Decision No. 26/2006/QD-TTg Approves the roadmap and conditions for the formation and development of electricity market levels in Vietnam

Pursuant to …;

Approving the roadmap and conditions for the formation and development of electricity market levels in Vietnam

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PRIME MINISTER

Pursuant to the Law on Organization of the Government dated December 25, 2001;

Pursuant to the Electricity Law dated December 3, 2004;

At the proposal of the Minister of Industry.

DECISION:

Article 1. Approving the roadmap and conditions for the formation and development of electricity market levels in Vietnam, with the following contents:

1. Purpose:

a) Gradually developing a competitive electricity market in a stable manner, eliminating state monopoly in the power sector, increasing customer choice of electricity suppliers;

b) Attracting investment from all economic sectors both domestic and foreign to participate in power activities, gradually reducing state investment in the power sector;

c) Enhancing the efficiency of production and business operations in the power sector, reducing pressure on electricity price increases;

d) Ensuring stable, reliable, and increasingly high-quality power supply;

đ) Ensuring sustainable development of the power sector.

2. Roadmap for the formation and development of electricity market levels in Vietnam:

The electricity market in Vietnam will be formed and developed through three levels:

- Level 1 (2005 - 2014): competitive power generation market.

- Level 2 (2015 - 2022): competitive wholesale electricity market.

- Level 3 (after 2022): competitive retail electricity market.

Each level will be implemented in two steps: pilot and completion, specifically as follows:

a) Step 1 - Level 1: pilot competitive power generation market (from 2005 to 2008).

- Implementing a competitive power generation market among power plants under Vietnam Electricity Corporation (EVN) to pilot competition in power generation according to a single buyer model. Power plants, transmission companies, and distribution companies under EVN will be reorganized into independent companies for accounting purposes.

- Independent Power Producers (IPP) not owned by EVN continue to sell electricity to EVN under long-term power purchase agreements (PPA) already signed.

- Upon completion of the pilot phase, large power plants playing a significant role in the current power system under EVN must be converted into independent IPPs (Independent Power Producers) in the form of state-owned companies; other power plants must be converted into independent power producers in the form of joint-stock companies to prepare for the complete competitive power generation market.

- The Ministry of Industry shall issue regulations governing market activities and provide guidance on implementation.

b) Step 2 - Level 1: complete competitive power generation market (from 2009 to 2014).

- Implementing a complete competitive power generation market after the necessary prerequisites for this step have been met.

- Allowing IPPs not owned by EVN to participate in bidding to start the complete competitive power generation market (according to a single buyer model); power generation units will sell electricity to the market through PPAs and competitive bids on the spot market at a ratio of electricity purchased and sold as specified by the Electricity Regulatory Authority.

c) Step 1 - Level 2: pilot competitive wholesale electricity market (from 2015 to 2016).

- Implementing a pilot competitive wholesale electricity market when the necessary prerequisites for this level have been met.

- Selecting some distribution companies and large customers to form a pilot competitive wholesale electricity market. Allowing the establishment of new wholesale companies to enhance competition in wholesale electricity trading. Current transmission companies will be merged into a single national transmission company under EVN; distribution companies, system operators, and market transaction management units will continue to be managed by EVN.

d) Step 2 - Level 2: complete competitive wholesale electricity market (from 2017 to 2022).

- Implementing a complete competitive wholesale electricity market when the necessary prerequisites for this step have been met.

- Allowing EVN's distribution companies to be converted into independent companies (state-owned or joint-stock) to directly purchase electricity from power generation units and vice versa, power generation units also compete to sell electricity to these companies. Wholesale companies also compete to sell electricity to distribution companies and large customers.

đ) Step 1 - Level 3: pilot competitive retail electricity market (from 2022 to 2024).

- Implementing a pilot competitive retail electricity market when the necessary prerequisites for this level have been met.

- Selecting appropriate distribution grid areas to implement the pilot. According to the level of electricity consumption specified by the Electricity Regulatory Authority, customers have the right to choose their electricity supplier (retail electricity unit). The retail electricity business function of selected distribution companies will be separated from management and operation functions of the distribution grid; retail electricity units will compete to sell electricity to individual customers and compete to buy electricity from wholesale electricity units.

e) Step 2 - Level 3: complete competitive retail electricity market (from 2024).

- According to the level of electricity consumption specified by the Electricity Regulatory Authority, electricity users nationwide have the right to choose their electricity supplier (retail electricity unit) or directly purchase electricity from the market.

- Organizations and individuals meeting requirements for power activities are permitted to establish new retail electricity units to compete in the retail sector. These units have the right to purchase electricity from power generation units or from the market to sell to electricity users.

3. Pre-requisites for forming the electricity market:

a) For the pilot competitive power generation market (Level 1 - Step 1)

Regarding organizational structure:

- Power plants under EVN are separated into independent accounting units;

- A market transaction management unit and a single buyer unit under EVN are established. Regarding regulatory documents:

- Grid transmission regulations and pilot power market operation regulations are issued by the Ministry of Industry. Regarding power system infrastructure:

- The SCADA/EMS system and remote metering systems have been fully established to power generation units under EVN and to key points in the transmission network, meeting the activities of the pilot competitive power generation market;

- Information systems serving operational management and transaction settlement on the market have been equipped appropriately.

Regarding the operational capacity of participating entities:

Newly established entities including the Electricity Regulatory Authority, the sole bulk buyer, the market operation entity, the system dispatch entity, the transmission entity, and power generation entities need to have staff who have been professionally trained to meet the requirements of the competitive electricity market.

b) For the complete competitive power generation market (Level 1 - Step 2)

Regarding organizational structure:

Power plants under EVN are separated into independent power generation units (without shared economic interests with the sole bulk buyer, the transmission entity, and the market operation entity) in the form of state-owned enterprises or joint-stock companies. The total installed capacity of a power generation unit shall not exceed 25% of the total system's installed capacity.

Regarding the legal framework:

- The restructuring plan for the electricity industry has been approved by the Prime Minister;

- The design proposal for the complete competitive electricity market has been approved by the Ministry of Industry;

- Market regulations are supplemented, amended, or newly established in accordance with the structure of the complete competitive power generation market;

- Regulations for operating the competitive power generation market include: grid transmission regulations; procedures for monitoring implementation of planning and executing projects within the planned project portfolio; procedures for issuing, amending, supplementing, and supervising the implementation of electricity business licenses; procedures for selecting investors to develop new projects according to the minimum cost generation plan; procedures for registering participation in the competitive power generation market; regulations on controlling monopolies and unfair competition in the electricity market; regulations on handling violations, resolving disputes, and complaints in electricity market operations are issued;

- Regulations on methods for establishing, procedures, and approval processes for retail electricity price schedules, power generation price ranges, wholesale electricity price ranges, transmission fees, distribution fees, market operation fees, regulation fees, ancillary service usage fees, and other related fees; model PPA regulations; regulations on monitoring electricity trading activities on the market, checking compliance with price schedules and various fees that have been issued;

- Regulations on handling long-term PPA costs when IPPs participate in the market are issued;

Regarding the electricity system infrastructure:

- The SCADA/EMS system and remote metering systems are fully established to all power plants in the system, meeting the activities of the complete competitive power generation market;

- Information systems serving market operation management are appropriately equipped;

- Equipment for market transaction monitoring functions at the regulatory authority is fully equipped;

- System reserve capacity must be maintained at over 20% of the total system's installed capacity;

- The installed capacity ratio of a power generation unit shall not exceed 25% of the total system's installed capacity.

Regarding the operational capacity of participating entities:

Independent power generation units need to have staff who have been professionally trained to meet the activities of the competitive electricity market.

c) For the pilot competitive wholesale electricity market (Level 2 - Step 1)

Regarding organizational structure:

Some electricity distribution companies are selected to pilot direct purchases of electricity from power generation units or wholesale sellers.

Legal framework:

- The design proposal for the pilot wholesale electricity market has been approved;

- Regulations on regulatory activities; market regulations; grid transmission regulations are amended and supplemented to be consistent with the structure and operation of the competitive wholesale market;

- Regulations on conditions for large customers to choose to purchase electricity directly from power generation units or through the electricity market are issued.

Regarding the electricity system infrastructure:

- Data collection systems, energy monitoring/control (SCADA/EMS), and remote metering systems are fully established to all independent distribution entities and to large electricity consumers, meeting the activities of the pilot competitive wholesale electricity market;

- Information systems serving market operation management are appropriately equipped;

Regarding the operational capacity of participating entities:

Selected distribution entities for the pilot wholesale electricity market need to have staff who have been professionally trained to meet the activities of the competitive electricity market.

d) For the complete competitive wholesale electricity market (Level 2 - Step 2)

Regarding organizational structure:

- Distribution companies have been reorganized to form independent distribution entities;

- New wholesale electricity entities are established to participate in transactions on the market, the sole buyer becomes a regular wholesale electricity company in the form of an independent company;

Legal framework:

- The design proposal for the complete competitive wholesale electricity market and the establishment proposal for independent distribution entities are approved;

- Regulations on regulatory activities, market regulations, and grid transmission regulations are amended and supplemented to be consistent with the structure of the competitive wholesale electricity market;

- Regulations on competitive selection of new power generation investors according to the minimum cost generation plan are amended to be consistent with the market's competitive objectives;

Regarding the electricity system infrastructure:

- SCADA/EMS systems and remote metering systems are fully equipped to all interconnection points of the transmission grid from independent distribution entities and to large electricity consumers;

- Information systems serving market operation management are appropriately equipped to meet the structure and operation of the wholesale market.

Regarding the operational capacity of participating entities:

Independent electricity distributors must have staff who have been trained in specialized fields and business operations to meet the activities of the competitive electricity market.

d) For the pilot competitive retail electricity market (level 3 - step 1)

The system of legal documents:

- The project for designing the pilot competitive retail electricity market and the project for restructuring distribution companies and selecting the scale of pilot retail electricity sales, which have been approved;

- Regulations on regulatory activities, market rules, and transmission grid regulations revised and supplemented to be consistent with the structure and operation of the retail electricity market;

- Distribution grid regulations established and promulgated.

Regarding the electricity system infrastructure:

- The SCADA/EMS system and remote metering systems must be fully invested in and implemented for all electricity consumers and measurement points within the selected distribution network pilot area;

- Information systems serving the management and operation of the electricity market must be equipped to be consistent with the structure and operation of the retail electricity market.

Regarding the operational capacity of participating units:

Retail electricity sellers chosen for the pilot retail electricity market must have staff who have been trained in specialized fields and business operations to meet the activities of the competitive electricity market.

e) For the complete competitive retail electricity market (level 3 - step 2)

Legal framework:

- The project for designing the competitive retail electricity market, which has been approved;

- Regulations on regulatory activities, market regulations, and transmission grid regulations revised and supplemented to be consistent with the structure and operation of the competitive retail electricity market. Regarding the power system infrastructure:

- The SCADA/EMS system and remote metering systems must be fully invested in for the distribution network;

- Information systems serving the management and operation of the electricity market must be equipped to be consistent with the structure of the competitive retail electricity market.

Regarding the operational capacity of participating entities:

Independent retail electricity sellers must have staff who have been trained in specialized fields and business operations to meet the activities of the competitive electricity market.

Article 2. Implementation

1. Assign to the Ministry of Industry:

a) To develop and submit for approval

b) To direct the implementation of building and developing the electricity market in Vietnam according to the approved development roadmap for market levels;

c) To approve projects for designing market levels and projects for restructuring power generation companies, transmission units, and distribution units suitable for each market level and organize their implementation;

d) To issue regulations for operating the electricity market and regulatory activities at each level of market development;

đ) To receive support from international financial organizations for projects serving the process of building and developing market levels;

e) To compile capital requirements for developing the electricity market annually for the Ministry of Planning and Investment to aggregate and submit for approval;

2. The Ministry of Planning and Investment shall coordinate with the Ministry of Finance to allocate sufficient funds from the state budget for the formation and development of the electricity market at each level according to the budget approved by the Ministry of Industry.

3. Vietnam Electricity Corporation:

a) To develop regulations for the operation of the internal competitive power generation market pilot project, submit them for approval by the Ministry of Industry, and organize their implementation;

b) To implement the internal competitive power generation market pilot project in accordance with the approved development roadmap under this Decision and the market operation regulations approved by the Ministry of Industry;

c) To organize training to enhance the professional skills of staff of newly established units under EVN to meet the competition requirements of the pilot market;

d) To invest in completing the necessary technical infrastructure for the operation of the complete competitive power generation market;

đ) To invest in technical infrastructure for the formation and provide initial funding for regulatory activities, for the formation of new independent units separated out, and for activities to enhance institutional capacity and professional training for the operation of the electricity market.

4. Independent power producers (IPP), distribution units, wholesale and retail electricity sellers:

a) To invest in technical equipment necessary to meet the operational requirements of the competitive power generation, wholesale, and retail electricity markets;

b) To train staff in specialized fields and business operations to meet the competition requirements of the market at each stage.

Article 3. Effectiveness

The Standard Measurement Quality Control Department shall be responsible for organizing and guiding the implementation of the Regulations adopted herein.

Article 4. Responsibilities for Implementation

The Minister of Industry, ministers, heads of ministerial-level agencies, heads of central government agencies, Chairmen of provincial People's Committees, Vietnam Electricity Corporation, and related units are responsible for implementing this Decision./.