Chương I: Quy định chung

CIRCULAR

ON METHODS FOR DETERMINING AND PRINCIPLES FOR APPLYING AVOIDED COST TARIFFS FOR SMALL RENEWABLE ENERGY POWER PLANTS; KEY CONTENTS OF POWER PURCHASE AGREEMENTS

Pursuant to the Law on Electricity dated November 30, 2024;

Pursuant to Decree No. 96/2022/ND-CP dated November 29, 2022 of the Government defining the functions, tasks, powers, and organizational structure of the Ministry of Industry and Trade; Decree No. 105/2024/ND-CP dated August 1, 2024 on amendments to Decree No. 96/2022/ND-CP and Decree No. 26/2018/ND-CP dated February 28, 2018 of the Government on the Charter for the Organization and Operation of Vietnam Electricity Group;

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

The Minister of Industry and Trade hereby promulgates this Circular on methods for determining and principles for applying avoided cost tariffs for small renewable energy power plants; key contents of power purchase agreements.

Chapter I

GENERAL PROVISIONS

Article 1. Scope and regulated entities

1. This Circular provides detailed guidance on Clause 5 Article 44, Point g Clause 1 Article 51, and Point e Clause 1 Article 51 of the Law on Electricity No. 61/2024/QH15 on methods for determining and principles for applying avoided cost tariffs for small renewable energy power plants, and on key contents of power purchase agreements.

2. This Circular applies to the following regulated entities:

a) Organizations and individuals purchasing or selling electricity from small renewable energy power plants;

b) The power system and electricity market operator, and other relevant agencies, organizations, and individuals.

Article 2. Interpretation of terms

For the purposes of this Circular, the following terms are defined as follows:

1. Seller means an organization or individual holding an electricity operation license or exempted from obtaining an electricity operation license in accordance with the law in the field of power generation, owning a small renewable energy power plant.

2. Buyer means Vietnam Electricity (EVN) or a power distribution entity holding an electricity operation license in the field of power distribution and retail, with the grid to which small renewable energy power plants will be connected for electricity purchase from the Seller.

3. Surplus electricity means the total electricity output generated during the rainy season exceeding the amount of electricity corresponding to a load factor of 0.85 during the rainy season.

4. Electricity at the busbar means the total electricity output generated minus the internal consumption within the scope of the power plant.

5. Power system and electricity market operator means the entity performing the functions of the National Load Dispatch Center and the Electricity Market Operator as prescribed under the Law on Electricity (currently the National Power System and Market Operation Company – NSMO).

6. Load factor means the ratio of actual electricity generation to the electricity generation possible at 100% rated capacity operation over a specific period (year, season, month, day).

7. Rainy season is defined as the period from July 1 to October 31.

8. Dry season is defined as the period from November 1 to June 30 of the following year.

9. Data year for tariff calculation for year N means the period from July 1 of year (N-2) to June 30 of year (N-1).

10. Small renewable energy power plant means a hydropower plant with an installed capacity of less than or equal to 30 MW, as defined under Decision No. 2394/QD-BCN dated September 1, 2006, of the Ministry of Industry.

Chapter II

FORMULATION, APPROVAL, AND IMPLEMENTATION OF AVOIDED COST TARIFFS

Article 3. Structure of the avoided cost tariff

1. The avoided cost tariff (excluding water resource tax, forest environmental service fees, water resource exploitation right fees, value-added tax, and other taxes, fees, and charges, if any, as prescribed by competent state authorities) shall be calculated based on the time of electricity usage during the day and the seasons of the year, as detailed in Appendix I enclosed with this Circular, comprising seven (07) components as follows:

a) Peak hours during the dry season;

b) Normal hours during the dry season;

c) Off-peak hours during the dry season;

d) Peak hours during the rainy season;

dd) Normal hours during the rainy season;

e) Off-peak hours during the rainy season;

g) Excess energy.

2. The costs corresponding to the seven (07) tariff components include:

a) Avoided generation energy cost;

b) Avoided transmission loss cost;

c) Avoided generation capacity cost (applicable only during peak hours of the dry season).

3. The time-of-use schedule applied to the avoided cost tariff shall conform to the provisions in the current retail electricity tariff or any replacement regulations.

For areas with transmission line overloads or electricity surplus as confirmed or announced by the power system and electricity market operator; for cascade hydropower plants; and for hydropower plants providing water discharge for downstream areas as requested by the provincial-level People's Committee; based on the load demand of each regional power system, taking into account self-consumption from rooftop solar power, the need to reschedule peak generation hours for small renewable energy power plants shall be considered (without rescheduling peak generation hours for individual generating units). The buyer and the seller shall negotiate the applicable peak generation hours in accordance with the principle of ensuring sufficient peak hours as prescribed.

Article 4. Avoided cost tariff

1. The avoided cost tariff shall be formulated and published annually.

2. By October 31 each year, the power system and electricity market operator shall take the lead and coordinate with Vietnam Electricity (EVN) and other relevant entities to update the database, calculate, and develop the avoided cost tariff for the following year using the methodology specified in Appendix II enclosed with this Circular, and submit it to the electricity regulatory authority under the Ministry of Industry and Trade.

3. Within five (05) working days from the date of receipt of the avoided cost tariff dossier as specified in Clause 2 of this Article, the electricity regulatory authority under the Ministry of Industry and Trade shall be responsible for verifying the contents of the submitted dossier. If necessary, the electricity regulatory authority shall issue a written request for the power system and electricity market operator to revise, supplement, or clarify the dossier. No later than fifteen (15) working days from the date of receipt of such a request, the power system and electricity market operator shall be responsible for submitting a written explanation and revised dossier as requested.

4. Within thirty (30) working days from the date of receipt of the complete avoided cost tariff dossier and the written explanation from the power system and electricity market operator, the electricity regulatory authority under the Ministry of Industry and Trade shall:

a) Appraise the input parameters and calculation results of the annual avoided cost tariff prepared by the power system and electricity market operator. If necessary, relevant organizations and individuals may be invited to participate in the appraisal;

b) Review, propose, and submit to the Minister of Industry and Trade for consideration and decision on the avoided cost tariff at a reasonable level to encourage electricity generation from renewable energy sources while ensuring that the avoided cost tariff is consistent with the country’s socio-economic conditions during each period.

5. Within two (02) working days from the date the avoided cost tariff is issued, the electricity regulatory authority under the Ministry of Industry and Trade shall be responsible for announcing the avoided cost tariff for the following year on the websites of the electricity regulatory authority and the Ministry of Industry and Trade.

6. In the event that the avoided cost tariff is not published on time, the avoided cost tariff of the previous year may be temporarily applied until the new avoided cost tariff is officially published. The difference arising from payments made under the old tariff and the new tariff shall be settled between the parties in the first payment period applying the new avoided cost tariff.

Article 5. Responsibility for grid connection

1. The Seller shall be responsible for investing in, operating, and maintaining the transmission lines and step-up substations (if any) from the Seller’s power plant to the connection point with the Buyer's power grid.

2. The connection point shall be mutually agreed upon by the Seller and the Buyer based on the principle of selecting the nearest connection point to the Buyer’s existing grid (unless otherwise agreed by both parties), ensuring the transmission capacity of the Seller’s power plant and in accordance with the approved power grid planning.

3. If the connection point differs from the metering point, the Seller shall bear the power losses along the connecting transmission line and the losses of the plant’s step-up transformer. The method for calculating the losses along the connecting transmission line shall be implemented in accordance with Appendix III enclosed with this Circular.

Article 6. Power purchase agreement

1. The principal contents of the power purchase agreement stipulated in Appendix IV enclosed with this Circular shall serve as the basis for the Seller and the Buyer to negotiate and sign the agreement. The Seller and the Buyer have the right to agree and supplement specific clauses in the power purchase agreement, provided that they comply with the laws of Vietnam.

2. The language of the agreement shall be Vietnamese. The Seller and the Buyer may agree to supplement the agreement with an English version.

3. The validity term of the avoided cost tariff applied in the power purchase agreement shall be twenty (20) years from the commercial operation date of the power plant or the commercial operation date of each generating unit in the case of a power plant with multiple generating units.

Chapter III

IMPLEMENTATION

Article 7. Responsibilities of the electricity regulatory authority under the Ministry of Industry and Trade

1. To instruct the power system and electricity market operator to develop the annual avoided cost tariff as prescribed in Appendix II enclosed with this Circular.

2. To designate power plants to provide necessary data for the development of the avoided cost tariff to the power system and electricity market operator (if necessary).

3. To appraise and submit to the Ministry of Industry and Trade for consideration and decision on the annual avoided cost tariff; to publish the annual avoided cost tariff.

4. To ensure confidentiality of cost-related information of power plants used in the calculation of the avoided cost tariff.

5. To provide guidance on the implementation of this Circular.

Article 8. Responsibilities of the Seller

1. To negotiate and sign a power purchase agreement with the Buyer based on the avoided cost tariff and the principal contents of the power purchase agreement stipulated in Appendix IV enclosed with this Circular.

2. To install a three-rate meter and associated devices in accordance with prevailing regulations for the measurement of electricity for payment purposes.

3. To sell all electricity output measured at the plant’s busbar to the Buyer under the avoided cost tariff. In case of supplying electricity to nearby areas without access to the national grid upon request from local authorities, the Seller may sell a portion of the electricity output to the local distribution unit at a mutually agreed price in accordance with applicable laws, provided that prior written agreement with the Buyer is obtained.

4. To comply with regulations on power system operation, transmission system operation, and distribution system operation issued by the Ministry of Industry and Trade.

Article 9. Responsibilities of the Buyer

1. To negotiate and sign the power purchase agreement with the Seller based on the avoided cost tariff and the principal contents of the power purchase agreement specified in Appendix IV enclosed with this Circular.

2. To purchase the entire electricity output delivered to the grid by the Seller according to the transmission capacity of the power grid, except for the electricity sold to local distribution units as prescribed in Clause 3 Article 8 of this Circular.

3. To comply with regulations on power system operation, transmission system operation, and distribution system operation issued by the Ministry of Industry and Trade.

4. To submit a report to the electricity regulatory authority under the Ministry of Industry and Trade on the outcome of the agreement with the Seller in the event of a change in the peak hour pricing period as prescribed in Clause 3 Article 3 of this Circular, within fifteen (15) days from the date of agreement with the Seller.

5. Vietnam Electricity (EVN) and its power corporations shall be responsible for developing plans to address transmission line overloads in cases specified in Clause 3 Article 3 of this Circular.

Article 10. Responsibilities of other power entities

1. The power system and electricity market operator shall be responsible for developing the annual avoided cost tariff and ensuring the confidentiality of cost-related information of power plants used for tariff calculation purposes.

2. Power plants and other power entities designated by the electricity regulatory authority under the Ministry of Industry and Trade shall be responsible for providing necessary data for the calculation of the avoided cost tariff to the power system and electricity market operator.

Article 11. Entry into force

1. This Circular shall come into force on February 1, 2025.

2. The following documents are hereby repealed: Circular No. 32/2014/TT-BCT dated October 9, 2014 of the Minister of Industry and Trade stipulating the procedures for formulating and applying the avoided cost tariff and promulgating the model power purchase agreement for small hydropower plants; Circular No. 29/2019/TT-BCT dated November 14, 2019 of the Minister of Industry and Trade on amendments to Circular No. 32/2014/TT-BCT dated October 9, 2014 of the Minister of Industry and Trade stipulating the procedures for formulating and applying the avoided cost tariff and promulgating the model power purchase agreement for small hydropower plants; and Circular No. 06/2016/TT-BCT dated June 14, 2016 of the Minister of Industry and Trade on amendments to Circular No. 32/2014/TT-BCT dated October 9, 2014 of the Minister of Industry and Trade.

3. For small hydropower plants and cascaded hydropower clusters that have been commissioned and have signed power purchase agreements under effective avoided cost tariffs prior to the effective date of this Circular, the parties shall continue to perform under the signed agreements.

4. For small renewable energy power plants, upon expiration of the avoided cost tariff-based power purchase agreement, the Seller shall negotiate a new power purchase agreement with the Buyer in accordance with Clause 2 Article 51 of the Law on Electricity.

5. A Seller owning a small renewable energy power plant within the scope and applicability of this Circular shall have the right to opt for participation in the electricity market provided that the following conditions are met:

a) Full infrastructure for participation in the electricity market is equipped as required;

b) Full compliance with electricity market regulations is committed, and a power purchase agreement consistent with market regulations is signed;

c) Once opting to participate in the electricity market, the Seller shall not revert to applying the avoided cost tariff;

d) In cases where the Seller is currently applying the avoided cost tariff and has already signed a power purchase agreement, the Seller shall enter into an agreement with the Buyer to terminate and liquidate the agreement in advance in accordance with the provisions of the signed agreement and the applicable regulations issued by competent state authorities.

6. During the process of developing and calculating the avoided cost tariff, if any issues arise, the relevant entities shall report them to the Ministry of Industry and Trade for timely amendment and supplementation./.

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