NEW REGULATIONS IN DETERMINING THE ELECTRICITY GENERATION PRICE RANGE

On November 8, 2022, the Ministry of Industry and Trade issued Circular 31/2022/TT-BCT (“Circular 31”) amending Circular 57/2014/TT-BCT and Circular No. 57/2020/TT-BCT stipulating on the method and procedure for formulating and promulgating the electricity price range and the price determination method of the electricity generation and power purchase agreements (“PPAs”). Circular 31 has the following notable points:

Change on the formula for calculating the annual average power generated

In which:

P_t: Total net capacity of standard power plants (kW);

T_max: Number of maximum operation hours (hour);

Thus, Circular 31 has added one component to determine the average power generated, namely capacity degradation rate (kCS), which is averaged for the entire economic life of the power plant on the equipment manufacturer's technical data. In case such data is indeterminable, the average data of factories having similar technology and installed capacity (%) shall be used.

Applying the new formula shall decrease the annual average power generated, thereby leading to an increase in the average fixed price of the standard power plant. The average fixed price of a standard power plant is one of the determining components and has a direct impact on the fluctuation of electricity prices.

Supplementation of a way to determine the PPA price

1. The PPA price must fall within the electricity generation price range in the base year of the power plant promulgated by the Minister of Industry and Trade.
2. In case the base year of a thermal power plant does not have a power generation price range, its PPA price shall be calculated and converted on the basis of corresponding cost components against the generation electricity price range of the most recent year of that type of power plant.
3. For projects that have started construction but have yet signed a PPA before the effective date of this Circular: The PPA price must fall within the electricity generation price range in the negotiation year of the PPA. In which, PPA price of the thermal power plant against the electricity generation price range shall be calculated and converted on the basis of the cost components corresponding used for calculating the electricity generation price range.

Circular 31 shall take effect from December 28, 2022.