Circular No. 32/2014/TT-BCT stipulates the procedures for developing and applying the Avoided Cost Tariff Schedule and promulgates the Model Power Purchase Agreement for small hydropower plants.

CIRCULAR

Provisions on the procedures for establishing, applying the Avoided Cost Tariff Table and issuing model Power Purchase Agreements for small hydropower plants.

 issuing model Power Purchase Agreements for small hydropower plants

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Pursuant to Decree No. 95/2012/NĐ-CP dated November 12, 2012, of the Government, detailing the functions, tasks, powers, and organizational structure of the Ministry of Industry and Trade;

Based on 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. 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 stipulating the procedures for establishing, applying the Avoided Cost Tariff Table and issuing model Power Purchase Agreements for small hydropower plants.

PART I

GENERAL PROVISIONS

Article 1. Scope and Applicability

1. This Circular stipulates the procedures for establishing, applying the Avoided Cost Tariff Table and issuing model Power Purchase Agreements applicable to small hydropower plants connected to the national power grid.

Small power plants using renewable energy sources that have not yet been provided with specific electricity pricing mechanisms as prescribed by the Prime Minister shall apply the mechanism prescribed in this Circular when connecting to the national power grid.

2. This Circular applies to the following entities:

a) Organizations and individuals purchasing and selling electricity from small power plants as prescribed in Clause 1 of this Article;

b) System operators and electricity market operators and other organizations and individuals related thereto.

Article 2. Interpretation of Terms

In this Circular, the following terms are understood as follows:

1. Seller is an organization or individual holding a power business license in the power generation sector owning small hydropower plants.

2. Buyer is the Vietnam Electricity Corporation or a power distribution company holding a power business license in the power distribution and retail sectors, having a power grid to which small hydropower plants will connect to purchase electricity from the Seller.

3. Avoided Cost Tariff Table is a tariff table calculated based on the avoided costs of the national power system when one (1) kWh of power generated from a small hydropower plant is fed into the distribution grid.

4. Avoided Cost is the production cost of one (1) kWh of the most expensive generating unit in the national power system, which can be avoided if the Buyer purchases one kWh from a small hydropower plant instead.

5. Excess electricity is the total amount of electricity generated during the rainy season exceeding the amount of electricity with a load factor of 0.85 during the rainy season.

6. Electricity on the meter is the total amount of electricity generated minus the amount of self-consumption within the plant premises.

7. Load factor is the ratio between the actual amount of electricity generated and the potential amount of electricity that could be generated at 100% rated capacity over a specified period (year, season, month, day).

8. Model Power Purchase Agreement is a power purchase agreement applicable to the sale and purchase of electricity from small hydropower plants applying the Avoided Cost Tariff Table prescribed in Appendix IV of this Circular.

9. Rainy season is calculated from July 1 to October 31.

10. Dry season is calculated from November 1 to June 30 of the following year.

11. Year for data calculation for tariff application for year N is from July 1 of year (N-2) to June 30 of year (N-1).

12. Renewable Energy is energy produced from small hydropower, wind, solar, geothermal, tidal, biomass, direct waste incineration, landfill gas, gas from waste treatment plants, and biogas.

Chapter II

CONSTRUCTION, APPROVAL, IMPLEMENTATION

 AVOIDED COST TARIFF TABLE

Article 3. Structure of Avoided Cost Tariff

1. The Avoided Cost Tariff Table (excluding water resource tax, forest environmental service fee, and value-added tax) is calculated according to usage time during the day and seasons throughout the year as detailed in Table 1 of Appendix I attached to this Circular, including seven (7) components as follows:

a) Peak hours in the dry season;

b) Normal hours in the dry season;

c) Off-peak hours in the dry season;

d) Peak hours in the rainy season;

đ) Normal hours in the rainy season;

e) Off-peak hours in the rainy season;

g) Excess electricity.

2. The corresponding costs for the seven (7) components of the tariff table include:

a) Generation cost of avoided electricity;

b) Transmission loss cost of avoided electricity;

c) Generation capacity cost of avoided electricity (applicable only during peak hours of the dry season).

3. The electricity usage time during the day applied to the Avoided Cost Tariff Table is consistent with the current retail electricity tariff schedule.

For areas where the power grid is connected to foreign grids, areas experiencing transmission line overload, and hydropower plants on the same cascade, the Buyer and Seller agree on the application period for peak hour prices according to the principle of ensuring the required number of peak hours as prescribed.

Article 4. Procedures for Establishing, Approving, and Announcing the Avoided Cost Tariff Table

1. The Avoided Cost Tariff Table is established and announced annually.

2. Before October 31 each year, the system operator and market operator are responsible for hosting and coordinating with the Buyer, Seller, and other power plants to update the database, perform calculations, and prepare the Avoided Cost Tariff Table for the next year according to the method prescribed in Appendix II attached to this Circular, and submit it to the Electricity Regulatory Authority.

3. Before December 31 each year, the Electricity Regulatory Authority is responsible for:

a) Reviewing the input parameters and calculation results of the annual Avoided Cost Tariff Table prepared by the system operator and market operator. If necessary, relevant organizations and individuals may be invited to participate in the review;

b) Studying, proposing, and submitting to the Minister of Industry and Trade for consideration and decision on the Avoided Cost Tariff Table at a reasonable level to encourage electricity production from renewable energy while ensuring that the Avoided Cost Tariff Table is appropriate to the economic and social conditions of the country at each stage;

c) Announcing the Avoided Cost Tariff Table.

4. Within two (2) days from the date of issuance of the Avoided Cost Tariff Table, the Electricity Regulatory Authority is responsible for announcing the Avoided Cost Tariff Table for the following year on its official website and that of the Ministry of Industry and Trade.

5. In case the Avoided Cost Tariff Table is not announced within the prescribed timeframe, the previous year's Avoided Cost Tariff Table may temporarily be applied until the new Avoided Cost Tariff Table is announced. Any difference arising from payment under the old and new Avoided Cost Tariff Tables will be settled in the first payment made under the new Avoided Cost Tariff Table.

Article 5. Risk Sharing Mechanism

1. The Seller when signing the Electricity Purchase and Sale Contract with the Buyer may choose to apply the pricing schedule according to the risk sharing mechanism stipulated in the Model Electricity Purchase and Sale Contract.

2. The risk sharing mechanism applies the Avoided Cost Tariff published annually together with predetermined floor prices and ceiling prices from the Avoided Cost Tariff of the year the Electricity Purchase and Sale Contract was signed. The electricity selling price for subsequent years after signing the contract will be equal to the applicable avoided cost tariff for that year if it falls within the range between the floor price and the ceiling price. If the avoided cost tariff for that year exceeds the ceiling price, then the ceiling price will be applied, and if the avoided cost tariff for that year is lower than the floor price, then the floor price will be applied in the payment for electricity generated.

3. The floor price of each component of the tariff is calculated at 90% of the price of that component in the Avoided Cost Tariff applicable for the year the Electricity Purchase and Sale Contract was signed.

4. The ceiling price of each component of the tariff is calculated at 110% of the price of that component in the Avoided Cost Tariff applicable for the year the Electricity Purchase and Sale Contract was signed.

5. The maximum duration for applying the tariff with the risk sharing mechanism is 12 (twelve) years from the year the Electricity Purchase and Sale Contract was signed. The Seller may choose a shorter application period. After the application period of the risk sharing mechanism, the price used in electricity payment from the Electricity Purchase and Sale Contract will be the published avoided cost tariff applicable for each year.

6. When applying the risk sharing mechanism, the Electricity Purchase and Sale Contract must specify in detail the Avoided Cost Tariff of the year the Electricity Purchase and Sale Contract was signed, the duration of the risk sharing mechanism application, and the corresponding floor and ceiling prices for each component of the tariff according to the risk sharing mechanism specified in Table 2 of Appendix I issued along with this Circular.

Article 6. Interconnection Responsibility

1. The Seller is responsible for investing in, operating, and maintaining the transmission lines and the step-up substation (if any) from the Seller's power plant to the interconnection point with the Buyer's grid.

2. The interconnection point shall be agreed upon by the Seller and the Buyer based on the principle of being the nearest point to connect to the existing Buyer's grid, ensuring the transmission capacity of the Seller's power plant, and complying with the approved grid plan.

3. In cases where the interconnection point differs from the metering equipment location, the Seller bears the loss of electrical energy on the interconnection line and the transformer step-up loss of the power plant. The calculation method for losses on the interconnection line is carried out according to the provisions set forth in Appendix III issued along with this Circular.

Article 7. Conditions for Applying the Avoided Cost Tariff to the Seller

The Seller is eligible to apply the Avoided Cost Tariff when meeting one of the following conditions:

1. The installed capacity of the power plant is less than or equal to 30 MW and all produced electricity comes from Renewable Energy.

2. The Seller has multiple cascaded hydropower plants on the same river and can apply the Avoided Cost Tariff for the cascaded hydropower complex when the total installed capacity of these plants is less than or equal to 60 MW. In cases where the cascaded hydropower complex includes a hydropower plant with a capacity greater than 30 MW that was put into operation first, the Seller can apply the Avoided Cost Tariff for the cascaded hydropower complex when the next hydropower plant enters commercial operation.

Article 8. Application of Model Power Purchase Contract

1. The use of the Model Power Purchase Contract is mandatory for power purchase transactions applying Avoided Cost Tariff between qualified power plants and Purchasers.

2. Power Purchase Contracts signed before this Circular takes effect shall continue to be valid according to the term stated in the contract. The Seller and Buyer may agree to switch to applying the Avoided Cost Tariff and the Model Power Purchase Contract instead of the previously signed Power Purchase Contract.

Article 9. Conditions for Participating in the Electricity Market

1. The Seller owning small hydropower plants within the scope and objects regulated by this Circular, if connected to the grid at 110 kV or higher voltage level, has the right to choose for the plant to participate in the electricity market.

2. Conditions for participating in the electricity market:

a) Connected to the grid at 110 kV or higher;

b) Equipped with complete infrastructure to participate in the electricity market as prescribed;

c) Commit to fully comply with all regulations of the electricity market, sign power purchase contracts in accordance with the model contracts issued by the Ministry of Industry and Trade applicable to power plants participating in the electricity market;

d) When choosing to participate in the electricity market, the Seller cannot opt again for the application of the Avoided Cost Tariff and the Model Power Purchase Contract;

đ) In case the Seller is currently applying the Avoided Cost Tariff and has signed the Model Power Purchase Contract, the Seller must enter into an agreement with the Buyer to terminate and settle the contract prematurely in accordance with the provisions stipulated in the previously signed contract and relevant regulations issued by competent state authorities.

Chapter III

IMPLEMENTING PROVISIONS

Article 10. Responsibilities of the Electricity Regulatory Authority

1. Direct the System Operation Unit and the Electricity Market to establish the Avoided Cost Tariff annually as prescribed in Appendix II attached to this Circular to ensure timely publication of the tariff.

2. Designate thermal power plants to provide necessary data for the establishment of the Avoided Cost Tariff for the System Operation Unit and the Electricity Market.

3. Select thermal power plants to be replaced based on the National Power Development Plan for each phase, considering reasonable investment, maintenance, and operation costs; notify the System Operation Unit and the Electricity Market as a basis for calculating the avoided capacity cost as prescribed in Clause 3 of Appendix II attached to this Circular.

4. Review and submit the Avoided Cost Tariff annually to the Ministry of Industry and Trade for consideration and decision; publish the Avoided Cost Tariff annually.

5. Maintain confidentiality of information related to the costs of power plants used to calculate the Avoided Cost Tariff.

6. Coordinate with the Industrial Safety and Environmental Protection Bureau, the Energy General Department, and related units to inspect and supervise power generation units in implementing current laws and regulations on construction quality management, dam safety, reforestation, reservoir operation procedures, forest environmental services, and other environmental requirements.

7. Guide the implementation of this Circular.

Article 11. Responsibilities of the Seller

1. Agree and sign contracts with the Buyer according to the Model Power Purchase Contract and the Avoided Cost Tariff.

2. Install three-phase meters in compliance with current regulations to measure electricity consumption for billing purposes.

3. Sell the entire electricity output from the plant to the Buyer when applying the Avoided Cost Tariff. In cases where electricity is supplied to nearby villages or communes without electricity at the request of local authorities, the Seller may sell part of the output at an agreed price in compliance with the law to the local distribution company but must reach a prior written agreement with the Buyer.

4. Submit one copy of the signed Power Purchase Contract to the Electricity Regulatory Authority no later than thirty days from the date of signing.

5. Comply with system operation regulations, transmission system regulations, and distribution system regulations issued by the Ministry of Industry and Trade.

6. Quarterly, the Seller is responsible for reporting to the Electricity Regulatory Authority on the implementation of forest environmental service payments for the previous quarter.

7. Quarterly and annually as required, report in writing to the Electricity Regulatory Authority on the implementation of current laws and regulations on construction quality management, dam safety, reforestation, reservoir operation procedures, forest environmental services, and other environmental requirements.

Article 12. Responsibilities of the Buyer

1. Agreeing and signing the purchase and sale contract with the Seller according to the Model Purchase and Sale Contract for Electricity and the Avoidable Cost Tariff Table if the Seller meets the conditions stipulated in Article 7 of this Circular and other relevant laws.

2. Purchasing the entire amount of electricity generated by the Seller onto the grid within the transmission capacity of the power grid, except for the portion of electricity sold to local distribution companies as provided for in Clause 3, Article 11 of this Circular.

3. Adhere to system operation regulations, transmission system regulations, and distribution system regulations issued by the Ministry of Industry and Trade.

4. Submitting to the Electricity Regulatory Authority a report on the results of negotiations with the Seller regarding changes in peak hour pricing as specified in Clause 3, Article 3 of this Circular within fifteen (15) days from the date of negotiation with the Seller.

5. The Vietnam Electricity Corporation and its affiliated power corporations have the responsibility to develop plans to address overloading situations as specified in Clause 3, Article 3 of this Circular.

Article 13. Responsibilities of Other Power Units

1. System operation units and electricity market operators are responsible for establishing the annual Avoidable Cost Tariff Table and maintaining confidentiality of information related to the costs of power plants used to calculate the Avoidable Cost Tariff Table.

2. Thermal power plants designated by the Electricity Regulatory Authority are responsible for providing necessary data to support the calculation of the Avoidable Cost Tariff Table for system operation units and electricity market operators.

Article 14. Effective Date

1. This Circular takes effect from November 25, 2014, replacing Decision No. 18/2008/QD-BCT dated July 18, 2008 of the Ministry of Industry and Trade concerning the Avoidable Cost Tariff Table and the Model Purchase and Sale Contract for Small Hydroelectric Power Plants.

2. For purchase and sale contracts signed before the effective date of this Circular, both parties shall be responsible for negotiating and signing supplementary agreements to amend and supplement the purchase and sale contract regarding the Buyer's responsibility to pay the Seller resource tax, value-added tax, and forest environmental service fees as currently prescribed.

3. During implementation, if any issues arise, the relevant units shall be responsible for reporting them to the Ministry of Industry and Trade for appropriate supplementation and amendment./.