up costs is agreed upon by the Seller and Buyer.

 

 

Section 4

DOCUMENTS TO SUPPORT NEGOTIATIONS OF ELECTRICITY PURCHASE AND SALE CONTRACTS

Article 19. Documents for Negotiating Power Purchase Agreements between the Seller and the Buyer

1. The documents for negotiating power purchase agreements for new power plants include but are not limited to the following:

1. Draft power purchase agreement as stipulated in Appendix III issued together with this Circular;
2. Approval of investment orientation or Decision on Investment Orientation or Certificate of Investment Registration of the project;
3. Decision on construction investment project accompanied by detailed explanation and investment project evaluation report by independent consultants, along with related documents;

d) Decision approving the initial total investment ceiling of the project or Adjusted Total Investment Ceiling of the project effective at the time of negotiating electricity generation prices and key contents in the basic design of the investment project relevant to negotiating the power purchase agreement, evaluation report on the basic design, and notification of the results of evaluating the basic design and total investment ceiling by the competent state management agency on construction (if applicable);

đ) Agreement on interconnection of the power plant to the national power grid accompanied by the interconnection plan of the power plant;

5. Loan contracts or documents and materials between the Project Owner and lenders, plans or actual disbursements of loan funds;

7. Fuel supply contract for the power plant, specifying clearly the fuel price for power generation, fuel transportation price, LNG storage price, gas reprocessing price, and distribution price, and additional fees, fuel delivery points, and fuel supply deadlines;
8. Documents calculating power loss and energy loss of transformers, transmission lines from high-voltage transformers to the interconnection point with the national power grid, and documents calculating self-consumption electricity in the power plant;
9. Documents calculating thermal efficiency ratio for thermal power plants;

11. Pricing scheme determined according to the method prescribed in Section 1 and Section 3 Chapter II of this Circular;
12. Other related documents.

2. Documents for negotiating power purchase agreements for operational power plants include but are not limited to the following:

1. Draft power purchase agreement according to the model prescribed in this Circular;
2. Existing power purchase agreement;
3. Technical dossier of the power plant, SCADA/EMS system technical data, relay protection and automation system, P-Q operating characteristics of generating units up to the current date;

d) Fuel supply contract for the power plant;

đ) Pricing scheme of the power plant determined according to the provisions in Section 1, Section 2, and Section 3 Chapter II of this Circular;

e) Financial reports of the power plant for the most recent years up to the date of negotiating the power purchase agreement.

Chapter III

AGENCY ELECTRICITY PURCHASE AND SALE CONTRACT

Article 20. Application of Model Power Purchase Agreement

1. The model power purchase agreement prescribed in Appendix III issued together with this Circular serves as a basis for the Seller and the Buyer to negotiate and sign. The Seller and the Buyer have the right to agree and supplement specific terms in the power purchase agreement in accordance with Vietnamese laws.

2. The language of the contract is Vietnamese. The Seller and the Buyer may agree to supplement the contract using English.

Article 21. Inspection of electricity purchase and sale contracts

The seller and buyer shall agree and be responsible for reporting to the Electricity Regulatory Authority for inspection of the electricity purchase and sale contract after concluding negotiations and signing the contract.

Chapter IV

IMPLEMENTING PROVISIONS

Article 22. Responsibilities of the Electricity Regulatory Authority

1. Inspect and provide opinions on electricity purchase and sale contracts and amendments and supplements to such contracts.
2. Guide and resolve any issues arising during the negotiation of electricity purchase and sale contracts between the seller and buyer.
3. Resolve disputes arising during the implementation of electricity purchase and sale contracts when the seller and buyer agree to have the disputes resolved at the Electricity Regulatory Authority.

Article 23. Responsibilities of Vietnam Electricity Corporation

Lead and coordinate with the buyer and seller to calculate and agree on the exchange rate differential settlement plan in implementing electricity purchase and sale contracts as stipulated in this Circular.

Article 24. Responsibilities of the Buyer

1. Agree and unify with the seller on the reallocation of special interconnection costs with the investors of power plants connected to the transmission lines and substations, and adjust the special interconnection price (if applicable) to ensure that the seller recovers construction, management, operation, and maintenance costs of the transmission lines and substations in accordance with the law.
2. Negotiate electricity purchase and sale contracts with the seller in accordance with this Circular; bear responsibility and ensure the accuracy, reasonableness, and legality of provided data and documents. Unify with the seller to report to the Electricity Regulatory Authority for inspection of the electricity purchase and sale contract as required.
3. Coordinate with the seller to calculate and unify the exchange rate differential in implementing electricity purchase and sale contracts as stipulated in this Circular, and provide it to Vietnam Electricity Corporation for consideration of the payment plan.

Article 25. Responsibilities of the Seller

1. Unify with the buyer to negotiate and report to the Electricity Regulatory Authority for inspection of the electricity purchase and sale contract as required; bear responsibility and ensure the accuracy, reasonableness, and legality of provided data and documents.
2. Implement investment projects to construct transmission lines and substations to load the capacity of some power plants when assigned by competent state authorities to build according to the national power development plan and provincial plan (if applicable). The transmission lines and substations must ensure the operation and loading of the full capacity and production volume of power plants in the region as approved in the plan.
3. Allow power plants within the approved national power development plan and provincial plan to connect to the assigned transmission lines and substations to supply electricity to the national grid.
4. Agree and unify with the investors of power plants on the allocation of special interconnection costs and adjustment of the special interconnection price (if applicable) to ensure that the investors recover construction, management, operation, and maintenance costs of the transmission lines and substations in accordance with the law.
5. Bear responsibility for managing, operating, and maintaining the assigned transmission lines and substations in accordance with the law.
6. Provide complete information, bear responsibility, and ensure the accuracy, reasonableness, and legality of provided data and documents to relevant units and agencies during the negotiation and inspection of electricity purchase and sale contracts.
7. The seller is responsible for organizing the selection of fuel suppliers and fuel transporters and signing fuel purchase and transportation contracts in compliance with Vietnamese laws, ensuring fairness, competition, and transparency.
8. The seller is responsible for all input parameters used to calculate the electricity purchase and sale contract price and is responsible for controlling fuel supply and transportation contracts to ensure legal fuel sources, competitive prices, and transparency in accordance with the law.
9. Coordinate with the buyer to calculate the annual exchange rate differential in implementing electricity purchase and sale contracts as stipulated in this Circular, and submit it to Vietnam Electricity Corporation for consideration of the payment plan.

Article 26. Responsibilities of the Fuel Supplier and Transporter

1. For gas fuel
   1. The domestic natural gas fuel supplier and transporter shall enter into Gas Supply Agreement (GSPA), Fuel Supply Contract, and Gas Transportation Agreement (GTA) in accordance with relevant laws.
   2. The fuel supplier and transporter for imported pipeline gas and liquefied natural gas (LNG) shall provide gas in accordance with relevant laws, specifically:

- In the case of delivery at the export port: The price of imported gas is the price of gas at the point of gas delivery at the export port;

- In the case of delivery at the gas distribution station or LNG terminal in Vietnam, the gas price includes the purchase price of imported gas and LNG, reasonable and lawful costs related to import activities (if any) such as import tax, financial costs, insurance, fixed profit margin, and other costs related to the import activities of the fuel supplier.

2. For coal fuel

Organizations shall select the coal transportation unit and sign the coal transportation contract in accordance with Vietnamese law, ensuring fairness, competition, and transparency.

Article 27. Amendment and Supplement to Power Purchase Agreements when there are Changes in Policies and Laws issued by Competent State Authorities

1. In the event that changes in policies and laws issued by competent state authorities adversely affect the legitimate interests of the Seller or Buyer, the Seller and Buyer have the right to renegotiate the power generation price.
2. In the event that there are conclusions from competent state authorities (inspection agencies, auditing bodies) regarding the content related to the power generation price and power purchase agreements, the Seller and Buyer shall renegotiate the power generation price and power purchase agreement.
3. In the event that the Seller is assigned to upgrade and renovate transmission lines and substations according to the planning, the Seller and Buyer may negotiate to supplement the special interconnection price to ensure that the power plant investor recovers construction, management, operation, and maintenance costs in accordance with the law.
4. In the event that operating power plants need to invest in upgrading equipment to meet national technical standards on the environment, the Seller and Buyer shall agree to supplement these costs into the power generation price of the power plant. The calculation of the power generation price shall be carried out according to the method agreed upon in the signed power purchase agreement, reported to the Ministry of Industry and Trade for consideration.
5. In the event that power plants have ash disposal and utilization projects approved by competent authorities to ensure waste and emission standards and environmental protection, the Seller and Buyer shall agree to supplement these costs into the ash disposal price component, which is a special price component for ash disposal and utilization in the power purchase agreement, ensuring the principle:

a) The scope of investment and operational procedures of ash disposal facilities are approved by competent authorities;

b) The selection of units to handle ash must comply with legal regulations, ensuring competition and transparency;

c) The Seller and Buyer shall settle accounts for ash handling costs based on the actual situation of the previous year. Revenue from the sale of ash from the power plant shall be used to offset ash handling costs and reduce the power generation price of the power plant.

Article 28. Transitional Provisions

1. For electricity purchase and sale contracts signed before the effective date of this Circular, the Seller and Buyer shall continue to perform such contracts until their expiration.
2. For power projects that have signed electricity purchase and sale contracts under the methods prescribed in Circular No. 56/2014/TT-BCT, Circular No. 51/2015/TT-BCT, and new power projects initiated before September 19, 2017, when the final investment cost is settled, the Seller and Buyer may request to recalculate the electricity generation price based on the approved final investment cost in accordance with Article 15 of this Circular.
3. For power plants that have signed electricity purchase and sale contracts, the Seller and Buyer have the right to negotiate and agree to amend the electricity purchase and sale contract in accordance with this Circular.
4. For each stage of the electricity market, the Seller and Buyer are responsible for amending and supplementing the terms of the electricity purchase and sale contract to be consistent with the regulations at each level of the electricity market.

Article 29. Effective Date

1. This Circular takes effect from the date of 01 the 6 This Circular takes effect from January 1, 2024, and replaces Circular No. 57/2020/TT-BCT dated December 31, 2020, issued by the Minister of Industry and Trade, which stipulates the method for determining the electricity generation price and electricity purchase and sale contracts.
2. Repeal Clause 2 of Circular No. 31/2022/TT-BCT dated November 8, 2022, issued by the Minister of Industry and Trade, amending and supplementing certain provisions of Circular No. 57/2014/TT-BCT dated December 19, 2014, issued by the Minister of Industry and Trade, which stipulates the method, procedures for establishing and promulgating the electricity generation price framework, and Circular No. 57/2020/TT-BCT dated December 31, 2020, issued by the Minister of Industry and Trade, which stipulates the method for determining the electricity generation price and electricity purchase and sale contracts.
3. Repeal Circular No. 02/2023/TT-BCT dated January 19, 2023, issued by the Minister of Industry and Trade, abolishing certain provisions of Circular No. 57/2020/TT-BCT dated December 31, 2020, issued by the Minister of Industry and Trade, which stipulates the method for determining the electricity generation price and electricity purchase and sale contracts.
4. During implementation, if any difficulties arise, organizations and individuals are responsible for reporting to the Ministry of Industry and Trade for appropriate supplementation and amendment./.