VietnameseCircular 10/2024/TT-BCT methods for setting prices for operation and dispatch of the electric power system
ATTRIBUTE
| Issuing body: | Ministry of Industry and Trade | Effective date: | Known Please log in to a subscriber account to use this function. Don’t have an account? Register here |
| Official number: | 10/2024/TT-BCT | Signer: | Truong Thanh Hoai |
| Type: | Circular | Expiry date: | Updating |
| Issuing date: | 31/07/2024 | Effect status: | Known Please log in to a subscriber account to use this function. Don’t have an account? Register here |
| Fields: | Electricity , Industry |
THE MINISTRY OF INDUSTRY AND TRADE No. 10/2024/TT-BCT | THE SOCIALIST REPUBLIC OF VIETNAM Hanoi, July 31, 2024 |
CIRCULAR
Prescribing methods for setting prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market
________________
Pursuant to the Law on Electricity dated December 03, 2004; the Law dated November 20, 2012 Amending and Supplementing a Number of Articles of the Law on Electricity;
Pursuant to the Law No. 16/2023/QH15 dated June 19, 2023 on Prices;
Pursuant to Decree No. 96/2022/ND-CP dated November 29, 2022 of the Government defining the functions, tasks, powers, and organizational structure of the Ministry of Industry and Trade;
At the proposal of the Director of Electricity Regulatory Authority of Vietnam;
The Minister of Industry and Trade hereby promulgates the Circular prescribing methods for setting prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market.
Chapter I
GENERAL PROVISIONS
Article 1. Scope of regulation and subjects of application
1. This Circular guides the methods for setting prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market from the date the System and Market Operator becomes an independent accounting unit.
2. This Circular applies to:
a) The Vietnam Electricity;
b) The System and Market Operator, after it becomes an independent accounting unit;
c) Other relevant organizations and individuals.
Article 2. Interpretation of terms
In this Circular, the terms below are construed as follows:
1. System and Market Operator means the unit that commands and controls the process of electricity generation, transmission, and distribution in the national power system and regulates transactions on the electricity market.
2. Prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market include the prices for operation and dispatch of the electric power system and the prices for regulation of transactions on the electricity market as prescribed in Clause 2, Article 31 of the Law on Electricity (amended and supplemented under Clause 8, Article 73 of the Law No. 16/2023/QH15 on Prices).
3. Year N means the Georgian calendar year in which the prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market are applied, starting from January 01 to December 31 of such year.
4. Year N-1 means the Georgian calendar year immediately preceding year N
5. Year N-2 means the Georgian calendar year immediately preceding year N-1.
Chapter II
METHODS FOR SETTING PRICES FOR OPERATION AND DISPATCH OF THE ELECTRIC POWER SYSTEM AND REGULATION OF TRANSACTIONS ON THE ELECTRICITY MARKET
Article 3. Methods for setting prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market
1. The prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market shall be calculated annually based on reasonable, valid and profitable expenses allowing the System and Market Operator to perform its tasks related to dispatching and operating the electric power system and regulating transactions on the electricity market during the year.
2. The prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market for year N(gN) shall be calculated using the following formula:
Where:
Gn: | Total allowable revenue of the System and Market Operator (in VND) from the operation and dispatch of the electric power system and regulation of transactions on the electricity market for year N, calculated in accordance with Article 4 of this Circular; |
| Total electricity output delivered and received at the primary delivery points by electricity wholesalers in the wholesale electricity market for year N (at the delivery points between the transmission grid and the distribution grid, as well as at the delivery points with power plants on the distribution grid) in accordance with the Regulations on operation of the competitive wholesale electricity market issued by the Ministry of Industry and Trade. In the initial phase of operating the wholesale electricity market, the electricity wholesalers include 05 Power Corporations under the Vietnam Electricity (Northern Power Corporation, Central Power Corporation, Southern Power Corporation, Hanoi Power Corporation and Ho Chi Minh City Power Corporation) (in kWh). |
Article 4. Method for calculating the total annually allowable revenue from operation and dispatch of the electric power system and regulation of transactions on the electricity market
Total allowable revenue from operation and dispatch of the electric power system and regulation of transactions on the electricity market for year N (GN) includes allowable capital cost 
, allowable operating and maintenance cost 
, allowable profits (LNN) and revenue adjustment for year N 
, calculated using the following formula:
Where:
| Total allowable capital cost for year N (in VND), calculated in accordance with Article 6 of this Circular; |
| Total allowable operating and maintenance cost for year N (in VND), calculated in accordance with Article 7 of this Circular; |
LNN : | Allowable profits for year N (in VND), calculated in accordance with Article 5 of this Circular; |
| Revenue adjustment for year N (in VND), equal to the estimated net income from disposal of fixed assets, equipment and materials for year N (based on the plan to dispose of assets, equipment, and materials for year N). |
Article 5. Method for calculating the allowable profits
Estimated allowable profits for year N (LNN) of the System and Market Operator shall calculated using the following formula:
Where:
| Equity by December 31 (or June 30 if December 31 data is not available) of year N-1 (in VND); |
ROEN: | The pre-tax return on equity ratio for year N of the System and Market Operator (%), which shall be based on the applicable average retail electricity price plan or a decision by the competent authority, and shall not exceed 10% during the period up to 2030. |
Article 6. Method for calculating the total allowable capital cost
1. Total allowable capital cost for year N 
shall be calculated using the following formula:
Where:
| Total estimated depreciation cost of fixed assets for year N (in VND), calculated in accordance with Clause 2 of this Article; |
| Total estimated financial cost for year N (in VND), calculated in accordance with Clause 3 of this Article; |
| Estimated exchange rate difference expected to arise from debt repayment in foreign currency for year N (in VND), calculated in accordance with Clause 4 of this Article; |
| Estimated revaluation exchange rate difference for year N (in VND), calculated in accordance with Clause 5 of this Article. |
2. Total estimated depreciation cost of fixed assets for year N 
shall be calculated in accordance with the regulations on management, use and depreciation of fixed assets of the Ministry of Finance.
3. Total estimated financial cost for year N 
includes short-term and long-term interests, bonds, financial leases and payable fees for capital loans, calculated under credit contracts or financial lease contracts of the System and Market Operator and the electricity market.
4. Estimated exchange rate difference expected to arise from debt repayment in foreign currency for year N 
shall be calculated in accordance with the regulations on finance and accounting.
5. Estimated revaluation exchange rate difference for year N 
shall be calculated in accordance with the regulations on finance and accounting.
Article 7. Method for calculating the total allowable operating and maintenance cost
1. Total allowable operating and maintenance cost for year N 
shall be calculated using the following formula:
Where:
| Total estimated cost of materials for year N (in VND), calculated in accordance with Clause 2 of this Article; |
| Total estimated payroll cost for year N (in VND), calculated in accordance with Clause 3 of this Article; |
| Total estimated cost for major repair for year N (in VND), calculated in accordance with Clause 4 of this Article; |
| Total estimated cost of outsourced services for year N (in VND), calculated in accordance with Clause 5 of this Article; |
| Total other estimated cash cost for year N (in VND), calculated in accordance with Clause 6 of this Article. |
2. Total estimated cost of materials for year N 
shall be calculated based on the independently audited data from year N-2, excluding any extraordinary or unusual expense from year N-2. It shall be adjusted for inflation each year using the average producer price index for industrial products over the previous 5 years as published by the General Statistics Office of Vietnam at the time of price setting and added with reasonable estimated cost for year N that were either not included or not fully accounted for in year N-2.
3. Total estimated payroll cost for year N 
shall be calculated using the following formula:
Where:
| Payroll cost of the System and Market Operator shall be calculated in accordance with the law on labor management, salaries and bonuses for employees, and the law on salariess, remunerations, and bonuses for managers in single-member limited liability companies wholly owned by the State, including electric safety bonuses; |
| Payroll-related cost of the System and Market Operator, including health insurance, social insurance, unemployment insurance, and trade union fees, which shall be calculated in accordance with relevant law regulations. |
4. Total estimated major repair cost for year N 
shall be calculated based on the estimates for major repairs in year N approved by the competent authority.
5. Method for calculating the total cost of outsourced services
a) Total estimated cost of outsourced services for year N 
includes:
- Payments made to external organizations and individuals for providing the following services: electricity, water, software, telephone services, telecommunications, books and newspapers; expenses for purchasing and utilizing technical documents; maintenance cost for calculation software; audit consulting fees; security and protection services (if applicable); office and workspace rental fees; asset insurance cost;
- Expenses for other services, as prescribed by regulations, under service agreements to support the operation of the electric power system and electricity market for year N, if necessary.
b) Total estimated cost of outsourced services for year N shall be calculated based on the independently audited data from year N-2, excluding any extraordinary or unusual expense from year N-2. It shall be adjusted for inflation each year using the average producer price index for industrial products over the previous 5 years as published by the General Statistics Office of Vietnam at the time of price setting and added with reasonable estimated cost for year N that were either not included or not fully accounted for in year N-2.
6. Method for calculating the total other estimated cash cost
a) Total other estimated cash cost for year N 
includes: taxes, fees, charges, land rental, meal allowances and other estimated cash cost for year N. Estimated taxes, fees, charges, land rentals, and meal allowances for year N shall be calculated in accordance with the applicable regulations;
b) Other estimated cash cost for year N includes: per diem; conference and hospitality expense; training cost; scientific research and innovation cost; expense for militia, security, and protection; expense for preventing and mitigating force majeure events such as natural disaster prevention, disease control, strikes, terrorism; fire prevention and firefighting; expense for labor protection, work uniforms, occupational safety, industrial hygiene, and environmental protection; drinking water during working hours, compensation for night shifts and hazardous conditions; expense for first aid in case of work accidents, common medical treatments and rehabilitation for workers, recruitment cost, and other cost as prescribed by law.
Other estimated cash cost for year N shall be calculated based on the independently audited data from year N-2, excluding any extraordinary or unusual expense from year N-2. It shall be adjusted for inflation each year using the average producer price index for industrial products over the previous 5 years as published by the General Statistics Office of Vietnam at the time of price setting and added with reasonable estimated cost for year N that were either not included or not fully accounted for in year N-2.
7. In cases where the data has been independently audited in year N-1, the System and Market Operator and Vietnam Electricity shall use the checked data on the cost of materials, cost of outsourced services, and other cash costs of year N-1 to calculate the respective cost of year N.
Article 8. Documents used for calculation of prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market
1. Report on grounds for developing prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market for year N.
2. Explanations and calculation tables for prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market for year N, including:
a) Report on the assessment of revenue and cost performance, financial indicators such as return on equity, debt-to-equity ratio, self-investment ratio, and debt repayment ratio for year N-1.
b) Explanations and calculations of the allowable profits for year N (LNN) of the System and Market Operator, including:
- Estimated equity for year N;
- Estimated return on equity ratio for year N.
c) Explanations and calculations of the total allowable capital cost for year N 
of the System and Market Operator, including:
- Total depreciation cost for year N: A summary table of fixed asset depreciation for year N, a detailed calculation table of basic depreciation costs by type of fixed asset for year N (including the depreciation table for assets expected to be operational during the year);
- Total financial cost and exchange rate differences for year N: A detailed calculation table of financial cost, loan interest, and exchange rate differences for year N by each credit contract and financial lease contract of the System and Market Operator.
d) Explanations and calculations of the total allowable operating and maintenance cost for year N 
, including:
- Total cost of materials for year N: Explanations and calculation table of the estimated cost of materials for year N as prescribed in Clause 2, Article 7 of this Circular;
- Total payroll cost for year N: Explanations and calculation table of the payroll cost for year N as prescribed in Clause 3, Article 7 of this Circular;
- Total major repair cost for year N: Explanations and calculation table of the major repair cost for year N as prescribed in Clause 4, Article 7 of this Circular;
- Total cost of outsourced services for year N: Explanations and calculation table of the cost of outsourced services for year N as prescribed in Clause 5, Article 7 of this Circular;
- Total other estimated cash cost for year N: Explanations and calculation tables of other estimated cash cost for year N as prescribed in Clause 6, Article 7 of this Circular.
dd) Explanations and calculation tables for the total allowable revenue from operation and dispatch of the electric power system and regulation of transactions on the electricity market for year N.
3. Attachments include:
a) A list, and values thereof, of investment projects that have been completed or estimated to be put into operation by December 31 of year N-1 and in year N (per month).
b) A summary table of employees for year N-1 and the plan for year N.
c) A list of major repairs of fixed assets for year N-1 and estimates for year N.
d) The financial statement of year N-2 (and the financial statement of year N-1, if available), which have been audited by an independent auditing organization.
Article 9. Documents used for calculation of adjusted prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market
1. In case of a discrepancy between the parameters for calculation of the prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market and the actual data used to set the prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market, leading to changes from the approved prices, the prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market shall be adjusted in accordance with the report submitted by the System and Market Operator.
2. Documents used for calculation of the adjusted prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market for year N include:
a) Report on grounds for developing the adjusted prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market for year N;
b) Explanations and calculation tables of the adjusted prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market of the System and Market Operator as prescribed in Article 3, Article 4, Article 5, Article 6 and Article 7 of this Circular;
c) Supporting documents.
Chapter III
IMPLEMENTATION PROVISIONS
Article 10. System and market operation service agreement
1. The system and market operation service agreement shall be signed between the System and Market Operator and Vietnam Electricity.
2. The Vietnam Electricity shall be responsible for paying the costs for dispatch of the electric power system and regulation of transactions on the electricity market under the signed agreement.
Article 11. Responsibilities of relevant units
1. The System and Market Operator shall assume the prime responsibility for and coordinate with Vietnam Electricity in developing and reporting on the prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market in accordance with the law regulations.
2. The System and Market Operator shall assume the prime responsibility for and coordinate with the Vietnam Electricity in calculating and accounting for revenues and costs; making and using invoices; performing obligations to the State Budget in accordance with the law regulations on corporate accounting, tax, management and use of the State’s capital invested in production and business at enterprises, and other relevant law regulations.
3. The Electricity Regulatory Authority of Vietnam shall assume the prime responsibility for and coordinate with the Department of Planning and Finance and the Department of Personnel and Organisation in appraising the prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market, and submit them to the competent authority for approval.
The Electricity Regulatory Authority of Vietnam shall submit the prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market for approval in accordance with the legal documents on the Government's decentralization of competence to approve the prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market.
Article 12. Transitional provisions
After it becomes an independent accounting unit, the System and Market Operator shall assume the prime responsibility for and coordinate with Vietnam Electricity in developing and reporting a cost calculation plan to calculate the prices for dispatch of the electric power system and regulation of transactions on the electricity market in accordance with this Circular and report it to the Electricity Regulatory Authority of Vietnam for appraisal in accordance with the regulations. While the prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market have not yet been approved, the parties may agree on temporary payment in the service agreement for operation and dispatch of the electric power system and regulation of transactions on the electricity market until the prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market for the respective year are approved. The difference between the temporary payment and the payment at the new prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market for this year shall be re-settled by the parties after the prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market for the respective year are approved.
Article 13. Principles for application of prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market
In cases where the prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market for year N are not approved before December 31 of year N-1, the parties may agree on temporary payment in the service agreement for operation and dispatch of the electric power system and regulation of transactions on the electricity market until the prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market for year N are approved. The parties may agree to apply the prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market of year N-1 in case of temporary payment. The difference between the temporary payment and the payment at the new prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market (for year N) shall be re-settled by the parties after the prices for operation and dispatch of the electric power system and regulation of transactions on the electricity market for year N are approved.
Article 14. Effect
1. This Circular takes effect on July 31, 2024.
2. Relevant units should report any difficulties arising in the course of implementation of this Circular to the Ministry of Industry and Trade for consideration and resolution./.
| FOR THE MINISTER DEPUTY MINISTER
Truong Thanh Hoai |
VIETNAMESE DOCUMENTS
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ENGLISH DOCUMENTS
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