Decision No. 2093/QD-BCT 2020 Project on designing the retail electricity market model

DECISION

On approving the Project on designing the retail electricity market model

THE MINISTER OF INDUSTRY AND TRADE

Pursuant to Government’s Decree No. 98/2017/ND-CP dated August 18, 2017, on defining the functions, tasks, powers and organizational structure of the Ministry of Industry and Trade (MINISTRY OF INDUSTRY AND TRADE);

Pursuant to the Electricity Law dated December 03, 2004 and the Law on amending and supplementing a number of articles of the Electricity Law dated November 20, 2012;

Pursuant to Prime Minister’s Decision No. 63/2013/QD-TTg dated November 08, 2013, on the roadmap, conditions and structure of the power sector to formulate and develop electricity market levels in Vietnam;

At the request of the Director of the Electricity Regulatory Authority of Vietnam.

DECIDES:

Article 1. To approve the Project on designing the retail electricity market model attached to this Decision.

Article 2.This Decision takes effect on the signing date.

Article 3.Director of the Electricity Regulatory Authority, Chief of the Ministry Office, Chief Ministry Inspector, Directors and Directors General of relevant Departments or Authorities affiliated to Ministries, Director General of the Vietnam Electricity Corporation, electricity generators and concerned organizations, individuals shall be responsible for the implementation of this Decision./.

The Minister

Tran Tuan Anh

PROJECT

ON DESIGNING THE RETAIL ELECTRICITY MARKET MODEL

(Attached to Decision No. 2093/QD-BCT dated August 07, 2020 by the Minister of Industry and Trade)

Chapter 1.

OVERALL STRUCTURE OF THE ELECTRICITY MARKET AT THE LEVEL OF ELECTRICITY RETAIL

Article 1. Name

1.                Vietnamese name: Thị trường bán lẻ điện cạnh tranh Việt Nam;

2.                English name: Vietnam Retail Electricity Market;

3.                Abbreviation: VREM

Article 2: The scope of the retail electricity market design

The retail electricity market design includes the following contents:

1.                Power purchase models and methods of electricity users.

2.                Role and functions of, and relationship among units in the electricity market by each specific model.

3.                Operation mechanisms of the retail electricity market, comprising the mechanism and method of making power purchase transactions; electricity price mechanism, mechanism of providing and using electricity distribution services and other relevant contents.

4.                Solutions, preconditions and plans for developing and operating the retail electricity market.

Article 3. Segments of competition in the retail electricity market

When transitioning to the retail electricity market level, the chain from production to consumption of electricity in the electric power system shall consist of 02 following segments of competition:

1. Competition in electricity wholesale:

a)                Making power purchase transactions between electricity generators and wholesale power buyers through the spot electricity market;

b)               Using electric grids in the national electric power system to transmit electricity from power plants (electricity sellers) to electricity delivery points of wholesale power buyers (within the scope of the spot electricity market in accordance with the Regulation on electricity market operation issued by the Ministry of Industry and Trade).

2. Competition in electricity retail:

a)                Making power purchase transactions between retail electricity sellers and electricity users;

b)               Using electric grids in the national electric power system to transmit electricity received from electricity delivery points specified at Point b, Clause 1 of this Article to electricity consumption places of electricity users.

Article 4. Power purchase models of electricity users

Depending on the connection scale and voltage, electricity users shall purchase power with the following models:

1.                Purchasing power in the spot market.

2.                Purchasing power from retail sellers.

Chapter 2

THE MODEL OF ELECTRICITY USERS BUYING POWER IN THE SPOT MARKET

Article 5. Participating subjects and modes

1. Participating subjects: Electricity users who fully meet criteria on the power consumption scale and connection voltage in accordance with the Regulation on competitive electricity market operation issued by the Ministry of Industry and Trade.

2. Participating modes: Electricity users shall buy power in the spot market through either the following modalities:

a)                Directly registering to take part in the spot market;

b)               Engaging in the market via an authorized representative.

3. Electricity users must fully satisfy conditions regarding to information technology infrastructure in service of the operation of the spot electricity market in accordance with the Ministry of Industry and Trade’s regulations.

Article 6. Operating rules

1.                An electricity user (or an authorized representative) shall purchase power in the spot electricity market as a power buyer.

2.                The power purchase point of this big electricity user shall be calculated (based on the power loss) from the power measuring point to the power delivery point in the border of the retail electricity market specified at Point b, Clause 1 of Article 3 of this Project.

3.                The rules of operating and making transactions for buying electricity in the spot market: Electricity users (or authorized representatives) shall comply with the Regulation on competitive electricity market operation issued by the Ministry of Industry and Trade.

Article 7: Mechanisms of a forward contract for difference and service contracts

1.                Forward contract for difference mechanism: An electricity user and an electricity generator shall sign in a forward contract for difference, commit to conducting a forward financial transaction in the future to manage the risk of price fluctuation in the spot electricity market. In such contract, the two parties shall make long-term commitments in paying the difference between the price in the spot electricity market and the price committed in the contract for a specific amount of power output in each transaction cycle in the future.

2.                Service contract mechanism: An electricity user (or an authorized representative) shall sign in a service contract on electric power transmission and distribution as well as electric power system and market operation with providers of such services in accordance with regulations of the Ministry of Industry and Trade.

Chapter 3

THE MODEL OF ELECTRICITY USERS SELECTING ELECTRICITY RETAILERS

Section 1.MEMBERS

Article 8. Classification of members

1.                Electricity retailers: Taking part in the market as electricity sellers and including competitive and default electricity retailers (in accordance with Article 9 of this Chapter).

2.                Electricity users: Taking part in the market as power buyers and comprising customers who participate and do not participate in the retail electricity market (in accordance with Article 10 of this Chapter).

3.                Power distribution units: Providing electricity distribution service in the retail electricity market (in accordance with Article 11 of this Chapter).

Article 9. Electricity retailers

1. Electricity retailers who take part in the competition in the retail electricity market shall perform the following functions:

a)                Participating in wholesale purchase of electricity from the spot electricity market in accordance with Clause 1, Article 3 of this Project;

b)               Competing with other electricity retailers to sell power to electricity users in the retail electricity market.

2. Default electricity retailers:

Retail power distribution units currently having a network of power distribution, including 05 Power Corporations under the Electricity of Vietnam (EVN) and other non-EVN: Shall act as default electricity retailers within the ambit of their distribution grids with the following functions:

a)                Selling power to electricity users who do not take part in the electricity market in accordance with Point a, Clause 2 of Article 10 of this Chapter;

b)               Providing electricity distribution service within the scope of the distribution grids under the ownership of units in case electricity users connecting to these grids to buy power from other electricity retailers in accordance with regulations of Article 11 of this Chapter.

Article 10. Electricity users

1. Electricity users joining in the retail electricity market:

a)                Selecting and buying power from suitable electricity retailers to meet the needs of electricity consumption in accordance with the Regulation on electricity market operation issued by the Ministry of Industry and Trade.

b)               In the first phase of model of electricity users selecting electricity retailers, prioritizing customers with consumed power output which is great enough to be eligible for choosing electricity retailers. Once necessary conditions are satisfied, adding customers with less consumed power output to the group of electricity users participating in the retail electricity market.

2. Electricity users not participating in the retail electricity market

a)                Electricity users not participating in the retail electricity market comprise:

- Customers failing to satisfy conditions to enter the retail electricity market;

- Customers who are eligible to participate in the electricity retail market but have not chosen a suitable electricity retailer yet.

b)               Such electricity users shall buy power from default electricity retailers to meet their power consumption demand.

Article 11. Power distribution units

1.                Managing, operating and developing power distribution grids in accordance with the planning approved by the competent state authorities.

2.                Providing the electricity distribution service for electricity retailers and electricity users participating in the retail electricity market on a fair, transparent and nondiscriminatory basis.

3.                Investing in the installation of power metering system in accordance with the Electricity Law; collecting power meter readings to be provided for electricity retailers and users for the settlement of power purchase transactions in the retail electricity market.

Section 2. OPERATING MECHANISMS IN THEMODEL OF ELECTRICITY USERS SELECTING ELECTRICITY RETAILERS

Article 12. Power purchase transactions between electricity retailers and users

1.                The power purchase between an electricity retailer and an electricity user shall be implemented through a definite-term power purchase agreement.

2.                For electricity users taking part in the electricity market

a)                An electricity user shall select a suitable electricity retailer and sign the power purchase agreement with such retailer.

b)               Electricity buying price of an electricity user shall be calculated in accordance with agreements in the power purchase agreement signed with the electricity retailer;

c)                An electricity user switched to buy electricity from another retailer:

-                    After fulfilling all obligations of a customer committed in the power purchase agreement which is previously signed with the electricity retailer;

-                    Collaborating with the new electricity retailer, previous electricity retailer and power distribution unit to conduct procedures for switching to a new electricity retailer in accordance with the Regulation on electricity market operation issued by the Ministry of Industry and Trade.

3. For electricity users not participating in the electricity market: Signing the power purchase agreement with default electricity retailers.

Article 13. Electricity price mechanism

1. Electricity retail price for customers when selecting electricity retailers include:

a) Power generation price of power plants, comprising:

- Power plants generating electricity to the national grid system

- Power plants providing supporting services in accordance with the Ministry of Industry and Trade’s regulations.

b)               Electric power transmission price: Complying with the regulations of the competent state authorities;

c)                Price of load dispatch and transaction regulation in the electricity market: Complying with the regulations of the competent state authorities;

d)               Power distribution price (taking into consideration the connection voltage of electricity users): Complying with the regulations of the competent state authorities;

e)                Other costs, consisting of:

-                    Costs and benefits of the electricity retailers;

-                    Taxes, costs, fees, etc. in accordance with the regulations of the competent state authorities.

2.                Electricity retail price for electricity users participating in the electricity market: Based on the agreements between electricity users and retailers.

3.                Electricity retail price for electricity users not participating in the electricity market: Complying with the Price Tariff regulated by the competent state authorities.

Article 14. Electricity payment mechanism

1.                Electricity users shall make payments for their consumed electricity to electricity retailers in accordance with the regulations in the signed power purchase agreement.

2.                Electricity users shall be responsible for implementing measures to ensure the compliance with the power purchase agreement (payment guarantee), according to the regulations of the Electricity Law and related legal documents.

Article 15. Provision and use of the electricity distribution service

1.                The provision and use of the electricity distribution service in the retail electricity market shall be implemented through an electricity distribution service contract signed between a power distribution unit and an electricity retailer.

2.                The connection to the distribution grid between an electricity user and a power distribution unit shall be agreed in accordance with regulations in the power purchase agreement and related legal documents.

Chapter 4

SOLUTIONS AND PLANS FOR IMPLEMENTATION OF THE RETAIL ELECTRICITY MARKET

Article 16. Solutions for implementation of the retail electricity market

1. Improving the system of legal documents for each stage of development and expansion of the retail electricity market. To be specific:

a)                Reviewing and reporting to the competent authorities to supplement regulations on the electricity distribution price, price for load dispatch and transaction regulation in the electricity market to the Electricity Law and the Law on Prices;

b)               Developing the Project on restructuring the power sector in service of the retail electricity market to be submitted to the Prime Minister for approval to ensure that the power sector structure is adjusted in alignment with the retail electricity market design model;

c)                Finalizing legal regulations in service of the retail electricity market.

2. Continuing to reform the electricity price in line with the roadmap for transitioning into the retail electricity market.

a)                Ensuring the transparent implementation of the electricity price, identified by the market principle without cross-subsidization among groups of customers, regions and areas in accordance with Resolution No. 55-NQ/TW dated February 11, 2020 by the Political Bureau of the Central Committee of the Communist Party of Vietnam. Reasonably regulating the electricity price through the appropriate market tools and social and security policies;

b)               Adjusting the retail electricity price in conformity to the existing regulations with an appropriate roadmap to fully and accurately reflect all eligible and reasonable input costs. Handling the costs arising from the difference in the exchange rate in the previous years when making a full transition into the retail electricity market.

3.                    Perfecting the wholesale electricity market:

a)                Establishing an independent unit for operating the electric power system and an independent market in line with the one member limited liability company model under the Prime Minister’s Decision No. 63/2013/QD-TTg dated November 08, 2013 and the Prime Minister’s Decision No. 168/QD-TTg dated February 07, 2017 to ensure the fairness, transparency and nondiscrimination among members in the electricity market;

b)               Continuing to improve the operation and supporting mechanisms of the spot electricity market in line with the design model approved in the Decision No. 8266/QD-BCT dated August 10, 2015 by the Ministry of Industry and Trade;

c)                Improving the system of information technology infrastructure in service of the wholesale electricity market to ensure the wholesale electricity market operating in line with the design model approved in the Decision No. 8266/QD-BCT dated August 10, 2015 by the Ministry of Industry and Trade.

4. Developing an appropriate roadmap to gradually help groups of customers take part in the retail electricity market:

a)                Evaluating and setting out appropriate criteria to classify each group of electricity users (by consumed power output, voltage level, etc.);

b)               Developing an appropriate roadmap to include more customers in the retail electricity market.

5.                Making a clear distinction between the electricity distribution cost and retail electricity price in distribution and retail units.

6.                Improving the electricity infrastructure to meet the requirements for operating the retail electricity market in a safe, reliable, continuous, high-quality and efficient manner:

a)                Improving the SCADA/DMS system and the distance metering system for the distribution grid which shall be fully invested in to meet the requirements of the retail electricity market;

b)               Improving the information system for the electricity market operation management, meeting the requirements of the retail electricity market;

c)                Developing a website to update all power selling packages of the electricity retailers, thereby creating favorable conditions for customers to search for adequate information to select suitable power selling packages from electricity retailers in the region;

d)               Formulating the database on electricity users: Managing information about the ID of electricity users, creating favorable conditions for the management, updating information when an electricity user switches to another electricity retailer (while maintaining the electrical meter).

7. Protection of interests of electricity users:

a)                Disseminating widely information about the implementation of the retail electricity market, and rights and interests of electricity users when entering the retail electricity market;

b)               Promulgating legal regulations detailing the procedures and responsibilities of stakeholders when electricity users switch from this electricity to another;

c)                Implementing policies supporting the retail electricity price for poor households and policy beneficiaries in accordance with the State’s regulations;

d)               Providing detailed regulations on default electricity retailers which shall take the responsibility for supplying power for electricity users conducting transactions outside the electricity market or electricity users who have not selected their electricity retailers yet.

Article 17. Implementation plan

1. Stage 1 (to the end of 2021): The preparation stage

-                    Implementing the transformation of the National Load Dispatch Center into the Electricity System and Market Operation Company Limited in accordance with the Prime Minister’s Decision No. 168/QD-TTg and Decision No. 852/QD-TTg;

-                    Submitting documents to the Prime Minister for approval on the Project on restructuring the power sector in service of the retail electricity market in 2020;

-                    Reviewing, revising and finalizing the Regulation on the operation of the wholesale electricity market and related legal documents to experimentally allow units generating power from renewable energy to sign direct contracts with electricity users (according to the model of Chapter 2 of this Project).

2. Stage 2 (from 2022 to 2024): Electricity users shall participate in the spot electricity market

a) Prerequisite conditions:

-                    Researching, amending and supplementing the regulations on electricity distribution price and price of load dispatch and transaction regulation in the electricity market in the Electricity Law and the Law on Prices;

-                    Promulgating regulations on calculating electricity distribution price and price of load dispatch and transaction regulation in the electricity market for electricity users to buy power from the spot electricity market;

-                    Completing the amendment and supplementation of legal documents on the electricity market operation which is suitable for support electricity users to enter the spot electricity market. Making a clear distinction between the payment flow in the spot market and the payment flow based on the bilateral contract between buyers and sellers.

-                    The Electricity System and Market Operation Company Limited is established to perform functions of load dispatch and transaction regulation in the electricity market in accordance with the regulations.

-                    Separating the distribution cost from the electricity retail cost in electricity distribution and retail units;

-                    Electricity users buying power in the spot market shall equip the information technology system in accordance with the Regulation on electricity market operation issued by the Ministry of Industry and Trade and have sufficient human resources to conduct daily power purchase transactions in the spot electricity market.

b) Operation mechanism:

-                    Implementing the pilot program on the mechanism of big electricity users signing direct contracts with units generating power from renewable energy (wind, solar) in accordance with the regulations issued by the Ministry of Industry and Trade. Based on results of the pilot program, developing the plan for the official implementation of the model in which electricity users buying power in the spot electricity market;

-                    Electricity users who have not participated in the electricity market yet shall continue to buy power from electricity distribution and retail units at the retail tariff regulated by the state competent authorities.

3. Stage 3 (after 2024): Customers shall choose to buy power from electricity retailers

a) Prerequisite conditions:

-                    Calculating and applying the electricity distribution price and price of load dispatch and transaction regulation in the electricity market in accordance with relevant legal regulations;

-                    Separating the electricity distribution cost from the electricity retail cost in electricity distribution and retail units;

-                    Reforming the electricity retail price: The electricity retail price has been adjusted to fully reflect all reasonable and eligible input costs without cross subsidization among groups of customers.

-                    Issuing the system of Circulars and regulations in service of the operation of the retail electricity market to allow electricity users select electricity retailers;

-                    Electricity retailers taking part in the retail electricity market shall meet the requirements for human resources and equip proper information technology infrastructure, satisfying the requirements of wholesale and retail electricity markets;

-                    Electricity users shall be provided with adequate information on the roadmap of the retail electricity market, and rights, interests and obligations in selecting electricity retailers as well as rights, interests and obligations under the signed power purchase agreement.

b) Operation mechanism:

-                    Continuing to improve the mechanism for electricity users to buy power in the spot electricity market;

-                    Electricity users shall be entitled to select electricity retailers in a roadmap which matches their power consumption scale and connection voltage issued by the Ministry of Industry and Trade in each stage.

Article 18. Implementation organization

1. To assign the Electricity Regulatory Authority of Vietnam

a)                To preside over and collaborate with related units to continue to prepare for the operation of the retail electricity market in line with the plan approved in this Decision;

b)               To develop the Project on restructuring the power sector in service of the retail electricity market and report to the Ministry of Industry and Trade to submit it to the Prime Minister for approval in 2020;

c)                To develop and perfect the system of legal normative documents which are necessary for each development stage of the retail electricity market;

d)               To preside over the review and finalization of infrastructure conditions, provide training for human resources and realize necessary solutions to implement the retail electricity market.

2. To assign the EVN

a)                To restructure the Corporation in accordance with regulations and plans approved by the Prime Minister;

b)               To collaborate with the Electricity Regulatory Authority of Vietnam to develop the Project on restructuring the power sector in service of the retail electricity market;

c)                To separate the electricity distribution cost from the electricity retail cost in Power Corporations under the EVN.

3. To assign Power Corporations, other electricity distribution and retail units

a)                To develop and implement the plan for restructuring in line with the retail electricity market;

b)               To separate the electricity distribution cost from the electricity retail cost;

c)                To train their human resources about the policy on developing the retail electricity market, the retail electricity market design model and the retail electricity market operation mechanism;

d)               To develop the infrastructure and human resources to meet the requirements for operating the retail electricity market./.