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Vietnam Energy Forum

Regulations on the mechanism to adjust the average retail electricity price (from May 15, 2024)

 - Deputy Prime Minister Le Minh Khai signed and promulgated Decision No. 05/2024/QD-TTg regulating the mechanism for adjusting the average retail electricity price (replacing Decision 24/2017/QD-TTg). This decision takes effect from May 15, 2024.

According to Decision No. 05/2024/QD-TTg, dated March 26, 2024:

- The average electricity selling price is established based on electricity generation costs.

- Costs for purchasing electricity transmission, distribution and retail prices.

- Costs for dispatching the power system and managing electricity market transactions.

- Costs for supporting services of the electricity system.

- Costs for Industry operating and management.

- Other costs are allocated and only include costs that directly serve the production and supply of electricity of Electricity of Vietnam (EVN) for ensuring the ability to operate, supply electricity and meet investment demands according to approved plans. In particular, the items' costs including account price are deducted according to regulations.

Adjustment principles:

1. Every year, after checking electricity production and business costs in year N-2 of EVN, the average electricity selling price in year N is reviewed and adjusted according to objective fluctuations in input parameters of all stages (electricity generation, electricity transmission, electricity distribution – retail prices, electricity system dispatching and electricity market transaction management, power system support services and operation industry management) and the allocation of other costs not included in the electricity price.

2. During the year, the average electricity selling price is considered and adjusted based on updating the cost of generating electricity, the costs of purchasing electricity from power plants providing auxiliary services according to the basic input parameters in the stage of electricity generation and other costs are not included in the electricity prices.

3. When the average electricity selling price decreases by 1% or more compared to the current average electricity selling price, the electricity price is allowed to adjust accordingly.

4. When the average electricity selling price increases by 3% or more compared to the current average electricity selling price, the electricity price is allowed to increase.

5. The minimum average electricity price adjustment time is 3 months (from the latest electricity price adjustment).

6. The average electricity selling price is calculated according to the provisions of Article 4 of this Decision. In case the calculated average electricity selling price is outside the price range, adjustments will only be considered within the price range prescribed by the Prime Minister. EVN is allowed to increase or decrease the average electricity selling price within the price range according to the mechanism specified in Articles 5 and 6 of this Decision. In case the average electricity selling price needs to be adjusted to be 10% or higher than the current average electricity selling price, or it affects the macroeconomic situation, the Ministry of Industry and Trade shall preside over and coordinate with ministries and related agencies to check, review and report to the Prime Minister for consideration and comments. In case of necessity, the Ministry of Industry and Trade coordinates with relevant ministries and agencies to report to the Price Management Steering Committee before reporting to the Prime Minister.

7. Adjusting the average electricity price must be implemented openly and transparently.

Annual adjustment mechanism:

Based on the plan for power supply and operation of the power system in year N issued by the Ministry of Industry and Trade, the results of checking the costs of electricity production and business in year N-2 according to the provisions of Article 7 of this Decision, estimated results of electricity production and business in year N-1 (in case there are no results of checking electricity production and business costs in year N-1), before January 25, year N, EVN calculates the average electricity selling price, according to the formula specified in Clause 2, Article 4 of this Decision and implement requirements on documents specified in Clause 2 of this Article:

1. In case the calculated average electricity selling price decreases by 1% or more compared to the current average electricity selling price, EVN is responsible for reducing the average electricity selling price by a corresponding level. Within 5 working days (from the date of adjustment), EVN is responsible for preparing documents to report to the Ministry of Industry and Trade to preside and coordinate with relevant ministries and agencies for inspection and supervision.

2. In case the average electricity selling price needs to be adjusted to increase from 3% to less than 5% compared to the current average electricity selling price, EVN decides to adjust the average electricity selling price to a corresponding level. Within 5 working days (from the date of making adjustments), EVN prepares documents to report to the Ministry of Industry and Trade to preside and coordinate with relevant ministries and agencies for inspection and supervision.

3. In case the average electricity selling price needs to be adjusted to increase from 5% to less than 10% compared to the current average electricity selling price, EVN is allowed to adjust the average electricity selling price to a corresponding increase after reporting and approved by the Ministry of Industry and Trade. Within 15 working days (from the receipt of EVN's complete price plan dossier), the Ministry of Industry and Trade is responsible for responding in writing for EVN to implement. Within 5 working days (from the actual date) EVN is responsible for reporting to the Ministry of Industry and Trade.

4. In case the average electricity selling price needs to be adjusted to increase by 10% or more compared to the current average electricity selling price, or affects the macroeconomic situation, based on the electricity price plan dossier provided by EVN submitted, the Ministry of Industry and Trade presides over inspection, review and sends comments to the Ministry of Finance and relevant ministries and agencies. Based on comments from the Ministry of Finance and relevant ministries and agencies, the Ministry of Industry and Trade synthesizes and reports to the Prime Minister for consideration and comments. In case of necessity, the Ministry of Industry and Trade coordinates with relevant ministries and agencies to report to the Price Management Steering Committee before reporting to the Prime Minister.

Adjustment mechanism during the year:

Before the 25th day of the first month of the 2nd, 3rd and 4th quarters, EVN determines the actual commercial electricity output of the previous quarter and the total cumulative commercial electricity output from the beginning of the year, estimating the commercial electricity output of the year's remaining months. Determine the electricity generation cost of the immediately preceding quarter, the cumulative electricity generation cost from the beginning of the year (including the cost of purchasing electricity from plants providing auxiliary services), and estimate the electricity generation cost for the remaining months. during the year according to basic input parameters in the electricity generation stage and update other costs not included in the electricity price to recalculate the average electricity selling price according to the formula specified in Clause 2, Article 4 of this Decision. Other parameters remain unchanged and comply with document requirements as prescribed in Clause 2 of this Article:

1. In case after the updated calculation, the calculated average electricity selling price is lower 1% or lower compared to the current average electricity selling price, EVN is responsible for reducing the average electricity selling price at a corresponding level. Within 5 working days (from the date of adjustment), EVN is responsible for preparing documents to report to the Ministry of Industry and Trade to preside and coordinate with relevant ministries and agencies for inspection and supervision.

2. In case after the updated calculation, the average electricity selling price needs to be adjusted to be higher than the current average electricity selling price by 3% to less than 5%, EVN decides to adjust the average electricity selling price to increase the corresponding level.

Within 5 working days (from the date of making adjustments), EVN prepares documents to report to the Ministry of Industry and Trade to preside and coordinate with relevant ministries and agencies for inspection and supervision.

3. In case after updated calculation, the average electricity selling price needs to be adjusted from 5% to less than 10% higher than the current average electricity selling price, EVN is allowed to adjust to increasing the average electricity selling price at the corresponding level after reporting and being approved by the Ministry of Industry and Trade. Within 15 working days (from the receipt of EVN's complete price plan dossier), the Ministry of Industry and Trade is responsible for responding in writing for EVN to implement. Within 5 working days (from the date of adjustment), EVN is responsible for reporting to the Ministry of Industry and Trade.

4. In case after updated calculation, the average electricity selling price needs to be adjusted to be 10% or higher than the current average electricity selling price, or affects the macroeconomic situation, based on Electricity price plan documents submitted by EVN, the Ministry of Industry and Trade presides over inspection, review and sends for comments to the Ministry of Finance and relevant ministries and agencies. Based on comments from the Ministry of Finance and relevant ministries and agencies, the Ministry of Industry and Trade synthesizes and reports to the Prime Minister for consideration and comments. In case of necessity, the Ministry of Industry and Trade coordinates with other agencies Relevant ministries and agencies report to the Price Management Steering Committee before reporting to the Prime Minister.

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