Decision No. 24/2017/QD-TTg dated June 30, 2017 of the Prime Minister on mechanism for adjustment of average retail electricity price

THE PRIME MINISTER

Decision No. 24/2017/QD-TTg dated June 30, 2017 of the Prime Minister onmechanism for adjustment of average retail electricity price

Pursuant to the Law on Government Organization dated June 19, 2015;

Pursuant to the Law on Electricity dated December 03, 2004; the Law dated November 20, 2012 on amendments to the Law on Electricity;

Pursuant to the Pricing Law dated June 20, 2012;

Pursuant to the Government’s Decree No. 137/2013/ND-CP dated October 21, 2013 detailing the implementation of a number of articles of the Law on Electricity and the Law on amendments to the Law on Electricity;

Pursuant to the Government’s Decree No. 177/2013/ND-CP dated November 14, 2013 detailing and guiding the implementation of certain articles of the Pricing Law, the Government’s Decree No. 149/2016/ND-CP dated November 11, 2016 on amendments to the Government’s Decree No. 177/2013/ND-CP dated November 14, 2013 detailing and guiding the implementation of certain articles of the Pricing Law;

At the request of Minister of Industry and Trade;

The Prime Minister promulgates this Decision to provide for the mechanism for adjustment of average retail electricity price.

Article 1. Scope of adjustment and subject of application

1. This Decision introduces the mechanism for adjustment of average retail electricity prices.

2. This Decision applies to organizations and individuals who participate in activities of electricity and use electricity.

Article 2. Interpretation of terms

In this document, these terms are construed as follows:

1. Average electricity price is an average retail price of electricity within the bracket of average retail electricity price defined by the Prime Minister.

2. Current average electricity price is the average price of electricity applied at the time when the adjustment of electricity price is under consideration.

3. Payments for purchase of electricity in the market are paid to electricity generating units that participate in the competitive electricity market under regulations on operation of the electricity market adopted by the Ministry of Industry and Trade, including:

a) Payments for electricity produced in the electricity market;

b) Payments for power outputs in the electricity market;

c) Payments for differences in the electricity according to the contract;

d) Other payments as defined in the Regulation on operation of electricity market.

4. Bracket of electricity price refers to the range of average retail electricity prices between the minimum price and the maximum price stipulated by the Prime Minister.

5. Basic input parameters in electricity generation are the factors that directly influence on the cost of electricity generation beyond the control of electricity units, including: fuel prices, exchange rates, structure of the production of electricity delivered and payments for purchase of electricity in the electricity market.

Article 3. Principles for adjustment of average retail electricity price

1. Upon the annual inspection of the prime costs for production of electricity of the Vietnam Electricity (EVN), the average electricity price shall be considered and adjusted according to the unforeseen change in input parameters of all phases (including generation, transmittal, distribution – retail, administration and ancillary services in order to ensure the operation of electricity system) which are used to calculate the current average electricity price.

2. The average electricity price shall be considered and adjusted in the year upon the change in basic input parameters in the phase of electricity generation which have been used for determining the current average electricity price.

3. When there is change in the input parameters prescribed in Clause 1 and Clause 2 of this Article resulting in decrease in the average electricity price compared to the current average electricity price, the price of electricity needs to be lowered.

4. When there is change in the input parameters prescribed in Clause 1 and Clause 2 of this Article resulting in increase in the average electricity price of 10% or above in comparison with the current average electricity price, the price of electricity needs to be raised.

5. The average electricity price may be adjusted after a period of at least 06 months as from the latest adjustment thereof.

6. EVN is authorized to rise or reduce the average electricity price within the price bracket announced by the Prime Minister.

If the average electricity price is 10% or above higher than the current average electricity price or is out of prescribed bracket of electricity price or may influence on the macroeconomic status following the calculation, the Ministry of Industry and Trade shall take charge and cooperate with the Ministry of Finance in examining, reviewing and submitting reports thereof to the Prime Minister for making decision on the adjustment of the average electricity price. The Ministry of Industry and Trade may cooperate with the Ministry of Finance to submit reports the Price Administration Steering Committee before submitting reports to the Prime Minister, where necessary.

7. The adjustment of the average electricity price must be transparent and disclosed to the public.

Article 4. Methods of setting annual average electricity price

1. The average electricity price shall be annually set according to payments for purchase of electricity from the electricity generating units, costs and profit target from the phases of electricity transmission, distribution – retail, load dispatch of the electricity system and management of transactions in the electricity market, costs of ancillary services in order to ensure the operation of the electricity system, general administration costs of EVN in order to ensure the operation and supply of electricity and meet investment needs under the plans adopted by regulatory authorities.

2. The average electricity price (G_BQ) of the year N shall be determined according to the following formula:

Where:

a) C_PD: Total cost of electricity generation in year N (VND), which is determined according to the following formula:

C_pD= C_TTD+ C_DMT+ C_BOT+ C_TDN+ C_NLTT+ C_NK

C_TTD: Total amount of electricity purchases in the year N with regard to the electricity bought from the power plants that directly or indirectly participate in the electricity market (VND); C_DMT:  Total payment for electricity purchases and target profit in the year N with regard to the electricity bought from multi-purpose hydroelectric plants (VND);

C_BOT: Total payment for electricity purchases in the year N with regard to the electricity bought from BOT power plants (VND);

C_TDN: Total payment for electricity purchases in the year N with regard to the electricity bought from minor hydroelectric plants (VND); C_NLTT: Total payment for electricity purchases in the year N with regard to the electricity bought from the power plants using renewable energy and new energy (VND);C_NK: Total payment for electricity purchases in the year N with regard to imported electricity (VND);

b) C_DVPT: Total payment for electricity purchases and target profit in the year N with regard to the electricity bought from the power plants providing ancillary services, including costs of trial operation of power plants (VND);c) C_TT: Total cost of the electricity transmission and target profit in the year N (VND);

d) C_PP-BL: Total cost of the electricity distribution – retail and target profit in the year N (VND);

dd) C_common: Total cost of the administration and target profit, including costs of activities directly serving the electricity production and supply in the year N (VND);

e) C_DD: Total cost of the load dispatch and management of transactions in the electricity market plus target profit, including the cost of regulation of the electricity market in the year N (VND);

g) C_other: Total amount of other costs which are not included in the electricity price, including undistributed exchange differences arising from the reassessment and being included in the prime cost of production of electricity in the year N (VND) as annually examined and decided by the Ministry of Industry and Trade and/or the Ministry of Finance;
h) A_TP: Estimated total commercial electricity generation in year N (kWh), which is determined according to the annual plan for electricity supply and electricity system operation promulgated by the Ministry of Industry and Trade.
3. Payments for purchase of electricity from electricity generating units shall be calculated according to the regulation on level-based operation of electricity market brought into force by Ministry of Industry and Trade and according to the power purchase agreements signed by and between the electricity generating units and buyers.

4. Costs of electricity transmission, distribution – retail, general administration, load dispatch services and management of transactions in the electricity market shall be determined according to the costs plus target profit from the phases of transmission, distribution – retail of electricity, load dispatch and management of transactions in the electricity market, cost of ancillary services, and general administration cost of EVN under regulations adopted by the Ministry of Industry and Trade.

Article 5. Mechanism for adjustment of annual average electricity price

1. Based on the annual plan for power supply and electricity system operation promulgated by the Ministry of Industry and Trade and the inspection of electricity production costs in the previous year as prescribed in Article 7 herein, and estimated electricity sale in the current year, EVN shall calculate the average electricity price according to the formula mentioned in Clause 2 Article 4 herein.

2. In case there in a decrease in the average electricity price in comparison with the current average electricity price and in the prescribed bracket of electricity price, EVN is responsible for reducing the average electricity price to the corresponding level and reporting to the Ministry of Industry and Trade and the Ministry of Finance for inspection.

3. If the average electricity price needs to rise from 3% to below 5% in comparison with the current average electricity price and is in the prescribed bracket of electricity price, EVN shall make decision on increase of the average electricity price to the corresponding level. EVN shall prepare and send reports on increase of electricity price to the Ministry of Industry and Trade and the Ministry of Finance for inspection.

4. If the average electricity price needs to rise from 5% to below 10% in comparison with the current average electricity price and is in the prescribed bracket of electricity price, EVN is allowed to rise the average electricity price to the corresponding level after submitting report and obtaining approval thereof from the Ministry of Industry and Trade. Within a period of 15 working days as from the receipt of reports, the Ministry of Industry and Trade shall give a written response thereof to EVN. After raising the electricity price, EVN must send reports thereof to the Ministry of Industry and Trade and the Ministry of Finance.

5. If the average electricity price needs to rise 10% or above in comparison with the current average electricity price or is out of prescribed bracket of electricity price or may influence on the macroeconomic status after rising, the Ministry of Industry and Trade shall take charge and cooperate with the Ministry of Finance in examining, reviewing and submitting reports thereof to the Prime Minister for consideration according to EVN’s plan for electricity price. The Ministry of Industry and Trade may cooperate with the Ministry of Finance to submit reports the Price Administration Steering Committee before submitting reports to the Prime Minister, where necessary.

Article 6. Mechanism for adjustment of average electricity price in the year

1. Before 25^thof the first month of Quarter II, Quarter II and Quarter IV, upon the consideration of basic input parameters in the phase of electricity generation in the previous quarter, EVN shall determine the cost of electricity generation in the previous quarter, the cost of electricity generation accrued from the beginning of year, the actual commercial electricity generation of the previous quarter, and accrued total commercial electricity generation, estimated total commercial electricity generation of the remaining months in year, and calculate the average electricity price by adopting the formula prescribed in Clause 2 Article 4 herein (other parameters remain unchanged).

2. If the average electricity price is lower than the current average electricity price and in the prescribed bracket of electricity price after calculation, EVN shall assume responsibility to reduce the average electricity price to the corresponding level and submit report thereof to the Ministry of Industry and Trade and the Ministry of Finance for inspection.

3. If the average electricity price needs to rise from 3% to below 5% in comparison with the current average electricity price and is in the prescribed bracket of electricity price after calculation, EVN shall make decision on increase of the average electricity price to the corresponding level. EVN shall prepare and send reports on increase of electricity price to the Ministry of Industry and Trade and the Ministry of Finance for inspection.

4. If the average electricity price needs to rise from 5% to below 10% in comparison with the current average electricity price and is in the prescribed bracket of electricity price after calculation, EVN is allowed to rise the average electricity price to the corresponding level after submitting report and obtaining approval thereof from the Ministry of Industry and Trade. Within a period of 15 working days as from the receipt of reports, the Ministry of Industry and Trade shall give a written response thereof to EVN. After rising the electricity price, EVN must send reports thereof to the Ministry of Industry and Trade and the Ministry of Finance.

5. If the average electricity price needs to rise 10% or above in comparison with the current average electricity price or is out of prescribed bracket of electricity price or may influence on the macroeconomic status after calculation, the Ministry of Industry and Trade shall take charge and cooperate with the Ministry of Finance in examining, reviewing and submitting reports thereof to the Prime Minister for consideration according to EVN’s plan for electricity price. The Ministry of Industry and Trade may cooperate with the Ministry of Finance to submit reports the Price Administration Steering Committee before submitting reports to the Prime Minister, where necessary.

Article 7. Inspection

1. Inspection of annual electricity production and trading cost

a) After the final accounts of electricity generation costs and audited financial statements of EVN and its subsidiaries are made, the Ministry of Industry and Trade shall annually take charge and cooperate with the Ministry of Finance to conduct the inspection of costs of electricity production and trading in the previous year. The Central Committee of the Vietnamese Fatherland Front, Vietnam Chamber of Commerce and Industry, relevant associations and regulatory authorities may be invited to conduct the inspection. The Ministry of Industry and Trade is allowed to invite an independent consultant to verify the final accounts of electricity generation costs and financial statements of EVN and its subsidiaries;

b) Within 30 days after completing the inspection, the Ministry of Industry and Trade shall hold a press conference to disclose the inspection results. The inspection results shall be published on the websites of the Ministry of Industry and Trade and the Electricity Regulatory Authority of Vietnam;

c) Inspected and disclosed contents include:

- Actual costs of the phases of electricity generation, transmission, distribution – retail, general administration, ancillary services to the electricity system and other costs as prescribed in Clause 2 Article 4 herein;

- Profits and losses of EVN;

- Costs which are included in the prime costs of electricity production and trading of EVN;

- Costs which are not included in the prime costs of electricity production and trading of EVN.

d) Other costs, including exchange differences from the reassessment which are not included in the electricity price in previous years and included in the prime costs of electricity production and trading, must be certified by an independent auditor and recorded in a separate audit report to serve the inspection.

2. Inspection of adjustment of electricity price

a) In case EVN makes decision on adjustment of the average electricity price under regulations in Clause 2, Clause 3 Article 5 and Clause 2, Clause 3 Article 6 herein or EVN submits the plan for electricity price to the Ministry of Industry and Trade and the Ministry of Finance under regulations in Clause 5 Article 5 and Clause 5 Article 6 herein, the Ministry of Industry and Trade shall take charge and cooperate with the Ministry of Finance and relevant agencies to consider and verify reports and/or calculations by EVN;

b) If EVN fails to reduce the average electricity price in cases it needs to be lowered, the Ministry of Industry and Trade shall request EVN to carry out the reduction of the average electricity price;

c) If there are mistakes in the calculation of the electricity price, the Ministry of Industry and Trade shall request EVN to suspend the adjustment or re-adjust the average electricity price.

Violations against regulations on adjustment and calculation of the average electricity prices in Point b, Point c Clause 2 Article 7 herein shall be handled in accordance with effective regulations of the Government’s Decree No. 109/2013/ND-CP dated September 24, 2013 on penalties for administrative violations against regulations on prices, fees, charges and invoices, and the Government s Decree No. 49/2016/ND-CP dated May 27, 2016 on amendments to the Government’s Decree No. 109/2013/ND-CP dated September 24, 2013 or their substitute legislative documents (if any).

Article 8. Implementationorganization

1. Ministry of Industry and Trade is responsible for:

a) Instructing EVN to calculate average electricity prices under regulations in Article 4 herein;

b) Making adjustment of electricity prices in accordance with regulations in Article 5 and Article 6 herein;

c) Taking charge of conducting inspections in accordance with regulations in Article 7 herein.

2. Ministry of Finance shall cooperate with Ministry of Industry and Trade in implementing this Decision.

3. EVN is responsible for calculating average electricity prices, making adjustment of average electricity prices and submitting reports thereof under regulations in Article 4, Article 5, Article 6 and Article 7 herein.

Article 9.Effect

1. This Decision takes effect on August 15, 2017 and supersede the Decision No. 69/2013/QD-TTg dated November 19, 2013 by the Prime Minister providing mechanism for adjustment of average retail electricity prices.

2. Ministers, heads of ministerial-level agencies, heads of the Government’s affiliates, Chairpersons of people’s committees of provinces or central-affiliated cities, EVN and relevant organizations and individuals shall implement this Decision./.

The Prime Minister

Nguyen Xuan Phuc