THE MINISTRY OF INDUSTRY AND TRADE
Circular No. 46/2018/TT-BCT dated November 15, 2018 of the Ministry of Industry and Trade on amendments and supplement to the Circular No. 21/2015/TT-BCT dated June 23, 2015 by the Minister of Industry and Trade regulating pricing method for electric power system s ancillary services and procedures for scrutinizing a contract for the provision of electric power systems ancillary services
Pursuant to the Government’s Decree No. 98/2017/ND-CP dated August 18, 2017on defining the functions, tasks, powers and organizational structure of the Ministry of Industry and Trade;
Pursuant to the Law on Electricity dated December 03, 2004 and the Law on amendments to the Law on Electricity dated November 20, 2012;
Pursuant to the Government’s Decree No. 137/2013/ND-CP dated October 21, 2013 detailing a number of articles of the Electricity Law and the Law Amending and Supplementing a number of Articles of the Electricity Law;
At the request of the General Director of the Electricity Regulatory Authority of Vietnam;
The Minister of Industry and Trade promulgates a Circular on amendments to the Circular No. 21/2015/TT-BCT dated June 23, 2015 by the Minister of Industry and Trade regulating pricing method for electric power system s ancillary services and procedures for scrutinizing a contract for the provision of electric power system s ancillary services.
Article 1.Amendments to the Circular No. 21/2015/TT-BCT dated June 23, 2015 by the Minister of Industry and Trade regulating pricing method for electric power system s ancillary services and procedures for scrutinizing a contract for the provision of electric power system s ancillary services (hereinafter referred to as the "Circular No. 21/2015/TT-BCT”)
1. To amend and supplement Clause 1, Clause 2 and Clause 3 Article 2 as follow:
“1.“Scheduled available output of an electric generator”means the anticipated maximum output gained during the electric generator’s continuous and stable generation of electric power for a given period agreed upon by two parties in conformity with the electric generator’s technical parameters.
2.“Ancillary services”include:
a) Fast start-up service;
b) Must-run generation services for maintaining the security of the power system, including:
- Regular must-run generation services of power plants for maintaining the security of power system;
- Must-run generation services rendered by gas turbine power plants as ordered by the operator of electric power system and market for the purpose of maintaining the security of the power system when the gas turbine power plant runs an open cycle or uses partial or entire auxiliary fuel because of the shortage of main fuel.
c) Spinning reserve service;
d) Frequency control service;
dd) Voltage regulation service;
e) Black start service.
3.“Ancillary service provider”refers to a power generation enterprise that owns one or several power plants and is mobilized to provide ancillary services according to orders of the operator of electric power system and market for maintaining the security of power system.”
2. To amend and supplement Article 3 as follows:
“1. With respect to a power plant on the list of providers of fast start-up service and regular must-run generation service of power plants for maintaining the security of the power system: The pricing of these ancillary services adopts the principles of adequately compensating for reasonable and valid actual expenses and generating rational annual profits for ancillary service providers which are thermal power plants. Ancillary service price is exclusive of value-added tax, other taxes and payables as defined in relevant laws. The ancillary service price for the said entity consists of:
a) Fixed price;
b) Variable price;
c) Start-up price;
d) Other fees (if any).
2. With respect to frequency control service, pricing is determined by adopting the following principles:
a) For strategic multi-target hydroelectric plants of Vietnam Electricity Corporation, which do not participate directly in the electricity market and are on the list of frequency control service providers: Reasonable and valid actual costs for providing frequency control service are accounted for as annual expenses of strategic multi-target hydroelectric plants according to the Regulation on methods and procedures for determination of annual expenses and electricity prices of strategic multi-target hydroelectric plants adopted by the Ministry of Industry and Trade;
b) For plants which participate directly in the electricity market and are on the list of frequency control service providers: Revenues shall be determined according to the Regulation on operation of competitive electricity market adopted by the Ministry of Industry and Trade.
3. With respect to spinning reserve service, pricing is determined by adopting the following principles:
a) For strategic multi-target hydroelectric plants of Vietnam Electricity Corporation, which do not participate directly in the electricity market and are on the list of spinning reserve service providers: Reasonable and valid actual costs for providing spinning reserve service are accounted for as annual expenses of strategic multi-target hydroelectric plants according to the Regulation on methods and procedures for determination of annual expenses and electricity prices of strategic multi-target hydroelectric plants adopted by the Ministry of Industry and Trade;
b) For plants which participate directly in the electricity market and are on the list of spinning reserve service providers: Revenues shall be determined according to the Regulation on operation of competitive electricity market adopted by the Ministry of Industry and Trade.
4. With respect to voltage regulation service, must-run generation service of gas turbine power plants, and black start service, pricing is determined by adopting the following principles:
a) For strategic multi-target hydroelectric plants of Vietnam Electricity Corporation, providing voltage regulation service and/or black start service: Reasonable and valid actual costs for providing voltage regulation service and/or black start service are accounted for as annual expenses of strategic multi-target hydroelectric plants according to the Regulation on methods and procedures for determination of annual expenses and electricity prices of strategic multi-target hydroelectric plants adopted by the Ministry of Industry and Trade;
b) For plants providing voltage regulation service, must-run generation service of gas turbine power plants, and black start service, which are not strategic multi-target hydroelectric plants of Vietnam Electricity Corporation: The ancillary service provider shall reach an agreement on ancillary service price, negotiate and enter into the contract for provision of ancillary service with Vietnam Electricity Corporation. The method for pricing of voltage regulation service, must-run generation service of gas turbine power plants, and black start service is governed by Section 3 Chapter II of this Circular.”
3. To amend Heading of Section 2 Chapter II as follows:
“Section 2. METHOD FOR PRICING OF FAST START-UP SERVICE, AND REGULAR MUST-RUN GENERATION SERVICE OF POWER PLANTS FOR MAINTAINING THE POWER SYSTEM’S SECURITY”
4. To amend, supplement the first part of Article 5; Clause 1; Point b, Point c, Point dd, Point e and Point g Clause 2 Article 5, and add Clause 3a to Article 5:
a) To amend and supplement the first part of Article 5 as follows:
“The fixed income in the year N (Gcd) of an ancillary service provider is determined by adopting the following formula:
Gcd= CKH+ COM,N+ CLVDH+ GDC+ LNN
Where:
CKH: Total fixed asset depreciation cost of the ancillary service provider in the year N, which is calculated according to Clause 1 of this Article (VND);
COM,N: Total fixed operational cost in the year N, which is determined according to Clause 2 of this Article (VND);
CLVDH: Total sum of interest costs and lending fees payable in the year N for the ancillary service provider’s investments in its assets (VND);
GDC: Adjusted fixed income in the year N (VND);
LNN: Rated profit in the year N (VND).”
b) To amend and supplement Clause 1 Article 5 as follows:
“1. Total fixed asset depreciation cost (CKH) of the ancillary service provider in the year N is determined as follows:
The service time and method for depreciation of fixed assets shall be governed by the Ministry of Finance’s Circulars providing guidance thereof and written guidelines provided by competent authorities. Total fixed asset depreciation cost is the fixed asset depreciation cost estimated for the year N at the time when two parties conduct negotiations on the plan for pricing of ancillary services rendered by power plants, which shall be then submitted for further appraisal.
If there is the difference between the fixed asset depreciation cost estimated in the ancillary service pricing plan for the year N-1 and the one realized in the year N-1, two parties shall consider adjusting the depreciation cost in the ancillary service pricing plan in the year N, if necessary.”
c) To amend and supplement Point b, Point c, Point dd, Point e and Point g Clause 2 Article 5 as follows:
“b) Method for calculation of total salary cost (CTL)
Total salary cost in the year N (CTL) is composed of total salary cost and salary-related costs such as health insurance, social insurance and unemployment insurance contributions, and labor union dues determined according to relevant laws.
If there is the difference between the total salary cost and salary-related costs such as health insurance, social insurance and unemployment insurance contributions, and labor union dues estimated in the ancillary service pricing plan for the year N-2 and the one realized in the year N-2 according to regulations adopted by competent authorities, two parties shall consider adjusting this cost in the ancillary service pricing plan in the year N, if necessary.
c) Method for calculation of major repair cost (CSCL)
Total major repair cost (CSCL) in the year N shall be negotiated by two parties on the basis of the values approved by competent authorities. If there is the difference between the total major repair cost estimated in the ancillary service pricing plan for the year N-2 and the one realized in the year N-2 due to changes in repaired items, repair schedule and contents, two parties shall consider adjusting the major repair cost in the ancillary service pricing plan in the year N, if necessary.
dd) Method for calculation of the sum of other monetary costs (CK)
The sum of other monetary costs in the year N (CK) is exclusive of taxes and fees.
Expenses for shift meals and land rents in the year N are determined according to current regulations. The sum of other monetary costs in the year N (CK) is exclusive of expenses for shift meals and land rents determined according to audited expenses in the year N-2, at the slippage rate of 2.5% per year, exclusive of unusually variable costs in the year N-2, and inclusive of reasonably estimated costs in the year N which are not yet accounted for in the year N-2.
e) The exchange difference cost in the year N shall be determined according to foreign currency loan agreements, the planned actual repayments on the loan principals in foreign currency, and the estimated exchange rate in the year N. If there is the difference between the exchange rate estimated in the ancillary service pricing plan in the year N-2 and the one realized in the year N-2, two parties shall consider adjusting the exchange difference cost in the ancillary service pricing plan in the year N, if necessary.
g) Two parties are entitled to negotiate the application of audited figures of material cost, outsourced service cost, and other monetary costs in the year N-1 to the calculation of corresponding costs in the year N.”
d) To add Clause 3a after Clause 3 Article 5 as follows:
“3a. Adjusted fixed income (GDC) of the ancillary service provider in the year N is calculated according to the difference between the actual coefficient of availability and the planned coefficient of availability specified in the pricing plan because of changes in the repair plan and the hours of outage of generators for repairing tasks in the year N-2 (excluding the hours of outage of generators reduced thanks to the power plant’s efforts).”
5. To add Article 5a after Article 5 as follows:
“Article 5a. Method for long-term pricing of ancillary services
1. The period for long-term pricing is equal to the effective period of the contract for the provision of long-term ancillary services specified in the Contract for provision of ancillary services.
The pricing of a long-term ancillary service shall be calculated every year, commencing from the year N (which is the first year of the pricing period) until the end of the contract’s period.
2. Principles of annual pricing:
a) Fixed price, total fixed income, fixed asset depreciation cost, interest cost, fixed material cost, salary cost, major repair cost, outsourced service cost, other monetary costs, and profits in each year of the pricing period shall be calculated according to Section 2 Chapter II of this Circular.
b) Material cost, outsourced service cost and other monetary costs (exclusive of expenses for shift meals and land rents) in the year N are determined according to Section 2 Chapter II of this Circular; from the year N+1 until the end of the term of contract, these costs shall be calculated at the slippage rate of 2.5% per year from the year N. Expenses for shift meals and land rents are determined according to relevant laws.
3. Mechanism for adjusting the annual ancillary service price
a) By November 01 every year, after figures in the previous year have been duly audited, if there is the difference between major repair cost, salary cost, exchange difference cost, and availability coefficient specified in the ancillary service pricing plan and those realized in the previous year, two parties shall consider this difference and adjust the ancillary service pricing plan for the following year, if necessary.
b) By November 01 every year, if there is the difference between the fixed asset depreciation cost specified in the ancillary service pricing plan and the one realized in that year, two parties shall consider this difference when adjusting the ancillary service pricing plan for the following year, if necessary.
c) By November 01 every year, upon the availability of audited figures of material cost, outsourced service cost and other monetary costs incurred in the previous year, two parties shall consider updating these costs in the ancillary service pricing plan for the following year, if necessary.
d) By November 01 every year, two parties shall consider adjusting the ancillary service pricing plan for the following year if the Government adopts new regulations on salary, taxation and finance.”
6. To amend and supplement Section 3 Chapter II as follows:
“Section 3. METHOD FOR PRICING OF BLACK START SERVICE, VOLTAGE REGULATION SERVICE, AND MUST-RUN GENERATION SERVICE OF GAS TURBINE POWER PLANTS
Article 8. Method for pricing of black start service
1. For thermal power plants:
Total black start cost (Gk,i,j) of the ancillary service provider is determined by adopting the following formula:
a) Black start cost ( Ck,i, j,l) for every start of the generator at each start mode is determined by adopting the following formula:
Where:
Ck,i,j,l: Black start cost of the generator i at the start mode j for the start l (VND);
Mi,j: Fuel consumption rate for the black start of the generator i at the start mode j (kg or BTU);
GnlkD: The price of fuel consumed to serve the black start of the generator (VND/kg or VND/BTU);
: Auxiliary fuel consumption rate for the black start of the generator i at the start mode j (kg);
gnlp: The price of auxiliary fuel consumed to serve the black start of the generator (VND/kg);
: The cost of auxiliary materials used to serve the black start of the generator i at the start mode j (VND);
j: The start mode of the generator (hot, warm or cold);
i: The generator i of the ancillary service provider;
L: Total number of black starts;
l: Time of black start.
b) Black start maintenance cost (Cdt) is comprised of the cost of training in black start according to the Regulation on black start and restoration of the national power system adopted by the Ministry of Industry and Trade and the cost of maintenance of equipment serving the black start (if any).
2. For hydroelectric plants:
a) For strategic multi-target hydroelectric plants of Vietnam Electricity Corporation: Reasonable and valid actual costs for providing black start service are accounted for as annual expenses of strategic multi-target hydroelectric plants according to the Regulation on methods and procedures for determination of annual expenses and electricity prices of strategic multi-target hydroelectric plants adopted by the Ministry of Industry and Trade;
b) For power plants other than the strategic multi-target hydroelectric plants of Vietnam Electricity Corporation: Total black start cost (Gk,i,j) of the ancillary service provider is equal to the black start maintenance cost (Cdt) determined according to Point b Clause 1 of this Article.
3. Two parties shall reach an agreement on payment of black start cost and specify it in the Contract for provision of black start service.
Article 8a. Method for pricing of voltage regulation service
1. Total voltage regulation cost is equal to the voltage drop compensation cost of the power plant providing ancillary service for the period when generators are mobilized for compensation (Rcb), which is calculated by adopting the following formula:
Where:
Rcb: The amount paid by the buyer to the seller for the amount of electricity output received to serve the compensation (VND);
D: Total days in the month;
d: Transaction date on which the electricity output is received to serve the compensation;
Acb: The electricity output received to serve the compensation, which is determined according to the statement of electricity output received to serve the compensation made by the operator of electric power system and market (kWh);
Gsx: The retail price of electricity in peak hours, off-peak hours and normal hours for customers in production sector at the voltage level for supply of electricity serving the compensation according to regulations of competent authorities (VND/kWh);
Cbd: Cost of maintenance of compensation equipment (if any).
2. Two parties shall reach an agreement on payment of the cost of compensation for voltage regulation and specify it in the Contract for provision of voltage regulation service.
Article 8b. Method for pricing of must-run generation service of gas turbine power plants
1. The price of must-run generation service of the gas turbine power plant is comprised of fuel cost, operational cost and variable maintenance cost specified in the Contract for provision of ancillary service. Two parties shall carry out an agreement on fixed cost (or output cost) and other costs, avoiding double-counting as regulated by law.
2. Two parties shall discuss and specify the payment of the cost of must-run generation service of gas turbine power plant in the Contract for provision of ancillary service."
7. To amend Clause 1 Article 9 as follows:
“1. By November 15 of the year N-1, Vietnam Electricity Corporation is responsible for requesting the Electricity Regulatory Authority of Vietnam to appraise prices of fast start-up service and regular must-run generation service of power plants in the year N (for contracts for provision of annual ancillary service) or in each year of the term of contract (for contracts for provision of long-term ancillary service) for maintaining the security of the power systems of providers of ancillary services according to Article 4, Article 5, Article 6 and Article 7 hereof."
8. To amend Article 11 as follows:
“1. The sample contract for provision of ancillary services provided in the Appendix enclosed herewith is applicable to the provision of fast start-up service, regular must-run generation service of power plants for maintaining the security of the power system, voltage regulation service, must-run generation services of gas turbine power plants, and black start service, between the designated provider of ancillary services and Vietnam Electricity Corporation.
2. The payment of prices of voltage regulation service, must-run generation service of gas turbine power plants, and black start service is governed by Section 3 Chapter II of this Circular.”
9. To amend and supplement Article 14 as follows:
“1. The Electricity Regulatory Authority of Vietnam shall:
a) Promulgate the Regulation on determination and provision of ancillary services, and the list of ancillary service providers in accordance with the Ministry of Industry and Trade’s regulations on power transmission system;
b) Review, appraise and submit the list of power plants providing black start service to the Ministry of Industry and Trade for promulgation according to the Regulation on the power transmission system, and the Regulation on black start and restoration of the national power system adopted by the Ministry of Industry and Trade;
c) Appraise and request the Minister of Industry and Trade to give approval for prices of ancillary services rendered by power plants providing fast start-up service, must-run generation service for maintaining the security of the power system, voltage regulation service, and the black start service;
d) Inspect contracts for the provision of ancillary services;
dd) Instruct and inspect the implementation of this Circular and settle relevant disputes.
2. Vietnam Electricity Corporation shall:
a) Make the list of power plants providing ancillary services according to the Regulation on the power transmission system, and the Regulation on black start and restoration of the national power system adopted by the Ministry of Industry and Trade;
b) Negotiate and approve the repair schedule for the power plant providing ancillary services according to actual repair period of similar items by the power plant and standards set by equipment manufacturers;
c) Review cost components of the electricity price specified in the signed power purchase agreement of the power plant on the list of power plants providing voltage regulation service and black start service for ensuring the avoidance of double counting and overpayment of ancillary service costs;
d) Negotiate and set prices of ancillary services with the providers of such ancillary services;
dd) Negotiate and enter into contracts or authorize the power trading companies to negotiate and conclude contracts for the provision of ancillary services with the providers; present contracts for the provision of ancillary services to the Electricity Regulatory Authority of Vietnam for inspection;
e) Request the Electricity Regulatory Authority of Vietnam to appraise prices of ancillary services agreed upon with the providers.
3. Providers of fast start-up service, must-run generation service for maintaining the security of the power system, spinning reserve service, frequency control service, voltage regulation service, and black start service shall:
a) Negotiate and enter into contracts for the provision of ancillary services;
b) Provide sufficient information, and ensure the accuracy, rationality and validity of data and documents submitted to relevant entities and authorities during the negotiation and inspection of contracts for the provision of ancillary services."
10. To amend and supplement Clause 2 Article 15 as follows:
“2. Vietnam Electricity Corporation and providers of ancillary services are entitled to determine the long-term pricing of ancillary services according to major repair period of main equipment of power plants according to the pricing methods specified in Article 5a hereof.
In case of long-term pricing of ancillary services, Vietnam Electricity Corporation shall negotiate and reach agreements on prices of long-term ancillary services with the providers of ancillary services, and apply such prices consistently to all providers of ancillary services in accordance with regulations herein."
11. To amend Clause 2 Article 2 - The sample contract for the provision of ancillary service enclosed with the Circular No. 21/2015/TT-BCT as follows:
“2. Term of contract
Unless a contract is extended or terminated according to Article 9 of this contract, its term shall be agreed upon by two parties in conformity with the corresponding period specified in the list of power plants providing ancillary services announced by a competent authority."
12. To abrogate Clause 3 Article 1, and Article 13 of Circular No. 21/2015/TT-BCT.
Article 2. Effect
1. This Circular takes effect on January 01, 2019.
2. Difficulties that arise during the implementation of this Circular should be reported to the Electricity Regulatory Authority of Vietnam for consideration and resolution within its competence or reporting the Ministry of Industry and Trade for consideration./.
The Minister
Tran Tuan Anh
Vietnamese
Circular 46/2018/TT-BCT DOC (Word)
Circular 46/2018/TT-BCT PDF (Original)
