Decision 05/2024/QD-TTg regulations on the mechanism for adjusting the average electricity retail prices

DECISION

Regulations on the mechanism for adjusting the average electricity retail prices

Pursuant to the Law on Electricity dated December 3, 2004; Law Amending and Supplementing a Number of Articles of Law on Electricity dated November 20, 2012; Law Amending and Supplementing a Number of Articles of Law on Public Investment, Law on Investment under the Public-Private Partnership Form, Law on Investment, Law on Housing, Law on Bidding, Law on Electricity, Law on Enterprises, Law on Excise Tax and Law on Civil Judgment Enforcement Law dated January 11, 2022;

Pursuant to Law on Prices 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 Law Amending and Supplementing a Number of Articles of Law on Electricity;

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

At the proposal of the Minister of Industry and Trade;

The Prime Minister has issued a Decision regulating the mechanism for adjusting the average electricity retail price.

Article 1. Scope of regulation and subjects of application

1. This Decision regulates the mechanism for adjusting the average electricity retail price.

2. This Decision applies to organizations and individuals involved in electricity activities and using electricity.

Article 2. Interpretation of terms

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

1. Average electricity price is the average electricity retail price within the price range of the average electricity retail price prescribed by the Prime Minister.

2. The current average electricity price is the average electricity retail price being applied at the time of considering electricity price adjustment.

3. The electricity buyer is Vietnam Electricity (EVN) and Power Corporations.

4. The electricity seller is electricity generation units, organizations and individuals performing electricity purchase contracts that have signed electricity purchase contracts with the electricity buyer.

5. Year N is the year in which the average electricity sale price is formulated according to the regulations in this Decision.

6. The price range is the range between the minimum price and the maximum price of the average electricity retail price prescribed by the Prime Minister.

7. Basic input parameters in electricity generation are factors that directly affect the cost of electricity generation that electric utility cannot control, including fuel prices, foreign exchange rates, generated electricity output structure and electricity purchase costs on the electricity market, in which electricity purchase costs on the electricity market are the costs of payment for electricity generation units participating in the electricity market according to the operation regulations of the electricity market issued by the Ministry of Industry and Trade.

Article 3. Principles for adjusting average electricity price

1. Annually, after reviewing the electricity generation and business costs of Vietnam Electricity (EVN) in year N-2, the average electricity price for year N is reviewed and adjusted in accordance with the objective fluctuations of the input parameters of all stages (electricity generation, electricity transmission, distribution and retail, electric system dispatch and electricity market operation, electric system ancillary services and industry operation and management) and the allocation of other costs not yet included in the electricity price.

2. Within the year, the average electricity price is reviewed and adjusted based on updates to the electricity generation costs, electricity purchase costs from electricity plants providing electric system ancillary services according to the basic input parameters in generation stage, and other costs not yet included in the electricity price.

3. If the average electricity price decreases by 1% or more compared to the current average electricity price, the electricity price is allowed to be adjusted downwards accordingly.

4. If the average electricity price increases by 3% or more compared to the current average electricity sale price, the electricity price is allowed to be adjusted upwards.

5. The minimum period for adjusting the average electricity price is 03 months from the most recent electricity price adjustment.

6. The average electricity price is calculated in accordance with the provisions of Article 4 of this Decision. In case the calculated average electricity sale price falls outside the price range, it can only be considered for adjustment within the price range prescribed by the Prime Minister. Vietnam Electricity (EVN) is allowed to adjust the average electricity sale price up or down within the price range according to the mechanism prescribed in Articles 5 and 6 of this Decision.

In case the average electricity sale price needs to be adjusted to a level more than 10% higher than the current average electricity price or affects the macroeconomic situation, the Ministry of Industry and Trade presides over, coordinate with relevant ministries and agencies to audit, review and report to the Prime Minister for consideration and comments. If necessary, the Ministry of Industry and Trade coordinates with relevant ministries and agencies to report to the Steering Committee on Price Management before reporting to the Prime Minister.

7. The adjustment of the average electricity price must be conducted in a public and transparent manner.

Article 4. Method of determining average electricity price

1. The average electricity price is determined based on the costs of the generation stage, the costs of purchasing services of electricity transmission, distribution and retail electricity, electric system dispatch and electricity market operation, electric system ancillary services, industry operation and management costs, other allocated costs and only include the costs directly serving the production and supply of electricity of Vietnam Electricity (EVN) to ensure the ability to operate, supply electricity and meet investment needs according to the approved plan, in which the costs of the stages take into account the cost deductions as prescribed.

2. The average electricity price for year N () is determined by the following formula:

Where: 

a) : Total electricity generation costs for year N (VND), determined by the following formula:

Where: 

: Total electricity purchase costs in year N from power plants directly and indirectly participating in the electricity market (VND);

: Total costs and budgeted profits in year N from multi-purpose strategic and dependent accounting hydropower plants (VND);

: Total electricity purchase costs in year N from BOT power plants (VND);

: Total electricity purchase costs in year N from small hydropower plants (VND);

: Total electricity purchase costs in year N from power plants using renewable energy and new energy (VND);

: Total electricity purchase costs in year N from electricity imports (VND);

b) : Total costs of power plants providing electric system ancillary services to the electric system in year V, including trial run costs of power plants (VND);

c) : Total cost of purchasing electricity transmission services in year N (VND);

d) : Total cost of purchasing electricity distribution and retail services in year N (VND);

dd) : Total industry operation and management costs and budgeted profits in year N (VND);

e) : Total cost of purchasing electric system dispatch and electricity market operation services in year N (VND);

g) : Total other costs not yet included in the electricity price, which are costs allowed to be included but not yet included in the electricity price, including exchange rate revaluation differences not yet allocated, calculated and allocated to the average electricity sale price in year N (VND);

h) : Total estimated commercial electricity output for year N (kWh).

3. The cost of purchasing electricity from the Seller is conducted according to the electricity market operation regulations at each level issued by the Ministry of Industry and Trade and in accordance with the Electricity Purchase Agreement signed between the Seller and the Buyer.

4. The cost of purchasing electricity transmission services, the cost of purchasing electricity distribution and retail services, the cost of purchasing electric system dispatch and electricity market operation services, the costs of power plants providing electric system ancillary services, and industry operation and management costs are determined on the basis of the cost plus budgeted profit of the stages of electricity transmission, distribution and retail, electric system dispatch and electricity market operation, power plants providing electric system ancillary services, industry operation and management of Vietnam Electricity (EVN) according to the regulations issued by the Ministry of Industry and Trade. Cost deductions are determined on the basis of the data in the audited Financial Statements.

Article 5. Mechanism for annually adjusting average electricity price

1. Based on the electricity supply and electric system operation plan for year N issued by the Ministry of Industry and Trade, the results of the audit of electricity generation and business costs in year N-2 according to the provisions in Article 7 of this Decision, the estimated results of electricity generation and business in year N-1 (in case the results of the audit of electricity generation and business costs in year N-1 are not yet available), before January 25 of year N, Vietnam Electricity (EVN) calculates the average electricity price according to the formula prescribed in Clause 2 of Article 4 of this Decision and implement the documentation requirements as prescribed in Clause 2 of this Article:

a) In case the calculated average electricity price decreases by 1% or more compared to the current average electricity price, Vietnam Electricity (EVN) is responsible for reducing the average electricity price accordingly. Within 05 working days from the date of adjustment, Vietnam Electricity (EVN) is responsible for preparing a report to the Ministry of Industry and Trade to preside over and coordinate with relevant ministries and agencies for audit and supervision.

b) In case the average electricity price needs to be adjusted to increase by 3% to less than 5% compared to the current average electricity price, Vietnam Electricity (EVN) decides to adjust the average electricity price to increase accordingly. Within 05 working days from the date of adjustment, Vietnam Electricity (EVN) is responsible for preparing a report to the Ministry of Industry and Trade to preside over and coordinate with relevant ministries and agencies for audit and supervision.

c) In case the average electricity price needs to be adjusted to increase by 5% to less than 10% compared to the current average electricity price, Vietnam Electricity (EVN) is allowed to adjust the average electricity price to increase accordingly after reporting and being approved by the Ministry of Industry and Trade. Within 15 working days from the date of receiving the complete price proposal document from Vietnam Electricity (EVN), the Ministry of Industry and Trade is responsible for responding in writing for Vietnam Electricity (EVN) to implement. Within 05 working days from the actual date of adjustment, Vietnam Electricity (EVN) is responsible for reporting to the Ministry of Industry and Trade.

d) In case the average electricity price needs to be adjusted to increase by 10% or more compared to the current average electricity price or affects the macroeconomic situation, on the basis of the electricity price proposal document submitted by Vietnam Electricity (EVN), the Ministry of Industry and Trade presides over the audit and review and sends to the Ministry of Finance and relevant ministries and agencies for comments. Based on the comments of the Ministry of Finance and relevant ministries and agencies, the Ministry of Industry and Trade compiles a report to the Prime Minister for consideration and comments. If necessary, the Ministry of Industry and Trade coordinates with relevant ministries and agencies to report to the Steering Committee on Price Management before reporting to the Prime Minister.

2. The document of the annual average electricity price proposal of Vietnam Electricity (EVN) includes:

a) An official report on the annual average electricity price proposal of Vietnam Electricity (EVN), including analyses and evaluations of the electricity production and business cost situation across all stages;

b) Documents attached to the official report on the annual average electricity price proposal of Vietnam Electricity (EVN), include: principles for calculating costs at each stage (electricity generation, electricity transmission, distribution and retail, electric system dispatch and electricity market transaction operation, industry operation and management), including principles for forecasting input parameters such as foreign exchange rates, domestic and imported fuel prices, prices of power plants scheduled to be put into operation within the calculation year but without electricity purchase agreements; a summary table of cost calculation results for each stage; a detailed table of cost calculation data for each stage; documents and papers used as a basis for calculation; explanations of cost norms and unit prices used in the calculation of expected costs for year N of stages (if any); explanations of electricity generation and business costs not yet included in the electricity price but already allocated to the cost of electricity generation and business and the remaining balance expected to be allocated to the average electricity price in year N; a report assessing the impact of electricity price adjustments on the electricity purchase costs of electricity users.

c) The entire document of the annual average electricity price proposal is stored on the data storage device attached to the report on the annual average electricity price proposal of Vietnam Electricity (EVN).

Article 6. Mechanism for adjusting the average electricity price during the year

1. Before the 25th day of the first month of Quarter II, Quarter III and Quarter IV, Vietnam Electricity (EVN) determines the actual commercial electricity output of the previous quarter and the total cumulative commercial electricity output from the beginning of the year, estimates the commercial electricity output of the remaining months of the year; determines the electricity generation costs of the preceding quarter, the cumulative electricity generation costs from the beginning of the year (including the cost of purchasing electricity from ancillary service providers), estimates the electricity generation costs of the remaining months of the year based on basic input parameters in the generation stage, and updates other costs not yet included in the electricity price to recalculate the average electricity price according to the formula prescribed in Clause 2 of Article 4 of this Decision (other parameters remain unchanged) and fulfill the documentation requirements as prescribed in Clause 2 of this Article:

a) In case the calculated average electricity price is lower than 1% or more compared to the current average electricity price after updating the calculation, Vietnam Electricity (EVN) is responsible for adjusting downwards the average electricity price accordingly. Within 05 working days from the date of adjustment, Vietnam Electricity (EVN) is responsible for preparing a report to the Ministry of Industry and Trade to preside over and coordinate with relevant ministries and agencies for audit and supervision.

b) In case the calculated average electricity price needs to be increased by 3% to less than 5% compared to the current average electricity price after updating the calculation, Vietnam Electricity (EVN) decides to adjusting upwards the average electricity price accordingly. Within 05 working days from the date of adjustment, Vietnam Electricity (EVN) prepares a report to the Ministry of Industry and Trade to preside over and coordinate with relevant ministries and agencies for audit and supervision.

c) In case the calculated average electricity price needs to be increased by 5% to less than 10% compared to the current average electricity price after updating the calculation, Vietnam Electricity (EVN) is allowed to adjusting upwards the average electricity price accordingly after reporting and being approved by the Ministry of Industry and Trade. Within 15 working days from the date of receiving the complete document of the electricity price proposal from Vietnam Electricity (EVN), the Ministry of Industry and Trade is responsible for replying in writing for Vietnam Electricity (EVN) to implement. Within 05 working days from the date of adjustment, Vietnam Electricity (EVN) is responsible for reporting to the Ministry of Industry and Trade.

d) In case the calculated average electricity price needs to be increase by 10% or more compared to the current average electricity price or affects the macroeconomic situation after updating the calculation, based on the document of the electricity price proposal submitted by Vietnam Electricity (EVN), the Ministry of Industry and Trade presides over the audit and review and sends to the Ministry of Finance and relevant ministries and agencies for comments. Based on the comments of the Ministry of Finance and relevant ministries and agencies, the Ministry of Industry and Trade compiles a report to the Prime Minister for consideration and comments. If necessary, the Ministry of Industry and Trade coordinates with relevant ministries and agencies to report to the Steering Committee on Price Management before reporting to the Prime Minister.

2. The document of the in-year average electricity price proposal of Vietnam Electricity (EVN) includes:

a) An official report on the in-year average electricity price proposal of Vietnam Electricity (EVN), including analyses and evaluations of the implementation of electricity generation costs in the preceding quarter;

b) Documents attached to the official report on the average electricity price proposal of Vietnam Electricity (EVN), include: principles for calculating and updating generation costs, including principles for forecasting input parameters such as foreign exchange rates, domestic and imported fuel prices, prices of power plants scheduled to be put into operation within the calculation year without electricity purchase agreements; a summary table of cost calculation results and a detailed table of cost calculation data for a generation stage; documents and papers used as a basis for calculation; explanations of cost norms and unit prices used in calculating and updating estimated costs for year N of an electricity generation stage (if any); explanations of electricity generation and business costs not yet included in the electricity price but already allocated to the cost of electricity generation and business and the remaining balance expected to be allocated to the average electricity price in year N; a report assessing the impact of electricity price adjustments on the electricity purchase costs of electricity users.

c) The entire document of the in-year average electricity price proposal is stored on the data storage device attached to the report on the in-year average electricity sprice proposal of Vietnam Electricity (EVN).

Article 7. Audit and supervision

1. Annual audit of electricity Generation and Business Costs

a) Annually, Vietnam Electricity (EVN) is responsible for submitting to the Ministry of Industry and Trade the audited report on electricity generation and business costs conducted by an independent auditing firm. Based on the report on electricity generation and business costs, the financial statements of Vietnam Electricity (EVN) and its member units that have been audited by independent auditing organizations in accordance with regulations, the Ministry of Industry and Trade presides over and coordinates with the Ministry of Finance to audit electricity generation and business costs, with the participation of the State Capital Management Committee at Enterprises, the Central Committee of the Vietnam Fatherland Front, the Vietnam Chamber of Commerce and Industry, state agencies and relevant associations. In case of necessity, the Ministry of Industry and Trade requests Vietnam Electricity (EVN) to hire independent consultants to verify the report on electricity generation and business costs of Vietnam Electricity (EVN) and its member units;

b) Within 30 days after the completion of the audit, the Ministry of Industry and Trade publicly discloses the audit results. The results shall be publicly disclosed on the website of the Ministry of Industry and Trade;

c) The contents of audit, supervision and publicly disclose include: actual costs of implementing each stage (electricity generation, electricity transmission, electricity distribution and retail, electric system dispatch and electricity market transaction operation, industry operation and management) and other costs as prescribed in Clause 2 of Article 4 of this Decision; average electricity retail price implemented by Vietnam Electricity (EVN); business results of losses and profits from electricity generation and business activities of Vietnam Electricity (EVN); costs not yet included in the electricity price since the most recent adjustment but have been accounted for in the cost of electricity generation and business of Vietnam Electricity (EVN); costs not yet included in the cost of electricity generation and business of Vietnam Electricity Group.

2. Audit of electricity price adjustments

a) In case Vietnam Electricity (EVN) decides to adjust the average electricity price in accordance with the provisions of points a and b of Clause 1 of Article 5 and points a and b of Clause 1 of Article 6 of this Decision, or in case Vietnam Electricity (EVN) submits to the Ministry of Industry and Trade the document of electricity price proposal according to the provisions of point d of Clause 1 of Article 5 and point d of Clause 1 of Article 6 of this Decision, the Ministry of Industry and Trade presides over and coordinates with the Ministry of Finance and relevant ministries and agencies to review and audit the reports and calculations of Vietnam Electricity (EVN);

b) In case the average electricity price needs to be adjusted down but Vietnam Electricity (EVN) does not make the adjustment, the Ministry of Industry and Trade is responsible for requesting Vietnam Electricity (EVN) to adjust down the average electricity sale price. Vietnam Electricity (EVN) is responsible for implementing the request of the Ministry of Industry and Trade within 05 working days from the date of receiving the request;

c) If any errors are detected in the results of electricity price calculation according to the provisions of points a and b of Clause 1 of Article 5 and points a and b of Clause 1 of Article 6 of this Decision, the Ministry of Industry and Trade is responsible for requesting Vietnam Electricity (EVN) to halt or revise the average electricity sale price. Vietnam Electricity (EVN) is responsible for implementing the request of the Ministry of Industry and Trade within 05 working days from the date of receiving the request.

Article 8. Implementation 

1. The Ministry of Industry and Trade is responsible for:

a) Guiding Vietnam Electricity (EVN) in calculating the average electricity sale price in accordance with the provisions of Article 4 of this Decision;

b) Implementing electricity price adjustments in accordance with the provisions of Articles 5 and 6 of this Decision;

c) Presiding over audits and supervision in accordance with the provisions of Article 7 of this Decision.

2. Relevant ministries and agencies are responsible for:

a) The Ministry of Finance, in coordination with the Ministry of Industry and Trade, is responsible for implementing this Decision in its role as the state agency for price management;

b) Relevant ministries and agencies are responsible for providing comments and coordinating on matters related to the assigned management scope in accordance with the assigned functions and responsibilities, and legal regulations;

3. The General Statistics Office is responsible for assessing the impact of electricity price adjustments on the macroeconomy.

4. Vietnam Electricity (EVN) is responsible for:

a) Calculating the average electricity price in accordance with the provisions of Articles 4, 5 and 6 of this Decision and submitting 01 set of document reporting the average electricity price proposal to the Ministry of Industry and Trade;

b) Implementing adjustments to the average electricity price, and submitting reports for competent authorities to audit and supervise in accordance with the provisions of Articles 5 and 6 of this Decision;

c) Providing relevant data for the General Statistics Office to assess the impact of electricity price adjustments on the macroeconomy;

          d) Submitting the report on electricity generation and business costs in accordance with the provisions of Article 7 of this Decision.

Article 9. Effect

1. This Decision takes effect on May 15, 2024, replacing Decision No. 24/2017/QD-TTg dated June 30, 2017, by the Prime Minister on the mechanism for adjusting the average electricity retail price.

2. Ministers, Heads of ministerial-level agencies, Heads of government agencies, Chairpersons of People's Committees of provinces and municipalities directly under the Central Government, Vietnam Electricity (EVN), and related organizations and individuals are responsible for implementing this Decision./

P.P PRIME MINISTER
DEPUTY PRIME MINISTER
Le Minh Khai