Thông tư 57/2020/TT-BCT

CIRCULAR

METHODS OF DETERMINING ELECTRICITY GENERATION PRICES AND POWER PURCHASE AGREEMENT VALUE

Pursuant to Law on Electricity dated December 3, 2004 and Law on amendments to Law on Electricity dated November 20, 2012;  

Pursuant to Decree No. 98/2017/ND-CP dated August 18, 2017 of the Government on functions, tasks, powers, and organizational structure of the Ministry of Industry and Trade;

Pursuant to Decree No. 137/2013/ND-CP dated October 21, 2013 of the Government on elaborating to Law on Electricity and Law on amendments to Law on Electricity;

At request of Director General of Electricity Regulatory Authority of Vietnam;

Minister of Industry and Trade promulgates Circular on methods of determining electricity sale prices and procedures for inspecting power purchase agreements.  

Chapter I

GENERAL PROVISIONS

Article 1. Scope and regulated entities

1. This Circular prescribes:

a) Methods of determining electricity sale prices and power purchase agreement value for various forms of power plants specified under Clause 2 of this Article.

b) Procedures for conducting self-inspection of power purchase agreements.

2. This Circular applies to:

a) Power plants connecting to national electrical grids with more than 30MW of gross installed capacity and power plants with 30MW of installed capacity or lower participating in electricity market on a voluntary basis;

b) Other relevant organizations and individuals;

c) This Circular does not apply to small hydroelectric power plants adopting schedules of avoidable costs, multi-objective strategic hydroelectric power plants independent power plants invested in form of BOT, power plants providing solely auxiliary services, biomass power plants, wind power stations, solar power plants, waste-to-energy plants and municipal solid waste-to-energy plants;

Other power plants not specified by Prime Minister and Ministry of Industry and Trade shall conform to Article 9 of this Circular.

Article 2. Term interpretation

In this Circular, terms below are construed as follows:

1. “Seller” refers to a generating entity owning power plants.

2. “Buyer” refers to Vietnam Electricity (EVN) (or representatives thereof by authorization), Northern Power Corporation, Central Power Corporation, Southern Power Corporation, Hanoi Power Corporation, Ho Chi Minh Power Corporation, primary energy consumers and other electricity traders according to regulations of power market.

3. “project developer” refers to an organization or individual directly managing, utilizing capital to invest in power plant construction projects, power line and electrical substation construction investment projects.

4. “connection costs” refer to costs for construction of power lines and electrical substations from power plants to connection points.  

5. “specific connection costs” refer to costs implemented by project developers or allocated for:

a) Constructing power lines and electrical substations from power plants to load capacity of power plants to connection points upon being assigned by competent authority to conduct construction investment.

b) Constructing power lines and electrical substations from power plants to connection points according to agreements between project developers and the Buyer.   

6. “connection point” refers to a point at which electrical equipment, electrical grids and power plants are connected to national electrical grid. Depending on electrical grid structure and connecting lines, connection points are determined to be:

- The final points of ceramic insulators holding transmission lines connecting to disconnector switches of power stations or power plants in case of overhead power lines.

- The ceramic insulators of disconnector switches of power stations or power plants in case of underground cable.

In case of connection points other than those specified above, substitute connection points shall be agreed upon by the Seller and power distributors or transmitters.

7. “delivered and received electricity” refers to electricity provided to the Buyer by the Seller to serve payment for electricity sale between the Buyer and the Seller.

8. “generating entity” refers to an organization or individual owning at least a power plant as per Vietnam laws.

9. “electrical system and national electricity market operator” (hereinafter referred to as “operator”) refers to National Load Dispatch Center or other load dispatch centers depending on level of development of electricity market.   

10. “parties” refer to the Buyer and the Seller under power purchase agreements.

11. “liquefied natural gas (LNG) storage, regasification and distribution contracts” refer to agreements between generating entities or fuel traders and entities investing, managing LNG storage to store, perform regasification, distribute and supply gas materials for powers plants signed as per applicable laws and ensuring competitive price and transparency.

12. “power purchase agreement (PPA)” refers to a contract serving power purchase of each power plant and is specified under Annex 3 of this Circular. 

13. “gas sale and purchase agreement (GSPA)” refers to a gas purchase agreement between gas seller and mine owner to purchase natural gas extracted domestically and provide to gas seller   

14. “gas sale agreement (GSA)” refers to gas sale agreement between gas seller and consumer.

15. “fuel (coal, natural gas, LGN) sale contract” refers to an agreement between a generating entity and a fuel trading entity to provide fuel for power plants, is signed according to applicable law and guarantees legitimate fuel origin, competitive price and transparency.

16. “fuel (coal, natural gas, LGN) transportation agreement” refers to an agreement between a generating entity or a fuel trading entity and a fuel transport service provider to transport fuel to power plants, is signed according to applicable law and guarantees competitive price and transparency.

17. “base year” refers to a year in which total investment or total revised project investment for calculating electricity generation price is approved.

18. “other power plants” refer to power plants not specified under Points a and c Clause 2 Article 1 hereof.

19. “new power plants” refer to power plants that have not signed first time PPA.

20. “construction commencement date” refers to the date on which the Seller is eligible for commencing construction according to Construction Law.

21. “net heat loss rate” refers to amount of heat required to produce 1 kWh of electricity at delivery point (BTU/kWh or kJ/kWh or kcal/kWh).

22. “total investment” refers to total construction investment of a project identified according to applicable laws and satisfactory to fundamental design and other details under construction investment feasibility reports. Total investment includes: compensation, assistance and relocation costs (if any); construction cost; equipment cost; project management cost; construction investment and consultancy cost; other costs; backup costs for additional workload and inflation.

23. “total revised investment” refers to total investment valid at the time of negotiating electricity price, in which total investment is revised to calculate electricity price when revising construction investment projects in following cases:

+ Natural disasters, environmental emergencies, conflicts, fire and other force majeure;

+ Appearance of factors that introduce higher effectiveness for the projects once project developers have proven the financial and socio-economic efficiency brought upon by revising the projects; 

+ Direct impact on the projects due to changes to construction planning;

+ Construction price indices publicized by Ministry of Construction, People’s Committees of provinces during project execution period exceeding construction price indices employed to calculate for inflation scenario under approved total project investment;

+ Project revision as a result of investment guideline revision.

24. “investment for settlement” refers to all legitimate costs required in investment process to bring projects into use.  Legitimate costs are all costs within the scope of approved projects, designs, estimates; construction contracts signed as per the law, including approved amendments thereto. Investment for settlement must be within total approved (or revised) investment as per the law.

25. “Circular No. 56/2014/TT-BCT” refers to Circular No. 56/2014/TT-BCT dated December 19, 2014 of Minister of Industry and Trade on methods of determining electricity generation price; procedures for inspecting power purchase agreements.

Chapter II

METHODS OF DETERMINING ELECTRICITY GENERATION PRICE

Section 1. METHODS OF DETERMINING ELECTRICITY GENERATION PRICE FOR NEW POWER PLANTS

Article 3. Principles of determining electricity generation price

1. Electricity generation price of power plants shall be developed on the basis of:

a) Legitimate costs of project developers throughout economic life of projects;

b) Internal rate of return (IRR) does not exceed 12%.

2. Electricity generation price of power plants consists:

a) PPA price: Agreed upon by both parties and developed according to Article 4 of this Circular;

b) Specific connection price: Agreed upon by both parties and determined according to Article 8 of this Circular.

3. Electricity generation price does not include VAT, water resource tax, fee for licensing rights to extract water resource, forest environmental service fee, environmental protection fee for solid waste and for industrial wastewater (applicable to thermal power plants) and other taxes, fees, monetary charges according to the Government (except for fees and charges included in electricity price solutions).

4. PPA price for comparing with price range for electricity generation in the base year

PPA price must be within price range for electricity generation in the base year of power plants issued by Minister of Industry and Trade, in which, PPA price of thermal power plants for comparing with price range for electricity generation in the base year shall be calculated on the basis of cost components corresponding to cost components serving calculation of price range for electricity generation.

Article 4. Methods of determining PPA price in the base year of power plants

PPA price, or P_C, (VND/kWh) shall be determined using following formula:

P_C = P^CD + P^BD

1. P^CD (VND/kWh) refers to fixed price in the base year and is determined using following formula:

P^CD = FC + FOMC_b

In which:

FC: Fixed cost determined under Article 5 of this Circular (VND/kWh);

FOMC_b­­: Operational and maintenance costs in the base year determined under Article 6 of this Circular (VND/kWh);

2. P^BD (VND/kWh) refers to variable prices in the base year.

a) For thermal power plants, P^BD shall be determined using following formula:

In which:

: Components of variable price revised according to variation of cost of primary fuel (coal, natural gas, LNG) of power plants in the base year, determined using method under Clause 1 Article 7 of this Circular (VND/kWh);

: Components of variable price revised according to variation of cost of secondary fuel (oil) of power plants in the base year, determined using method under Clause 2 Article 7 of this Circular (VND/kWh);

: Components of variable price revised according to other variations of power plants in the base year, determined using method under Clause 3 Article 7 of this Circular (VND/kWh).

: Transportation cost for primary fuel for generating electricity in the base year, determined using method under Clause 4 Article 7 of this Circular (VND/kWh).

b) For thermal power plants, regular maintenance cost in the base year is calculated in operational and maintenance cost according to major repair cost and other costs of the base year, thus, P^BD equals 0.

3. Costs for experimenting, testing operation and inspecting for acceptance of power plants:

a) For costs for experimenting, testing operation and inspecting for acceptance deriving before commercial operation date (COD): payment for such costs before the COD shall be agreed upon by both parties on the basis of total approved project investment; 

b) For costs for test operation deriving during operation of power plants: Agreed upon by both parties.

Article 5. Methods of determining average fixed cost of power plants

1. Average fixed cost (FC) of power plants is determined on the basis of financial analysis of projects in Schedules 1 and 2 under Annex 2 attached to this Circular. Input indices to determined FC of power plants are determined according to Clause 2 of this Article.

2. Input indices used for calculating FC of power plants

a) Total investment:

Total investment refers to total investment valid at the time of negotiating electricity price for calculating electricity price, including all costs within investment responsibility of the Seller until the connection points of power plants which consist of:

- Power plants;

- Infrastructure, wharfs for power plants, LNG import ports (for power plants utilizing LNG), other relevant costs and costs allocated to projects (if any);

Specific connection costs shall conform to Article 8 of this Circular.

b) Economic life: Conform to Annex 1 of this Circular, unless otherwise prescribed by competent authority;

c) Electricity generated on average over multiple years at generator terminals:

- For thermal power plants: Determine according to capacity of generator terminals according to approved design and average number of hour in which power plants are operating at maximum capacity (T_max) over several years.    T_max of power plants is determined according to approved design but must not be lower than T_max specified under Annex 1 hereof, unless otherwise approved by competent authority in writing. Average capacity degradation rate for economic life of power plants shall be agreed upon by both parties on the basis of technical documents of equipment manufacturers (kWh);

- For hydroelectric power plants: Determine according to approved fundamental design or written approval of competent agencies (kWh).

d) Percentage of used electricity and depreciation of step-up transformers of power plants, depreciation of power lines from step-up transformers of power plants to points of connection (if any): Is a value smaller than value determined according to approved fundamental design of power plants or according to technical documents of equipment manufacturers (%);

dd) Period in which depreciation of each primary fixed asset category is accounted for: Determined on the basis of period in which depreciation of each primary fixed asset category is accounted for based on the period regulated by Ministry of Finance from time to time or based on written permission of competent authority (if any) (year);

e) Owner’s equity rate, loan capital and investment capital phases in total investment:

Determined according to decision on approving investment projects and capital mobilization situation at the time of negotiating, conforming to regulations and law issued by competent authority. Minimum owner’s equity shall be 15% of total investment of projects;

g) Interest rate and repayment period during operation period: Based on loan agreements, documents between project developers and credit institutions, lending banks;

h) Corporate income tax rate, other taxes, fees: Determined according to relevant law provisions.

Article 6. Methods of determining operational and maintenance costs of power plants

Operational and maintenance cost in the base year FOMC_b (VND/kWh) is determined using following formula:

In which:

: Operational and maintenance cost according to major repair cost and other costs of the base year, determined according to Clause 1 of this Article (VND/kWh);

: Operational and maintenance cost according to personnel cost in the base year, determined according to Clause 2 of this Article (VND/kWh).

1. Operational and maintenance cost based on major repair cost and other cost in the base year  (VND/kWh) determined using following formula:

In which:

: Total major repair cost and other costs in the base year including major repair cost, secondary material costs, externally purchased material cost, other monetary cost (VND).

In case of failure to determine total major repair cost and other costs after using formula under this Clause, calculate TC_scl in the base year using following formula:

TC_scl =VDT_XD+TB x k_scl

In which:

VDT_XL+TB: Total construction costs and equipment costs determined on the basis of total investment specified under Point a Clause 2 Article 5 of this Circular (VND);

k_F,scl: Percentage of major repair cost and other costs (%) of power plants agreed upon by both parties and not exceeding value under Annex 1 hereof;

A_GN: Average power generated over multiple years at delivery points between the Buyer and the Seller (kWH) and calculated as follows:

- For thermal power plants:

In which:

Pt: Generator terminal capacity under approved design (kW);

T_max: Average hours in which power plants operate at maximum capacity, determined according to Point c Clause 2 Article 5 hereof (hour);

t_td: Percentage of electricity used and depreciation of step-up transformers of power plants, power line depreciation from step-up transformers to connection points with national electrical grids, determined according to Point d Clause 2 Article 5 hereof (%);

k_CS: Average percentage of capacity degradation for economic life of power plants determined according to Point c Clause 2 Article 5 hereof (%).

- For hydroelectricity power plants:

In which:

A_bq : Average power generated over multiple years at generator terminals, determined according to Point c Clause 2 Article 5 hereof (kWh);

t_td : Percentage of electricity used and depreciation of step-up transformers of power plants, power line depreciation from step-up transformers to connection points with national electrical grids, determined according to Point d Clause 2 Article 5 hereof (%).

2. Operational and maintenance cost based on personnel cost in the base year  (VND/kWh) determined using following formula:

In which:

TC_nc: Total personnel cost in the base year include cost for salary, social insurance, health insurance, union fee and other allowances (VND);

Total personnel cost TC_nc of the base year is determined on the basis of total personnel cost of power plants and calculation to covert to the base year as follows:

- In case salary for calculating personnel cost of power plants equals region-based minimum wage  of the year in which electricity price is calculated: Conversion rate conforms  to region-based minimum wage;

- In case of inability to determine total personnel cost as specified above: Adopt following formula:

TC_nc =VDT_XL+TB x k_F,nc

In which:

VDT_XL+TB: Total construction cost and equipment cost determined on the basis of total investment specified under Point a Clause 2 Article 5 of this Circular (VND);

k_F,nc: Percentage of personnel cost (%) of power plants agreed upon by both parties without exceeding value under Annex 1 hereof;

A_GN : Average power generated over multiple years at delivery points between the Buyer and the seller and calculated according to Clause 1 of this Article (kWh);

Article 7. Methods of determining variable price of thermal power plants

Variable price, P^BD, of thermal power plants in the base year (VND/kWh) is determined using following formula:

In which:

: Components of variable price revised depending on variation of primary fuel price of power plants in the base year, determined using method under Clause 1 of this Article (VND/kWh);

: Components of variable price revised depending on variation of secondary fuel price (oil) of power plants in the base year, determined using method under Clause 2 of this Article (VND/kWh);

: Components of variable price revised depending on other variations of power plants in the base year, determined using method under Clause 3 of this Article (VND/kWh).

: Transportation cost for primary fuel for generating electricity in the base year, determined using method under Clause 4 of this Article (VND/kWh).

1.  is determined using following formula:

In which:

: Average net heat loss rate of primary fuel agreed upon by both parties and not greater than fundamental design/technical design corresponding to total investment for calculation of electricity price or specifications of equipment manufacturers, determined corresponding to load level under Annex 1 hereof;

: Primary fuel price in the base year is determined as follows:

Primary fuel price in the base year is calculated by weighted average of PPA or written agreements (VAT not included), unit of measurement: VND/kcal or VND/kJ or VND/BTU.

2.  is determined using following formula:

In which:

: Average net heat loss rate of secondary fuel (oil) agreed upon by both parties (kg/kWh);

: Price of secondary fuel (oil) in the base year includes costs for transporting to power plants and other fees as per the law (VAT not included) (VND/kg).

3.  is determined using following formula:

In which:

C_vlp: Total annual auxiliary material cost of power plants determined based on quantity and unit price of auxiliary materials used for electricity generation in the base year (VND);

C_kd: Total initiation costs include fuel costs, other costs serving initiation (VND); number of initiation sessions agreed upon by both parties on the basis of electrical grid demand and operational characteristics of power plants;

C_k: Annual regular repair and maintenance costs including regular repair and maintenance costs calculated on the basis of total construction and equipment investment of power plants, percentage of regular repair and maintenance costs agreed upon by both parties without exceeding value under Annex 1 hereof and costs for dredging port entry agreed upon by both parties (if any) (VND);

A_GN­: Average electricity generated over multiple years at delivery points between the Buyer and the Seller and calculated according to Clause 1 Article 6 hereof (kWh).

4.  is determined using following formula:

In which:

: Average net heat loss rate determined according to Clause 1 Article 7 hereof.

: Transportation price for primary fuel for generating electricity in the base year (VAT not included), unit of measurement: VND/kcal or VND/kJ or VND/BTU and determined as follows:

- For coal-fired thermal power plants: weighted average according to coal transportation agreements or written agreements;

- For gas-fired thermal power plants: weighted average according to fees for collecting, transporting and distributing gas approved by competent authority as per the law or according to written agreements.

- For LNG-fired thermal power plants: weighted average according to LNG transportation agreements, LNG storage, regasification and distribution contracts (if any) or other written agreements.

For fuel sale contracts in which primary fuel price, , has inlcuded transportation price for primary fuel, fees for collection, transportation, distribution, storage and regasification, repsective  shall equal 0.

Article 8. Methods of determining specific connection prices of power plants

1. Specific connection prices (PDT) serve to salvage specific connection costs implemented by project developers of power plants or is allocated and agreed upon with the Buyer on the basis of specific connection costs, investment capital components, loan interest during operation period according to loan agreements, costs for managing, operating and maintaining and other factors according to agreement between both parties to ensure that project developers recover costs for constructing, managing, operating and maintaining as per the law.   Unit of measurement: VND/kWh or VND/kW or VND/month.

2. Once specific connection costs are settled, parties shall recalculate specific connection prices using method under Clause 1 of this Article.

3. Specific connection costs shall be considered legitimate costs and included in electricity purchase prices in methods of calculating average electricity retail price of EVN.   

Article 9. Methods of determining electricity generation price for other power plants

For other power plants, based on principles under Section 1 of this Chapter, the Buyer and the Seller shall develop methods of determining electricity generation price and PPA depending on practical situations of power plants, request Electricity Regulatory Authority of Vietnam and report to Ministry of Industry and Trade.

Section 2. METHODS OF DETERMINING ELECTRICITY GENERATION PRICE OF POWER PLANTS ENTERING COMMERCIAL OPERATION

Article 10. Methods of determining electricity generation price for power plants with expired PPAs and power plants with unexpired economic life  

For power plants with expired PPAs and unexpired economic life: Electricity generation price under current PPAs shall continue to apply to subsequent years until economic life expires.

Article 11. Methods of determining electricity generation price for power plants with expired economic life

1. Fixed price of power plants with expired economic life is determined in a manner that enables power plants to recover costs serving electricity production, according to period for calculation shall conform to frequency of major repair of primary equipment and according to agreement on reasonable interest.   In case competent authority approves period for calculation in writing, comply with written approval of competent authority.

2. Variable price of power plants with expired economic life is determined according to Article 7 hereof. 

3. In case a power plant with expired economic life is subject to investment and upgrade, both parties shall agree upon, negotiate PPA value of power plants based on Articles 4, 5, 6, and 7 hereof and conforming to depreciation period of primary equipment subject to upgrade.

Article 12. Methods of determining electricity generation price for power plants under renegotiation based on settled investment capital

For power plants where both parties have the rights to renegotiate electricity price based on settled investment capital according to Clause 2 Article 28 hereof: After determining settled investment capital, the Seller is responsible for sending documents related to settled investment capital to the Buyer. Both parties shall renegotiate electricity price based on following principles:

1. Methods of determining PPA value according to Article 4 hereof.

2. Indicators for calculating PPA value shall conform to Article 4 hereof and input indicators are updated at the same time settled investment capital is determined.

3. PPA value for comparing with price range for electricity generation must be within the price range of the year in which settled investment capital is approved.

4. Electricity generation price shall be applied from the commercial operation date of power plants, fixed price of each year according to Article 13 hereof; do not revise annual fixed price of years preceding the date on which parties sign contracts for revising PPA based on electricity price identified on the basis of settled investment capital. 

Section 3. METHODS OF DETERMINING POWER PURCHASE AGREEMENT VALUE BY EACH YEAR OF PPAS

Article 13. Principles of determining annual fixed price of power purchase agreements

1. Both parties have the rights to adopt weighted average fixed price agreed upon during years under contracts.

In case both parties agree on converting average fixed price to fixed price of each year, these fixed prices must be determined in a manner satisfactory to Clause 2 of this Article.

2. On the basis of practical loan capacity and financial capacity of projects, both parties shall negotiate about average fixed price of power plants and convert to annual fixed cost (FC_j fixed cost of year j) as long as average fixed cost does not change compared to mutually agreed value and following principles are complied:

a) Financial discount rate when calculating annual fixed price agreed by both parties according to the IRR of power plants;

b) Projects developers shall return loans for investment and construction of power plants according to deadline for repaying loan capital.

Article 14. Principles of adjusting electricity generation price of each year under power purchase agreements

1. Component of operational and maintenance costs of power plants shall be adjusted according to following principles:

a) Components of operational and maintenance costs according to major repair costs and other costs shall be adjusted based on inflation rate of average costs under Annex 1 hereof.  Both parties shall conduct research, propose solutions for adjusting components of operational and maintenance costs according to major repair costs and other costs for items in foreign currency; 

b) Components of operational and maintenance costs according to personnel costs shall be adjusted based on variation of minimum region-based wages at the time of payment or based on CPI publicized by General Statistics Office of Vietnam without exceeding 2.5%/year.

2. On an annual basis, based on total loan in foreign currency, plans for repaying loan in foreign currency, figures on principle debt paid in practice, conversion rate agreed upon by both parties in electricity price solutions and conversion rate of the previous year, both parties shall calculate difference in rates, propose payment solutions, send to Electricity Regulatory Authority of Vietnam and request Ministry of Industry and Trade to consider approving payment solutions.

Foreign exchange rate difference (FED) is calculated using following formula:

In which:

m: Number of foreign currency in electricity solution both parties agree upon (number);

n: Number of times principle debt in foreign currency i is paid in calculating year (time);

D_i,j: Number of principle debt in foreign currency paid for the j^th time foreign currency i in practice in calculating year. Principle debt in foreign currency i paid in practice in calculating year must not be greater than principle debt in foreign currency i in respective year in electricity price solutions agreed upon by both parties;

λ_i,j: Conversion rate in the j^th payment of foreign currency i in the year (.../VND);

λ_i,b: Base conversion rate of foreign currency i agreed upon by both parties under electricity price solutions (.../VND).

Article 15. Methods of determining power purchase agreement value of power plants at the time of payment

PPA value of power plants at the time of paying electricity bill in month t, year j: P_C,j,t (VND/kWh) is determined using following formula:

In which:

FC_j: Fixed costs in year j determined according to Clause 1 of this Article (VND/kWh);

FOMC_j,t: Operational and maintenance costs in month t, year j determined according to Clause 2 of this Article (VND/kWh);

: Variable price in month t, year j determined according to Clause 3 of this Article (VND/kWh).

1. Fixed costs in year j: FC_j is determined according to Article 13 hereof.

2. Operational and maintenance costs in month t, year j are determined using following formula:

In which:

: Components of operational and maintenance costs according to major repair costs and other costs in year j (VND/kWh);

: Components of operational and maintenance costs according to personnel costs in month t, year j (VND/kWh).

a) Components of operational and maintenance costs according to major repair costs and other costs are determined using following formula:

In which:

: Operational and maintenance costs according to major repair costs and other costs in the base year determined according to Clause 1 Article 6 hereof;

i: Inflation rate of components of operational and maintenance costs according to major repair costs and other costs specified under Annex1 hereof;

l: Order of payment year from the base year (for base year, I=1).

b) Components of operational and maintenance costs according to personnel costs in month t, year j:  determined as follows:

- In case wages in electricity price solutions equal minimum region-based wages, apply following formula:

In which:

: Operational and maintenance costs according to personnel costs in the base year determined according to Clause 2 Article 6 hereof;

: Minimum region-based wages at the time of payment in month t, year j (VND/month);

: Minimum region-based wages in the base year (VND/month).

- In case total personnel costs: TC_nc are calculated based on construction and equipment investment, apply following formula (VND/kWh):

In which:

: Operational and maintenance costs according to personnel costs in the base year, determined according to Clause 2 Article 6 hereof;

i₁: Inflation rate of components of operational and maintenance costs according to personnel costs, determined based on consumer price index (CPI) in year (j-1) compared to year (j-2) publicized by General Statistics Office of Vietnam in December of year (j-1) without exceeding 2.5%/year;

l: Order of payment year starting from the base year (for the base year: l = 1, i₁ = 0).

3. Variable prices of thermal power plants in month t, year j:  (VND/kWh) are determined using following formula:

In which:

: Components of variable prices adjusted according to variation of primary fuel prices of thermal power plants in month t, year j, determined according to Point a of this Clause (VND/kWh);

: Components of variable prices adjusted according to variation of secondary fuel (oil) price of power plants in month t, year j determined according to Point b of this Clause (VND/kWh);

: Components of variable prices adjusted according to other variations of power plants in year j, determined according to Point c of this Clause (VND/kWh).

: Transportation costs for primary fuel of power plants in month t, year j, determined according to Point d of this Clause (VND/kWh).

a) Components of variable prices adjusted according to variation of primary fuel prices of power plants in month t, year j:  are determined using following formula:

In which:

: Average net heat loss rate determined according to Clause 1 Article 7 hereof;

k_HR: Coefficient for average net heat loss rate for actual operating coditions depending on temperature of coolant and ambient temperature agreed upon by both parties;

k_HS: Percentage of capacity reduction in year j (%);

l: Year of commercial operation of power plants;

 : Primary fuel price for electricity generation at the time of payment in month t, year j, determined by weighted average based on quantity of invoices under fuel sale contracts at the time of calculation.

b) Components of variable prices adjusted according to variation of secondary fuel (oil) price of power plants in month t, year j:  are determined using following formula:

In which:

: Components of variable prices adjusted according to variation of secondary fuel (oil) prices of power plants in the base year, determined under Clause 2 Article 7 hereof;

k_HS: Percentage of capacity reduction in year j (%);

l: Year of commercial operation of power plants;

: Secondary fuel (oil) prices for electricity generation including fees for transporting to power plants at the time of payment in month t, year j;

: Secondary fuel (oil) prices for electricity generation in the base year determined under Clause 2 Article 7 hereof.

c) Components of variable prices adjusted according to other variations of power plants in year j:  determined using following formula:

In which:

: Components of variable prices adjusted according to other vairations of power plants in the base year determined under Clause 3 Article 7 hereof;

i: Inflation rates of components of variable prices adjusted according to other variations based on rates under Annex 1 hereof.

k_HS: Percentage of capacity reduction in year j (%);

l: Year of commercial operation of power plants.

d) Fees for transporting primary fuel of power plants in month t, year j:  (VND/kWh) are determined using following formula:

In which:

: Average net heat loss rate determined according to Clause 1 Article 7 hereof.

k_HR: Coefficient for adjusting average net heat loss rate depending on practical operating conditions, coolant temperature and ambient temperature agreed upon by both parties;

k_HS: Percentage of capacity reduction in year j (%);

l: Year of commercial operation of power plants;

: Fees for transporting primary fuel at the time of payment in month t, year j are determined by weighted average based on quantity of invoices according to fuel transport agreements, LNG storage, regasification and distribution contracts (if any) (VATnot included), to be sepcific:

- For coal-fired thermal power plants: weighted average according to coal transportation agreements;

- For gas-fired thermal power plants: weighted average according to fees for collecting, transporting and distributing gas;

- For LNG-fired thermal power plants: weighted average according to LNG transportation agreements, LNG storage, regasification and distribution contracts (if any).

For fuel sale contracts already including primary fuel transportation prices, components of primary fuel transportation prices  shall equal 0.

4. Total costs for initiation in month t of thermal power plants  (VND), are determined using following formula:

In which:

u: Machine order of power plants;

U: Number of machines of power plants;

f: Type of fuel (for primary fuel f = 1; secondary fuel f = 2);

s: Initiation status of machines;

S: Initiation status number of machines;

p_u,f,s: Number of ignitions of machines u, use fuel f, in initiation status s in the month;

M_u,f,s: Amount of coal (kg) or gas (BTU) consumed for a single instance of initiation of machines u, using fuel f in initiation status s;

D_u,f,s: Fuel unit price for a single instance of initiating machines u, using f, in initiation status s, determined, determined in VND/kg for coal and VND/BTU for gas;

: Total of other costs serving initiation.

Payment for initiation costs of thermal power plants shall conform to regulations on electricity market publicized by Ministry of Industry and Trade.

Chapter III

PROCEDURES FOR NEGOTIATING AND INSPECTING OF POWER PURCHASE AGREEMENTS

Article 16. Adoption of model power purchase agreements

1. For new power plants and power plants negotiating according to Article 10 hereof, on the basis of model power purchase agreements under Annex 3 hereof, the Buyer and the Seller shall negotiate and add clauses depending on practical situations of power plants (if necessary).

2. The Buyer and the Seller shall agree and be responsible for submitting reports on power purchase agreement negotiation results to Electricity Regulatory Authority of Vietnam according to Article 19 hereof.

Article 17. Procedures for negotiating power purchase agreements

1. For new power plants, power purchase agreements between parties must be signed before the construction commencement date.

2. The Seller is responsible for preparing request for power purchase agreement negotiation and sending to the Buyer for negotiation and adoption of procedures for signing power purchase agreements.

3. Within 15 working days from the date on which adequate written request from project developers is received, the Buyer is responsible for organizing power purchase agreement negotiation with the Seller. At the end of negotiation process, both parties must initial the draft power purchase agreements.  

4. After draft power purchase agreements have been initialed, the Buyer and the Seller shall agree and be responsible for reporting to Electricity Regulatory Authority of Vietnam.

Article 18. Request for power purchase agreement negotiation

1. Request for power purchase agreement negotiation applied to new power plants includes but are not limited to:

a) Official Dispatch requesting power purchase agreement negotiation;

b) Draft power purchase agreements using form under Annex 3 hereof and revisions depending on practical conditions of power plants (if any);

c) Approval of investment guidelines or Decision on investment guidelines or investment registration certificate of projects;

d) Decision on investing in construction, explanation and reports on appraisal of power plant investment projects of independent consultants, attached documents;

dd) Decision on approving total investment for the first time or revised total investment of projects valid at the time of negotiating electricity price and primary contents in fundamental design of investment projects relating to power purchase agreement negotiation, appraisal reports on fundamental design;

e) Agreements on connecting power plants to national grids together with connection solutions; agreements on SCADA/EMS and regulating information systems; agreements on protective and automatic relay systems;

g) Loan agreements or documents between project developers and creditors, plans or facts of disbursement of loans;

h) Fuel supply contracts for power plants, specifying fuel prices for electricity generation, fuel transportation costs, LNG storage, regasification and distribution costs and additional costs, fuel delivery points and deadline for fuel supply;

i) Documents on calculating capacity and electricity loss of transformers and power lines from step-up transformers to connection points with national electrical grids and documents on electricity used in power plants;

k) Documents on calculating net heat loss rates for thermal power plants;

l) Electricity solutions determined according to Section 1 and Section 3 Chapter II hereof;

m) Other relevant documents.

2. Request for power purchase agreement negotiation of power plants entering commercial operation includes but are not limited to:

a) Official Dispatch requesting power purchase agreement negotiation;

b) Draft power purchase agreements using form under Annex 3 hereof;

c) Available documents on power purchase agreements;

d) Technical dossiers of power plants, technical specifications of SCADA/EMS systems, protective and automatic relays, machine P-Q operational characteristics;  

dd) Fuel supply contracts for power plants;

e) Electricity solutions of power plants determined according to Section 1, Section 2, and Section 3 Chapter II hereof;

g) Audited financial statements of power plants of the nearest year from the date of negotiating power purchase agreements.

Article 19. Procedures for inspecting power purchase agreements

1. After negotiating power purchase agreements, both parties shall agree and be responsible for submitting reports on inspection of power purchase agreement and documents under Article 18 hereof to Electricity Regulatory Authority of Vietnam.  

2. Within 5 working days from the date on which applications for inspection of power purchase agreements are received, Electricity Regulatory Authority of Vietnam is responsible for examining legitimacy of the applications and requesting both parties to submit additional documents if necessary as per the law.  

3. Within 30 working days from the date on which adequate applications for inspection of power purchase agreements are received, Electricity Regulatory Authority of Vietnam is responsible for examining and providing feedback on power purchase agreements.  

4. Within 30 working days from the date on which feedback on power purchase agreement is provided, both parties are responsible for officially signing the power purchase agreements. In case Electricity Regulatory Authority of Vietnam fails to provide feedback on power purchase agreements before the deadline under Clause 3 of this Article, both parties may officially sign the power purchase agreements based on clauses agreed upon.    The Buyer is responsible for sending 1 copy of signed power purchase agreements to Electricity Regulatory Authority of Vietnam for storage and implementation monitor.

5. In case electricity under Clause 4 Article 3 hereof according to recommendations of the Seller exceeds price range for electricity generation publicized by Minister of Industry and Trade, both parties are responsible for reporting, explaining and proposing solutions to enable Electricity Regulatory Authority of Vietnam to consider and report to Minister of Industry and Trade.

Article 20. Revision of power purchase agreements in case of changes to regulations and policies promulgated by competent authority

1. In case changes to regulations and policies promulgated by competent authority affect legal benefits of the Buyer or the Seller in a negative manner, both parties hold the right to renegotiate electricity generation price.  

2. In case the Seller is assigned to invest in upgrade and renovation of power lines and electrical substations according to planning, both parties hold the right to negotiate additional specific connection costs to enable project developers of power plants to recover construction, management, operation and management costs as per the law.

3. In case active power plants must be invested for renovation and upgrade to meet national technical regulations on environment, the Seller and the Buyer must add these costs to electricity price of power plants.  Calculation of electricity price shall conform to method agreed upon by both parties under signed power purchase agreements, and be reported to Ministry of Industry and Trade and Electricity Regulatory Authority of Vietnam.  

4. In case solutions developed by power plants for disposing, selling ashes and slags are approved by competent authority to be satisfactory to refuse, emission and environmental protection standards, the Buyer and the Seller shall add these costs to components of costs for disposing, selling ashes and slags which are specific components of costs for disposing, selling ashes and slags under power purchase agreements following these principles: (i) Investment scope, procedures for ash and slug disposal must be approved by competent authority; (ii) Selection of entities for disposing ashes and slags of power plants must conform to regulations and law, ensure competitiveness and transparency; (iii) Both parties shall settle costs for disposing ashes and slags according to practical situations of the previous year.    Revenues generated from sale of ashes and slags of power plants shall be utilized to reimburse costs for disposing ashes and slags and reduce electricity price of power plants.

Chapter IV

IMPLEMENTATION

Article 21. Responsibilities of Ministry of Industry and Trade

1. Guiding natural gas consumption mechanisms in power purchase agreements conforming to regulations under gas sale and purchase agreements and gas sale agreements approved by competent authority.  

2. Deciding on paying for differences in rates of power plants.

Article 22. Responsibilities of Electricity Regulatory Authority of Vietnam

1. Examining and providing feedback on power purchase agreements and revisions of power purchase agreements of power plants.

2. Guiding and dealing with difficulties arising during negotiation on power purchase agreements between parties.

3. On an annual basis, consolidating feedback of entities regarding input figures for calculating power purchase agreement value specified under Annex 1 hereof and proposing to Minister of Industry and Trade for consideration, decision and revision (if any).

4. Dealing with conflicts that arise during execution of power purchase agreements in case both parties agree to settle conflicts at Electricity Regulatory Authority of Vietnam.

5. Examining, consolidating and reporting to Ministry of Industry and Trade to consider paying for difference in rates among power plants after receiving reports of EVN.

Article 23. Responsibilities of Vietnam Electricity

1. Before January 31 each year, taking charge and cooperating with the Buyer and the Seller in calculating difference in rates in execution of power purchase agreements of the previous year according to Clause 2 Article 14 hereof, and reporting to Electricity Regulatory Authority of Vietnam. 

2. On an annual basis, considering and requesting Electricity Regulatory Authority of Vietnam to revise input figures for calculating power purchase agreement value according to Annex 1 hereof and other contents in this Circular (if any).

Article 24. Responsibilities of the Buyer

1. Agreeing with the Seller on redistributing specific connection costs to project developers of power plants connecting to power lines, electrical substations and revising specific connection costs (if any) to enable the Seller to recover construction, management, operation and maintenance costs for power lines and electrical substations as per the law.  

2. Negotiating power purchase agreements with the Seller; being responsible and guaranteeing accuracy, legitimacy of provided figures and documents. Agreeing with the Seller on submitting reports on inspection of power purchase agreements to Electricity Regulatory Authority of Vietnam as per the law.

3. Before January 15 each year, taking charge and cooperating with the Seller in calculating difference in rates in execution of power purchase agreements of the previous year according to Clause 2 Article 14 hereof, providing to EVN and reporting to Electricity Regulatory Authority of Vietnam. 

Article 25. Responsibilities of the Seller

1. Negotiating with the Buyer, reporting to Electricity Regulatory Authority of Vietnam regarding inspection and signing of power purchase agreements as per the law prior to construction commencement date; being responsible and ensuring accuracy, legitimacy of provided figures and documents.

2. Developing construction investment projects for power lines and electrical substations to load capacity of power plants when assigned to implement construction investment by competent authority according to national electricity development planning and provincial planning (if any). Power lines and electrical substations must operate and load all capacity and electrical production of power plants in vicinity according to approved plans.

3. Allowing power plants within national electrical development planning or provincial planning to connect to power lines and electrical substations to send electricity to national electrical grid.

4. Agreeing with project developers of power plants on distributing and revising specific connection costs to enable project developers to recover construction, management, operation and maintenance costs for power lines and electrical substations as per the law.  

5. Being responsible for managing, operating and maintaining power lines and electrical substations within their investment and construction capacity as per the law.

6. Providing adequate information, being responsible, ensuring accuracy and legitimacy of figures and documents provided to relevant entities and agencies during power purchase agreement negotiation and inspection process.

7. The Seller is responsible for selecting fuel suppliers and/or transporters according to bidding laws, other regulations and law and legally responsible for ensuring equality, competitiveness and transparency except for following cases:

 (i) The Seller has signed mid-term or long-term fuel supply contracts with fuel suppliers;

 (ii) Natural gas supply contracts and fees for collecting, transporting and distributing natural gas conform to regulations of competent authority.

In case of inability to select fuel transporters via bidding due to special reasons (other than exceptions 7.i and 7.ii above), the Seller is responsible for negotiating with fuel suppliers or fuel transporters (depending on cases under Article 26 of this Circular) according to unit price promulgated by competent agencies; if unit price has not been promulgated by competent agencies, the Seller is responsible for negotiating with fuel suppliers or transporters (depending on cases under Article 26 of this Circular) according to unit price calculated on the basis of internal unit price of selected fuel transporters, ensuring effectiveness, competitiveness and not exceeding unit price of other transport service providers within the same means of transport (if any), price of fuel transported to warehouses of the Seller not exceeding price of the same fuel at warehouses of the Seller provided by other providers (if any).    

Prior to signing fuel transport contracts without bidding, the Seller must provide the Buyer with documents agreed upon under power purchase agreements.  Within 20 days from the date on which the Seller provide adequate documents and the Buyer has not provided feedback on selection of fuel transporters, the Seller and/or fuel transporters (depending on delivery conditions) may sign fuel transport contracts based on terms agreed upon.

The Seller is responsible for signing fuel purchase, sale and transport agreements according to applicable laws while ensuring competitive price and transparency.”

8. The Seller is responsible for all input figures for calculating power purchase agreement values and responsible for controlling and bidding for fuel supply and transport agreements while ensuring legal fuel sources, competitive price and transparency.

9. Before January 15 of each year, the Seller shall submit reports on execution of power purchase agreements of the previous year with the Buyer, difficulties that arise during execution of power purchase agreements and proposed solutions (if any) to Electricity Regulatory Authority of Vietnam.

10. Before January 15 each year, cooperating with the Buyer in calculating difference in rates in execution of power purchase agreements of the previous year according to Clause 2 Article 14 hereof, sending to EVN and reporting to Electricity Regulatory Authority of Vietnam. 

Article 26. Responsibilities of fuel suppliers and transporters

1. For gas fuel

(i) Domestic natural gas suppliers and transporters sign GSPA, GSA, gas transport agreements (GTA) as per relevant laws, in which:

- Price of domestically extracted natural gas is price of gas extracted from gas mines.

- For natural gas domestically extracted via pipelines for collecting, transporting and distributing that are exclusive in nature, fees for collecting, transporting and distributing emission must be approved by competent authority.

(ii) Fuel suppliers and transporters for fuel imported by pipes and for LNG shall provide gas according to relevant law provisions, in which:

- In case clauses of gas storage and distribution are exclusive in nature, fees for storage, regasification and distribution must be approved by competent authority.

- In case of delivery at ports for export: Price of import gas shall be price of gas at delivery points at ports for export.

- In case of delivery at gas distribution stations or LNG warehouses in Vietnam, gas price includes costs for purchasing import gas, LNG and legitimate costs related to import activities (if any) namely import tariffs, financial expenses, insurance, norm interest and other costs related to import activities of fuel suppliers.

2. For coal fuel

(i) In case of delivery at warehouses and ports of the Seller, selected coal suppliers are responsible for:

- Organize selecting coal transporters as per bidding laws and relevant law provisions on the basis of equality, competitiveness, transparency and legal responsibility.

- In case coal suppliers are unable to select coal transporters via bidding due to special causes, coal suppliers are responsible for selecting coal transporters following similar principles applied to the Seller under Clause 7 Article 25 hereof.

- Signing coal transport agreements with selected coal suppliers as per the law.  Prior to signing coal transport contracts not via bidding, selected coal suppliers are responsible for providing relevant documents to the Seller. 

(ii) In case of delivery at warehouses and ports of coal suppliers:

- The Seller shall organize selection of coal transporters according to Clause 7 Article 25 hereof.

- Coal transporters selected by the Seller shall sign coal transport agreements as per the law with the Seller.  Prior to signing coal transport contracts not via bidding, selected coal suppliers are responsible for providing relevant documents to the Seller. 

Article 27. Amendments to Circular No. 57/2014/TT-BCT dated December 19, 2014 of Minister of Industry and Trade on methods and procedures for developing and promulgating price range for electricity generation

1. Amend Clause 3 Article 6 as follows:

“3. Investment unit cost refers to investment cost for 1 kW of average net capacity of standard power plants calculated on the basis of total investment valid at the time of calculating price range for electricity generation and current foreign exchange rate. Components of investment unit cost include:

a) Construction costs include costs for constructing structures, work items; deconstructing and dismantling old architectural components; leveling construction premises; constructing temporary structures; auxiliary structures serving construction; temporary housing structures for residential and construction operation;

b) Equipment costs including costs for purchasing technology equipment, training factory operation; installing, testing, calibrating; transporting, insurance, taxes and other relevant costs;

c) Compensations for land clearance and relocation costs according to decisions of competent authority; costs for fortifying construction foundation;

d) Project management costs include costs for organizing implementation of project management affairs from project development to inspection for acceptance and use;

dd) Construction consultancy costs include costs for consulting survey, design, construction supervision, inspection consultancy and other construction consultancy costs;

e) Other costs including working capital during factory operation for acceptance, loan interests, loan costs during power plant constructions and other necessary costs;

g) Backup costs include costs for additional work load and inflation factor that occurs during construction period.”

2. Amend Point a Clause 4 Article 6 as follows:

“a) Loan interest rate r_d (%) determined by weighted average of interest rates of loans in domestic and foreign currency based on following formula:

r_d = D_F x r_d,F + D_D x r_d,D

In which:

D_F: Percentage of loans in foreign currency in total loans under Annex 1 hereof (%);

D_D: Percentage of loans in domestic currency in total loans under Annex 1 hereof (%);

r_d,F: Interest rates of loans in foreign currency determined on the basis of interest rates of loans in foreign currency of power plant projects which undergo electricity price negotiation in the last 5 years from the date on which price range for electricity generation (%/year);

r_d,D: Interest rates of loans in foreign currency determined on the basis of interest rates of loans in foreign currency of power plant projects which undergo electricity price negotiation in the last 5 years from the date on which price range for electricity generation (%/year).”

3. Amend Article 8 as follows:

“Variable costs of standard power plants for year in which price range is applied (VC) refer to components for recovering fuel costs, other variable costs of standard power plants with number of hour operating at maximum capacity, determined by using following formula:

VC = HR x P_nlc x (1+f)

In which:

VC: Variable costs of standard power plants (VND/kWh);

HR: Net heat loss rate calculated at load level specified under Annex 1 hereof, unit of measurement: kcal/kWh or kJ/kWh or BTU/kWh;

f: Percentage of total costs for initiation, fuel – auxiliary material costs and other variable costs for electricity generation over primary fuel costs, specified under Annex 1 hereof (%);

P_nlc: Primary fuel costs of standard power plants, excluding transport fees; for coal-fired power plants that already include depreciation, management costs, insurance (if any); in case fuel supply agreements cannot separate fuel transport costs, primary fuel costs shall equal costs under primary fuel sale and purchase agreements; unit of measurement of P_nlc: VND/kcal or VND/kJ or VND/BTU.”

4. Revise net heat loss rate and primary fuel costs under Annex 2 as follows:

Article 28. Transition clauses

1. For power purchase agreements signed before the effective date hereof, both parties shall execute signed power purchase agreements until said agreements expire.

2. For electricity projects entering into power purchase agreements using methods under Circular No. 56/2014/TT-BCT , Circular No. 51/2015/TT-BCT dated December 29, 2015 and electricity projects executed before September 19, 2017, when settled investment capital is approved, both parties hold the rights to request recalculation of electricity price according to Article 12 hereof.

3. For power plants entering into power purchase agreements, if necessary, both parties shall negotiate and add k_HR according to Article 15 hereof.

4. For power plants entering into power purchase agreements, in case agreements on upstream consumption of gas are approved by competent authority, Ministry of Industry and Trade shall provide guidelines on gas consumption mechanisms for power plants and permit both parties to revise power purchase agreements.

5. For power plants whose construction has been commenced and power plants that have not concluded negotiation for power purchase agreement value before the effective date hereof, may negotiate after construction commencement date using methods under this Circular.  

Article 29. Entry into force

1. This Circular comes into force from February 22, 2021 and replaces following Circulars:

a) Circular No. 56/2014/TT-BCT ;

b) Circular No. 51/2015/TT-BCT dated December 29, 2015 of Minister of Industry and Trade on amendments to Circular No. 30/2014/TT-BCT dated October 2, 2014 of Minister of Industry and Trade on operation of competitive electricity generation market and Circular No. 56/2014/TT-BCT ;

2. Annuls Article 1 of Circular No. 13/2017/TT-BCT dated August 3, 2017 of Minister of Industry and Trade on amendments of Circular No. 56/2014/TT-BCT ; Circular No. 30/2014/TT-BCT on operation of competitive electricity generation market and Circular No. 57/2014/TT-BCT on methods and procedures for developing and issuing price range for electricity generation;

3. Annuls Article 134 and Annex 5 of Circular No. 45/2018/TT-BCT dated November 15, 2018 of Minister of Industry and Trade on operation of competitive electricity generation market and amendments to Circular No. 56/2014/TT-BCT ;

4. Difficulties that arise during the implementation of this Circular should be reported to the Ministry for consideration./.