Thông tư 32/2014/TT-BCT

CIRCULAR

PROCEDURES ON ESTABLISHMENTAND APPLICATION OF AVOIDABLE COST TARIFF SCHEDULE AND PROMULGATION OF SPECIMEN POWER PURCHASE AGREEMENT (PPA) TO SMALL HYDROPOWER PLANTS

Pursuant to the Government's Decree No. 95/2012/ND-CP dated November 12, 2012, defining the functions, tasks, powers and organizational structure of the Ministry of Industry and Trade;

Pursuant to Law on Electricity dated December 03, 2004 and the Law on amendments to a number of articles of Law on Electricity dated November 20, 2012;

Pursuant to the Government’s Decree No. 137/2013/ND-CP dated October 21, 2013 detailing the implementation of a number of articles of the Law on Electricity and the Law on amendments to a number of articles of the Law on Electricity;

At the request of general director of Electricity Regulatory Authority,

The Minister of Industry and Trade promulgates the Circular regulating procedures on establishment and application of avoidable cost tariff schedule and promulgation of specimen PPA to small hydropower plants.

Chapter I

...

...

...

Article 1. Scope and regulated entities

1. This Circular regulates procedures on establishment and application of avoidable cost tariff schedule and promulgation of specimen PPA to small hydropower plants connected to national grid.

Small power plants using renewable energy source may apply mechanism as prescribed hereof when connecting to the national grid if separate electricity price mechanism stipulated by the Prime Minister does not enter into force.

2. This Circular applies to following entities:

a) Organizations and individuals buying and purchasing electricity from small power plants as prescribed in Clause 1, this Article;

b) Electricity system and market operators and other relevant organizations, individuals;

Article 2. Interpretation of terms

In this Circular, some terms are construed as follows:

1. The Seller refers to organizations, individuals that have licenses for operation in the area of electricity generation and own a small hydropower plant.

...

...

...

3. Avoidable cost tariff schedule refers to the tariff which is based on costs that can be avoided by the national electricity system when 01 (one) kWh of generation capacity from small hydropower plants is transmitted to distribution grids

4. Avoidable cost refers to the cost for producing 01 (one) kWh of generation capacity by generating stations in the national electricity system and this cost is avoidable if the Buyer purchases 01 (one) kWh from an alternative small hydropower plant.

5. Excess electrical power means all electrical power produced during rainy season exceeds electrical power with load factor 0.85 in rainy season.

6. Electrical power on busbar means all electrical power produced minus amount of electricity self-feeding the plant.

7. Load factor refers to the ratio of amount of electrical energy actually produced to amount of electrical energy possibly produced at maximum rated capacity during a certain period of time (year, season, month, day).

8. Specimen power purchase agreement (PPA) refers to the agreement for sale and purchase of power applied by small hydroelectric plants according to avoidable cost tariff schedule as prescribed in Annex IV herein.

9. Rainy season refers to the period of time from July 01 to October 31.

10. Dry season refers to the period of time from November 01 to June 30 of the following year.

11. Year to collect figures for the calculation of cost tariff schedule (hereinafter referred to as ‘tariff schedule year’) is from July 1 of the year N-2 to June 30 of the year N-1.

...

...

...

Chapter II

ESTABLISHMENT, APPROVAL AND IMPLEMENTATION OF AVOIDABLE COST TARIFF SCHEDULE

Article 3. Structure of avoidable cost tariff schedule

1. Avoidable cost tariff schedule (not including water resource taxes, forest environment service fee and value added taxes) is based on use time of day and seasons of year as detailed in Table 1, Annex I enclosed herewith including seven components as follows:

a) Peak hours of dry seasons;

b) Normal hours of dry seasons;

c) Low hours of dry seasons;

d) Peak hours of rainy seasons;

dd) Normal hours of rainy seasons;

...

...

...

g) Excess electrical energy;

2. Costs in proportion to seven components comprise:

a) Avoidable cost of distributed generation;

b) Avoidable cost of transmission losses;

c) Avoidable generation capacity cost (only applied during peak time of dry season)

3. Use time of day applied to avoidable cost tariff schedule accords with provisions prescribed in current retail price tariff schedule.

With respect to areas connected to electrical grids from abroad, areas of transmission line overload, hydropower plants on the same stairstep, the Buyer and Seller should negotiate the time for applying peak hour price on the principle that the number of peak hours must be ensured as prescribed.

Article 4. Procedures on establishment, approval and implementation of avoidable cost tariff schedule

1. Avoidable cost tariff schedule is established and announced annually.

...

...

...

3. Before December 31 annually, Electricity Regulatory Authority shall:

a) Assess input factors, calculations of avoidable cost tariff schedule established by electricity system and market operator; In case of need, may invite relevant organizations, individuals to take part in assessment;

b) Study, propose and submit avoidable cost tariff schedule to the Minister of Industry and Trade for consideration and decision in order to encourage production of electricity from renewable energy, and at the same ensure the avoidable cost tariff schedule accord with socio-economic conditions of the country in each period;

c) Announce avoidable cost tariff schedule;

4. Within two days since the avoidable cost tariff schedule is issued, Electricity Regulatory Authority shall be responsible for announcing the avoidable cost tariff schedule for the following year on the portal of Electricity Regulatory Authority and the Ministry of Industry and Trade;

5. Temporarily apply the avoidable cost tariff schedule of preceding year if the avoidable cost tariff schedule of the following year is not issued. Temporarily apply the avoidable cost tariff schedule of preceding year if the avoidable cost tariff schedule of the following year is yet to be issued.

Article 5. Risk-sharing mechanism

1. The Seller upon signing a PPA with the Buyer using specimen PPA is entitled to choose to apply the tariff schedule according to risk-sharing mechanism as stated in specimen PPA.

2. Floor price of each tariff schedule component is calculated as 90% of price of such component in the avoidable cost tariff schedule applied to the year when the PPA is signed.

...

...

...

4. Maximum duration for enforcement of the tariff schedule with risk-sharing mechanism is 12 years since the year when the PPA is signed. The Seller may choose shorter duration.

5. Upon application of risk-sharing mechanism, PPA should detail avoidable cost tariff schedule of the year when the PPA is signed, risk-sharing application duration, floor and ceiling price in proportion to each component of avoidable cost tariff schedule according to risk-sharing mechanism as prescribed in Table 2, Annex I enclosed herewith.

Article 6. Responsibility for connection

1. The Seller shall be responsible for investing, operating and caring lines and step-up transformers (if any) from its power plants to connection point of the Buyer’s electrical grid.

2. Connection point should be located in the immediate proximity to the Buyer’s electrical grid in accordance with the approved electrical grid planning as agreed by the Seller and Buyer.

3. If the connection point and measurement instruments are located in two different places, the Seller shall incur power loss on transmission lines and step-up transformers. Method of calculating losses in transmission lines is instructed in Annex III enclosed herewith.

Article 7. Conditions for application of avoidable cost tariff schedule to the Seller

The Seller shall be eligible for applying avoidable cost tariff schedule when meeting one of following conditions:

1. Installed capacity of plants is smaller or equal to 30 MW and all electrical energy is produced from renewable energy.

...

...

...

Article 8. Application of specimen PPA

1.  The use of specimen PPA is compulsory in power purchase applying avoidable cost tariff schedule between qualified power plants and the Buyer.

2. The PPA signed before the effective date of this Circular shall remain valid according to the duration specified in the contract. The Seller and Buyer may negotiate on a shift toward using avoidable cost tariff schedule and specimen PPA in lieu of signed PPA.

Article 9. Conditions for participation in electricity market

1. The Seller that owns small hydropower plants within scope and regulated entities under this Circular and connected to an electrical grid from 110 KV and over is entitled to decide to participate in electricity market.

2. Conditions for participation in electricity market:

a) Be connected to electrical grid from 110 KV and over;

b) Well equipped with infrastructure for participating in electricity market as prescribed;

c) Be committed to complying fully with regulations of electricity market, signing PPA according to the model promulgated to the plants participating in electricity market by The Ministry of Industry and Trade;

...

...

...

Chapter III

IMPLEMENTARY PROVISIONS

Article 10. Responsibility of Electricity Regulatory Authority

1. Direct electricity system and market operator shall establish avoidable cost tariff schedule on an annual basis as prescribed in Annex II enclosed herewith to ensure the announcement of the tariff schedule is made at specified time.

2. Request thermopower plants to provide necessary figures to system and market operator for the establishment of avoidable cost tariff schedule;

3. Choose alternative thermopower plants based on National electricity development planning in each period on the basis of allowable expenses for investment, maintenance and operation; request the system and market operator to calculate avoidable capacity add-on as prescribed in Clause 3, Annex II enclosed herewith.

4. Assess and make submission to the Ministry of Industry and Trade for consideration and decision on avoidable cost tariff schedule on an annual basis; make annual announcement of avoidable cost tariff schedule;

5. Keep confidential for information about costs of power plants used for calculation of avoidable cost tariff schedule;

6. Coordinate with Industrial Safety Techniques And Environment Agency, Directorate of Energy and relevant units in inspecting and monitoring generating units in implementing applicable regulations on dam construction quality control, forestation, reservoir operation processes, forest environment services and other environmental requirements;

...

...

...

Article 11. Responsibility of the Seller

1. Negotiate and sign a contract with the Buyer according to PPA and avoidable cost tariff schedule;

2. Install three-phase electricity meter in accordance with applicable regulations to measure electrical energy used for payment of electricity bills;

3. Sell all amount of electrical energy on the plant's busbar to the Buyer when avoidable cost tariff schedule is applied. If requested by local authorities to provide electricity to villages, communes without electricity in the vicinity of the plant, the Seller may sell part of the output to local electricity distribution units with negotiable price in accordance with laws but must be negotiated in advance with the Buyer.

4. Deliver one copy of signed PPA to Electricity Regulatory Authority within 30 at the latest since the signing day.

5. Comply with regulations on operation of electricity system, electricity transmission system, electricity distribution system promulgated by the Ministry of Industry and Trade;

6. At the end of the quarter periodically, the Seller shall be responsible for making reports to Electricity Regulatory Authority on payment of environmental service fee for preceding quarter;

7. On a annual, quarterly basis, make reports to Electricity Regulatory Authority on the exercise of applicable regulations on dam construction quality control, dam safety, forestation, reservoir operation processes, forest environment services and other environmental requirements;

Article 12. Responsibility of the Buyer

...

...

...

2. Purchase all electrical energy transmitted on the electrical grid by the Seller except electrical energy sold to local electricity distribution units as prescribed in Clause 3, Article 11 hereof;

3. Comply with regulations on operation of electricity system, electricity transmission system, electricity distribution system promulgated by the Ministry of Industry and Trade;

4. Make report to Electricity Regulatory Authority on result of negotiation with the Seller in case the time for applying peak hour price is changed as prescribed in Clause 3, Article 3 hereof within 15 days since the date of negotiation with the Seller;

5. Vietnam Electricity and Power Corporations shall be responsible for constructing measures to handle cases of transmission overload as prescribed in Clause 3, Article 3 hereof.

Article 13. Responsibility of other electricity supplying units

1. The system and market operator shall be responsible for establishing avoidable cost tariff schedule annually, and keeping confidential for information relating to costs of power plants used for calculation of avoidable cost tariff schedule;

2. Thermopower plants appointed by Electricity Regulatory Authority shall be responsible for providing necessary figures to the system and market operator for calculation of avoidable cost tariff schedule.

Article 14. Effect

1. This Circular takes effect since November 25, 2014, replacing the Ministry of Industry and Trade’s Decision No. 18/2008/QD-BCT dated July 18, 2008 regulating avoidable cost tariff schedule and specimen PPA applying to small hydropower plants.

...

...

...

3. Difficulties that arise during the implementation of this Circular should be reported to the Ministry of Industry and Trade for amendments and supplements as appropriate. /.

PP. THE MINISTER
DEPUTY MINISTER




Cao Quoc Hung

ANNEX I

AVOIDABLE COST TARIFF SCHEDULE
(Enclosed with the Minister of Industry and Trade’s Circular No. 32/2014/TT-BCT)

Table 1. Avoidable cost tariff schedule

Price components

...

...

...

Rainy season

Peak hours

Normal hours

Low hours

Peak hours

Normal hours

Low hours

Excess electrical energy

I. Avoidable electrical energy costs

...

...

...

Avoidable cost for generation of electrical power

X

X

...

...

...

X

X

X

X

Avoidable cost of transmission losses

X

X

X

X

...

...

...

X

X

II. Avoidable capacity add-on

...

...

...

Avoidable generation capacity cost

X

0

0

0

0

0

0

Total

...

...

...

X

X

X

X

X

X

Notes:

- X = applied with value other than 0; 0 = not applied.

- Avoidable cost tariff schedule is not inclusive of water resource taxes, forest environment service fee and value-added taxes. The Buyer shall be responsible for paying to the Seller for all taxes and forest environment service fee as mentioned above;

...

...

...

Table 2. Ceiling and Floor price tariff schedule in application of risk-sharing mechanism

Dry season

Rainy season

Peak hours

Normal hours

Low hours

Peak hours

...

...

...

Low hours

Excess electrical energy

Tariff schedule in the year when the contract is signed (N)

X₁

X₂

X₃

X₄

X₅

X₆

...

...

...

Ceiling price (applied until month of year N+k)

1.1x₁

1.1x₂

1.1x₃

1.1x₄

1.1x₅

1.1x₆

1.1x₇

Floor price (applied until month of year N+k)

...

...

...

0.9x₂

0.9x₃

0.9x₄

0.9x₅

0.9x₆

0.9x₇

- Where, k is the duration of risk-sharing mechanism since the year when the PPA is signed (no more than 12 years)

ANNEX II

...

...

...

1. Avoidable electrical energy costs

Steps of calculating avoidable electrical energy costs:

a) Calculate average fuel cost per month (VND/kWh) of individual thermopower plants in tariff schedule year, except for BOT, IPP thermopower plants that have been committed to an off-take agreement, and oil-fired power plants. Total monthly fuel cost of thermopower plants and busbar electrical energy is supplied by relevant thermopower plants.

For power plants with fuel costs subject to fluctuation of global fuel price, the fuel costs used to calculate variable costs shall be subject to ceiling level as 110% of average fuel cost in the year before tariff schedule year of such plant.

b) With each hour of tariff schedule year, rank in ascending order the variable costs of base-load and intermediate-load thermopower plants (except BOT, IPP plants committed to off-take agreement) to determine marginal costs of the plant; Variable costs are determined based on average fuel cost per month of thermopower plants.

c) Total generation capacity of the system in tariff schedule year is symbolized as (P).

d) Reference capacity P* is calculated as F_a x P with F_a as the adjustment factor for marginal energy portion of load chart proposed by the system and market operator and selected between F_o; 0,4;

Where:

...

...

...

X: Total electrical production of combined cycle gas turbine power plants (except BOT power plants) in tariff schedule year;

P_i : Average gas price (USD/mmBTU) of combined cycle gas turbine power plants with gas price subject to global fuel price in tariff schedule year;

dd) With each hour of tariff schedule year, cMj electrical energy price is calculated based on expenses of plants of high cost price and calculated according to reference capacity P* (excluding plants prescribed in Point d this Clause)

e) Electrical energy price is adjusted according to growth rate of fuel cost in tariff schedule year; Annual fuel cost growth rate is determined in order of priority as follows:

- According to contracts for supply of fuel to peak-load plants in the system;

- According to market price with clear and reliable reference sources permitted to apply by Electricity Regulatory Authority;

- Proposed by the system and market operator and permitted to apply by Electricity Regulatory Authority;

g) With every period of time in proportion to six time components of the avoidable cost tariff schedule, annual average price is calculated as average of cMj in each period of time.

h) Excess electrical energy is calculated as 50% of the price in low hours in rainy season.

...

...

...

Calculation of avoidable cost of transmission losses as follows:

a) With every hour of year, conditions for operation of the system are determined on the basis of capacity of 500kV line running through boundaries distinguishing loads in three regions (North-Central region and South-Central region).

b) For the reason that on the 500 kV line always exists a certain transmission capacity stream, "balance' does not mean 'zero' but a capacity stream (regardless of direction) on a threshold value. This thresh is based on conditions for adjustment to voltage and stabilization of electricity system.

c) Any plant qualified to be connected to the Northern grid that receive electricity from the Central grid via the 500 KV line shall receive payment for transmission losses.

d) Any plant qualified to be connected to the Central grid that receive electricity from the Southern grid via the 500 KV line shall receive payment for transmission losses.

dd) The plant shall be penalized for transmission losses in remaining cases.   With every hour of year, avoidable cost of transmission losses (T) is calculated as follows:

If the power plant is connected to the Northern grid:

T_B = C_M (1 + λ_B)(1 ± λ₅₀₀) - C_M

If the power plant is connected to the Central grid:

...

...

...

If the power plant is connected to the Southern grid:

T_N = C_M (1 + λ_N) - C_M

Where:

C_M

=

Average fuel cost per month of peak-load gas-powered thermoelectric generating station in the system (VND/kWh)

λ_B, λ_T, λ_N

...

...

...

Respective loss ratio on Northern, Central and Southern transmission system and 220Kv voltage class including transformer losses

Λ₅₀₀

=

Average loss ratio on 500kV line including transformer losses

T_B, T_T, T_N

=

Respective avoidable cost of transmission losses on Northern, Central and Southern grids (VND/kWh)

...

...

...

3. Avoidable capacity add-on of avoidable cost tariff schedule

Avoidable capacity add-on is determined as capacity add-on of thermopower plants being replaced with renewable energy – run small electrical sources. Alternative thermopower plants shall be selected by Electricity Regulatory Authority based on national electricity development planning in each period on the basis of allowable expenses for investment, maintenance and operation. Indicators for calculating avoidable capacity cost:

Investment costs of base year that is based on allowable investment costs of selected thermopower plants;

- Slippage factor for investment cost is based on Manufactures Unit Value Index (MUV) announced by the World Bank on www.worldbank.org;

- Economic life of thermopower plants is based on regulations on methods of determining electricity generating cost issued by the Ministry of Industry and Trade;

- Discount rate I (WACC) is 10%/year;

- Fixed expenses for maintenance and operation in the base year are based on fixed expenses for maintenance and operation of selected plants or equivalent;

- Slippage factor of annual fixed operation and maintenance cost is 2.5%/year;

- Annual fixed operation and maintenance costs do not include water resource taxes, environmental protection fees and other relevant taxes according to applicable regulations;

...

...

...

- US$ exchange rate in tariff schedule year is based on average per day and selling US$ exchange rate at closing time in headquarter of Joint Stock Commercial Bank for Foreign Trade of Vietnam.

Avoidable capacity cost is based on transmission losses in following formula:

AGC* = AGC (1+λ₂₂₀) (1-λ₅₀₀)

Where:

AGC*

:

Avoidable generation capacity cost adjustable according to transmission losses

Λ₂₂₀

:

...

...

...

_Λ500

:

Average loss ratio on 500kV line including transformer losses at peak hours in dry season;

AGC

:

Avoidable capacity cost

Value AGC* is calculated and applied in case of peak hours in dry season (h_d).

Avoidable generation capacity price (VND/kWh) is determined in following formula:

Avoidable generation capacity cost (VND/kWh) = AGC*/h_d

...

...

...

ANNEX III

METHOD OF CALCULATION OF LOSSES ON TRANSMISSION LINES IN CASE CONNECTION POINT AND MEASUREMENT POINT ARE LOCATED APART
(Enclosed with the Minister of Industry and Trade’s Circular No. 32/2014/TT-BCT)

1. In case connection point and measurement point are located apart, amount of electrical energy received by the Buyer at the connection point (in kWh) during the billing period shall be adjusted according to average loss factor, calculated in following formula.

2. Following factors are used in calculation:

P: Installed capacity of the plant (MW);

Cos φ: Capacity factor of the plant;

A: Average electrical production per year of the plant kWh/year;

U: Rated voltage at busbar (kV);

R: Total resistance of transmission line (Ω), determined from technical documents of manufacturer for cables used as transmission lines at 25^oC;

...

...

...

T: Loss factor of step-up transformer (if the electrical meter is placed on primary side of step-up transformer); this factor shall have value 'zero’ if the electrical meter is placed on secondary side of step-up transformer;

X refers to electrical energy according to indicators of the electrical meter installed at the plant during the invoice period (kWh).

XL refers to amount of electrical energy received at the connection point during the invoice period after subtracting losses in transmission lines and step-up transformers (kWh).

3. Formula for calculating average loss factor of transmission line as follows:

Where:

4. Amount of electrical energy for which the Buyer shall pay to the Seller (XL) is calculated in following formula:

...

...

...

ANNEX IV

SPECIMEN PPA APPLYING TO AVOIDABLE COST TARIFF SCHEDULE
(Enclosed with the Minister of Industry and Trade’s Circular No. 32/2014/TT-BCT)

TABLE OF CONTENTS

Article 1. Definition

Article 2. Delivery, receipt and purchase of electricity

Article 3. Connection, measurement and operation

Article 4. Invoices and payment

Article 5. Force Majeure

...

...

...

Article 7. Dispute settlement

Article 8. Entrusting, transfer and re-structuring

Article 9. Participation in electricity market

Article 10. Other negotiations

Article 11. Commitments

Annex A: Power purchase forms

Annex B: Technical specifications of power plants

Annex C: Requirements for connection to system

Annex D: Requirements prior to commercial operation

...

...

...

THE SOCIALIST REPUBLIC OF VIETNAM
Independence – Freedom – Happiness
------------

POWER PURCHASE AGREEMENT (PPA)

Pursuant to Law on Electricity dated December 03, 2004 and the Law on amendments to the Law on Electricity dated November 20, 2012;

Pursuant to the Law on Commerce dated June 14, 2005;

Pursuant to the Minister of Industry and Trade’s Circular No. …..…/2014/TT-BCT dated….regulating procedures on establishment and application of avoidable cost tariff schedule and promulgation of Power purchase agreement to small hydropower plants;

Pursuant to demands for power purchase of the two sides,

Today, on….., at…..

...

...

...

The Seller:………………..

Address:….

Phone number:……………………Fax:……………..

Tax code:….

Account:…………………Bank……………………….

Representative:…..

Job title:………………….(authorized by…..under the letter of authorization dated…….)

The Buyer:………………..

Address:….

...

...

...

Tax code:….

Account:…………………Bank……………………….

Representative:…..

Job title:………………….(authorized by…..under the letter of authorization dated…….)

Negotiate and sign the Power purchase agreement for purchase of electricity according avoidable cost tariff schedule as follows:

Article 1. Definition

In this Contract, some terms are construed as follows:

1. The Lender: Organizations, individuals that provide loans to the Seller or the Buyer for the implementation of this Contract. The list of lenders shall be informed to each other by the two parties according to Article 10 under this Contract.

2. Party or Parties: the Seller, the Buyer or the two Parties or any unit that assumes rights and obligations from one party or Parties under this contract.

...

...

...

4. Connection point: Position where the Seller’s line is connected to the Buyer’s electrical grid as agreed in Annex C of the contract.

5. Electricity delivery point: Position where the Seller’s sold output is measured.

6. Excess electrical energy means all amount of electricity energy produced during rainy season exceeds determined amount of electricity energy with a given load factor in rainy season.

7. Sold electrical energy: Amount of electrical energy generated at maximum capacity of a power plant minus amount of electrical energy required for self-feeding the power plant and losses, agreed to sell to the Buyer by the Seller on an annual basis according to Annex B of the contract (kWh).

8. Normal hours: Use time of day as prescribed in current written instructions on application of electricity retail price tariff schedule.

9. Peak hours: Use time of day as prescribed in current written instructions on application of electricity retail price tariff schedule.

10. Low hours: Use time of day as prescribed in current written instructions on application of electricity retail price tariff schedule.

11. Contract: includes this document and attached annexes.

12. Base interest rate: Vietnam interbank offered rates (VNIBOR) for a one-month term at the time of payment

...

...

...

14. Rainy season: a period of time in a year as prescribed in avoidable cost tariff schedule.

15. Contract year: Twelve months of calendar year starting from the first day of November and closing at the last day of December of the same year except in case of first contract year that starts from the day of commercial operation and closes at the last day of December of the same year. Last contract year closes at the last day of the contract duration.

16. Payment due date: Fifteen working days since the Buyer receives valid electricity bill from the Seller.

17. Commercial operation date: The day when the Seller informs the Buyer of delivery of electrical energy in accordance with the contract or the day when the Seller starts to deliver electrical energy to the Buyer in accordance with this contract and the Buyer should make payment for such amount of electricity.

18. Power plant: includes all electricity generating facilities, protective equipment, connecting equipment and relevant  utilities; land used for electrical works, utility works serving production of electricity owned by the Seller under this contract.

19. Electricity system regulatory unit: Electricity supplying units including the system and market operator, regional electricity system regulatory units, distributed electricity system regulatory units that are assigned to command, control electricity generating, transmitting and distributing units in the implementation of national electricity system operation process according to technical procedures, regulations and operational method.

20. Electricity system operation process: Circulars, processes on electricity system operation standards, conditions and procedures on connection to electrical grids, regulation and operation of electricity system, measurement of electrical energy in the electricity transmission and distribution system.

21. Norms and standards in electricity sector: Regulations, standards and practices applied in electricity sector promulgated by Vietnam’s competent agencies/organizations or regulations, standards promulgated by international agencies, organizations, regional countries in accordance with laws of Vietnam, recommendations from equipment manufacturers with due account taken of conditions for materials, resources, fuel and techniques acceptable to electricity sector in Vietnam at a certain point of time.

22. Emergency case: refers to conditions or situations likely to disrupt the supply of electricity to the Buyer’s client including cases likely to cause major damage to the Buyer’s electrical system, threaten human life, properties or affect technical capability of the plant.  

...

...

...

1. Delivery of electricity

Since the commercial operation date, the Seller shall agree to sell and deliver electricity to the Buyer and the Buyer shall agree to purchase electricity from the Seller under this Contract.

2. Electricity price

Electricity price under this Contract is instructed in avoidable cost tariff schedule annually announced by Electricity Regulatory Authority and is instructed in the Ministry of Industry and Trade’s Circular No.  .../2014/TT-BCT.

3. Electricity purchase

The Seller agrees to operate the power plant with available capacity of the facilities in accordance with norms, standards of electricity sector, regulations on operation of electricity system and other relevant provisions. The Seller shall not take any responsibility for damage directly caused to the Buyer due to insufficient supply of electricity if the fault lies not with the Seller. If the Seller cuts electrical energy to sell to a third party or for the purpose of producing other forms of energy instead of electrical energy in power plants without written consent of the Buyer, it shall not be exempted from legal liability.

4. Operation plan

a) Before or on the date of implementation of this Contract, the Seller shall provide to the Buyer the chart of average generation capacity per year on the busbar on a monthly basis in accordance with conceptual design of power plants. For power plants, the Seller shall provide charts of generation capacity over years in the hydrographic data value chain in conceptual design of the power plant.

b) Before December 01 of the contract year, the Seller shall provide to the Buyer annual forecasts about operation, including:

...

...

...

- Downtime schedule

c) In case actual capacity and electrical energy as well as the time of delivery deviate from the forecasts (within 5%), the Seller shall not legally liable to the Buyer and not incur any payment or penalty. In case annual forecasts provided to the Buyer deviate by more than 5% from the chart of monthly generation capacity as prescribed in Point a, this Clause, the Seller should provide a written explanation of such deviation to the Buyer including hydrographic data or other relevant figures as foundations for above deviation.

d) The Seller should provide daily electricity forecasts to the Electrical system regulatory unit as requested.

5. Downtime

a) The Seller should inform the Buyer of planned unavailability of the plant for repairs three months in advance. The Buyer should discuss downtime schedule with the Seller before the plant is not working.

b) The Seller should make early notice to the Buyer about unexpected unavailability of the plant  including downtime and comply with regulations on operation of electricity system.

6. Operation of electrical grid

The Buyer and Seller shall carry out operation and maintenance of electrical grid and equipment connecting to power plants within scope of assets management in accordance with regulations on distribution grids, transmission grids, norms and standards of electricity sector, regulations on operation of electricity system to ensure purchase of electricity under the Contract. The Buyer should discuss and agree with the Seller on balance of loads and stabilization of voltage to distribution grids to ensure maximum loading capacity of distribution grids and transmission grids.

With respect to areas connected to electrical grids from abroad, areas of transmission line overload, the Buyer and Seller shall discuss the time of applying peak hour prices on principle of ensuring adequate peak hours as prescribed.

...

...

...

The Buyer shall not be liable for buying and receiving electricity in following cases:

a) The power plant fails to comply fully with regulations on distribution grids, transmission grids, norms and standards of electricity sector, regulations on operation of electricity system when carrying out operation and maintenance.

b) The Buyer is in the process of installing, repairing equipment, replacing, assessing or inspecting distribution grids, transmission grids directly related to connection to the power plant.

c) The Buyer’s distribution grids and transmission grids or system connecting direct to them have a problem.

d) The Buyer’s distribution grids, transmission grids need supports to restore operation capacity in accordance with regulations on distribution grids, transmission grids, regulations on operation of electricity system, norms and standards of electricity sector.

8. Interruption to delivery of electricity

The Seller may suspend or cut amount of electricity sold and delivered to the Buyer in case installation or repairs to equipment, replacement, assessment, inspection or implementation of repairs to power plants facilities directly affect delivery of electricity to the Buyer.

The Seller should make prior notice to the Buyer about suspension or cut of amount of electricity delivered at least 10 days.

9. Coordination

...

...

...

10. Capacity factor

The Seller agrees to operate the power plant in consistence with the Buyer’s electrical grids to deliver electricity at the delivery point (where electricity is delivered) with voltage level and capacity factor from 0.85 (corresponding to reactive power generation mode) to 0.9 (corresponding to reactive power receiving mode) as prescribed in Annex C. Unless otherwise as required by the Buyer, the Seller’s power plant should be operated with capacity factor determined according to regulations on distribution grids at the delivery point to the Buyer.

11. Consistent operation

The Seller shall be responsible for making a written notice to the Buyer at least 30 days before the first synchronization of generating stations of the Seller’s power plants with the Buyer’s grids. The Seller should coordinate operation with the Buyer at the first synchronization and subsequent ones.

12. Standards

The Buyer and Seller should comply with regulations relating to delivery and receipt of electricity, regulations on measurement of electricity and relevant legislative documents.

13. Changes of commercial operation date

Within from six to 12 months before the date of commercial operation as stated in Annex B, the Seller should officially re-confirm change to commercial operation date.

Article 3. Connection, measurement and operation

...

...

...

The Seller shall be responsible for investing and installing facilities to transmit and deliver electricity to the Buyer at the delivery point in accordance with regulations on distribution grids and other relevant provisions. The Buyer shall be responsible for cooperating with the Seller in implementing the installation.

2. Connection

a) The Seller shall be responsible for carrying out investment, construction, operation and maintenance of connection facilities to connect the power plant to SCADA system in accordance with regulations on distribution grids and other relevant provisions. The Seller shall incur expenses for upgrading measurement system at electrical substation to measure effective and reactive power in two directions on distribution lines connected to power plants as prescribed in Annex C under this Contract.

b) The Buyer is entitled to consider design and examine sufficiency of protective equipment. The Buyer should make a written notice to the Seller about the result of assessment within 30 days since receipt of all technical documentation relating to design. The Buyer should make a written notice about all detected design errors. The Seller shall implement amendments and supplements proposed by the Buyer in accordance with regulations on distribution grids, transmission grids according to voltage class connected to the plant.

c) The Buyer shall be responsible for allowing the Seller’s power plant to be connected to the Buyer’s grids after the Seller has completed all amendments and supplements proposed by the Buyer and cooperating with the Seller in completing trial operation and acceptance testing of the power plant.

3. Connection standards

Facilities of the Seller and Buyer should be installed, operated and connected according to regulations on distribution grids.

4. Inspection of implementation of connection standards

Upon receipt of notices as prescribed, one party shall be entitled to inspect connection facilities of the other party to ensure compliance with regulations on distribution grids This inspection should not affect operation of the inspected party. If facilities of the inspected party fail to meet requirements for operation and maintenance, the inspecting party should make notifications to the inspected party about adjustments to be made. The inspected party shall be responsible for taking necessary remedial measures at the request of the inspecting party.

...

...

...

The Seller should install capacity factor correction capacitors for each exciter generator (if any). Such capacitors should be closed and opened simultaneously with each exciter generator. Capacitor value in KVAr should ensure highest standard value yet not beyond requirements for no KVAr loads of generators.  The Seller shall pay to the Buyer expenses for electricity consumed to operate exciter generator according to retail price of corresponding voltage class in case such amount of electricity is taken from the Buyer’s grids. This payment is instructed in Article 4 under this Contract.

6. Measurement

a) The Seller shall:

- Carry out installation and maintenance of main and backup measurement instruments used to measure electricity and issue invoices;

- Provide locations for installation of measurement instruments if the connection point is located at the power plant.

b) Measurement instruments should:

- Accord with regulations on measurements and other relevant regulations;

- Be able to store and record effective and reactive power in two directions;

- Be able to transmit data to locations at the request of the Buyer;

...

...

...

7. Meter indicator reading

Both the Buyer and Seller shall record meter indicators on a monthly basis (or on a regular basis agreed by the two parties)

After a notification is made as prescribed, the Buyer may enter the power plant or location of the measurement instruments to read indicators, inspect the meter and perform other activities relating to the execution of the obligations under this Contract. Entrance of the Buyer into the power plant should ensure not to affect normal activities of the Seller. Personnel or inspectors appointed by the Buyer should comply with regulations on safety and rules of the power plant upon entering the power plant.

8. Accuracy of measurement instruments

All measurement instruments of the power plant should be regularly inspected in accordance with regulations on inspection cycle of measurement instruments. Inspection fee shall be incurred by the Seller. In case of need, one party may propose inspection of accuracy of any measurement instrument. Inspection fee shall be incurred by the proposing party. Result of inspection shall be informed to the other party on request. In case tolerance of measurement instruments is found greater than permissible limit, the Seller shall be responsible for making corrections or replacing and refunding outstanding amount from the proceeds to the Buyer plus basic interests of such outstanding amount and expenses for inspection of the measurement equipment.

Each party shall be notified in advance and entitled to delegate somebody to participate in removing seals, inspecting and affixing the meter with lead seal. In case one party confirms that the meter is damaged or fails to work, such party should make immediate notification to the other party.

9. b) Inspection of measurement equipment

Inspection of measurement equipment or confirmation of accuracy of measurement equipment shall be carried out according to regulations on measurement by competent bodies or as appointed. The inspection shall be carried out before the equipment is put into use for the first time. All measurement equipment shall be affixed with lead seal and locked after inspection and the Buyer is entitled to witness this process.

10. Transfer ownership of electricity

...

...

...

11. Operation

The Seller should comply fully with regulations on distribution grids, transmission grids, norms and standards of electricity sector, regulations on operation of electricity system and other relevant provisions when carrying out operation of the power plant.

Article 4. Invoices and payment

1. Invoices

On a monthly basis (or on a regular basis agreed by the two parties), both the Buyer and Seller shall record meter indicators on the day as agreed to determine amount of electricity delivered and received in a month. The Seller shall record meter indicators according to forms with confirmations by the Buyer and deliver the result accompanied by invoices (including distribution price that the Seller has to pay to the Buyer) in writing (or by facsimile succeeded by an official dispatch, or a copy of the official dispatch delivered by post) to the Buyer within 10 working days since the recording of meter indicators.

2. Payment

The Buyer shall make payment to the Seller for all the amount of electricity received no later than payment due date as prescribed in Clause 16, Article 1 and according to the tariff schedule as prescribed in Annex A under this Contract. Any amount of money as agreed by the parties that is not paid within the term as stated above shall incur monthly basic interests for all the late payments, effective after payment due date (except in cases of disputes over payment invoices).

In case the Buyer does not read meter indicators along with the Seller as prescribed in Clause 1, this Article, the Buyer shall be also responsible for fulfilling payment obligations for the amount of electrical energy delivered and received as prescribed.

The Seller shall make payment to the Buyer for distribution price under the Contract (if any).

...

...

...

If the data required for determination of amount of electricity or payments owed by the Buyer is inadequate except for cases as prescribed in Clause 4, this Article, the Seller should estimate such data and make adjustments to the next actual payments.

4. Order of application and replacement of meter indicator

To determine amount of electricity received and accepted by the Buyer in a payment term, recording of electrical output, making invoices and payments shall be based on estimated figures in following order:

a) Indicators of main electrical meters in power plants in the payment term with voltage class in accordance with provisions set out in Clause 8, Article 3 under this Contract.

b) Indicators of backup electrical meters in power plants with voltage class in accordance with provisions set out in Clause 8, Article 3 under this Contract.

c) When all the meters fail to record the amount of electricity delivered and received, the amount of electricity should be estimated based on average amount of electricity per month (if any) in the same payment term of the year before the contract year and adjustments should be made appropriately to specific invoicing stages according to corresponding available figures that affect the plant’s generation capacity such rain fall, flow of incoming water, actually consumed amount of fuel, average heat loss rate, number of operation hours, up-time of generating stations (hereinafter referred to as ‘operational parameters’) during the failure of the meters.

When reliable figures are not available, the amount of electricity should be estimated based on average amount of electricity per month in six payment terms before the failure of the meter (or less if the plant’s operation period is less than six months) and adjusted according to the downtime or operational parameters.

5. Invoice disputes

In case one party does not agree on whole or part of the invoice for electrical production or amount of money to be paid, such party may make a written notice to the other party within one year since receipt of the valid invoice.

...

...

...

If the Buyer is found not at fault, the Seller shall be responsible for refunding all arbitration fees plus monthly basic interests from the receipt of the payments to the date of payment of arbitration fees unless the Buyer is yet to make any payment to the Seller.

All the payments as prescribed in this Clause shall be fulfilled within 15 days since final decision on the dispute is given according to Article 7 under this Contract.

Article 5. Force Majeure

1. Force Majeure

Force majeure events under this Contract refer to the events occurring out of control and not caused by failure, carelessness or irresponsibility of one party in the fulfillment of obligations under the contract, including following events:

a) Decisions issued by competent agencies affecting fulfillment of obligations by one party;

b) After the date of commercial operation, the Seller fails to obtain licenses or approvals from competent state agencies even though a lot of efforts are appropriately made.

c) Natural disasters, conflagration, fire and explosion, floods, tsunami, epidemic diseases or earthquakes;

d) Violence, rebellion, fighting, acts of hostility, sabotage, embargo, blockage, isolation or any act of war or community hostility whether the war is declared or not;

...

...

...

e) Other uncontrollable events;

2. Cases not cited as force majeure events:

Following cases shall be not considered as force majeure events:

a) A breach of the Contract committed by one party prior to the force majeure event;

b) Late payments;

c) One party fails to fulfill its obligations under the Contract for the reason that such party fails to comply strictly with norms of electricity sector and regulations on distribution grids.

3. Negotiations on force majeure events

In case of a force majeure event, the party that cites the event should:

a) Make an immediate notice to the other party about the force majeure event, providing causes, evidence, expected duration and impact of the event on the performance of obligations.

...

...

...

c) Immediately take necessary remedial measures and provide evidence of the remedial work;

d) Take necessary measures to minimize damaging effects on the parties under the Contract;

dd) Make immediate notification to either party about the end of the force majeure event;

4. Consequences of force majeure events

In case the breaching party has taken all necessary measures as prescribed in Clause 3, this Article yet failed to fulfill part or whole of its obligations under this Contract because of the force majeure event, the breaching party shall be exempted from liability for performance of the obligations under the Contract because of the force majeure.

5. Duration of a force majeure event

In case one party fails to perform its obligations under the Contract due to a force majeure event for a year, the other party may unilaterally terminates the Contract after 60 days since the issue of a written notice unless such obligations are fulfilled within the abovementioned 60 days;

Article 6. Contract duration, events to affect contract performance, compensations for damage and suspension of contract performance

1. Contract duration

...

...

...

2. Events to affect contract performance by the Buyer

a) The Seller fails to fulfill the date of commercial operation as prescribed in Annex B within three months except in cases of force majeure.

b) The Seller falls into the state of dissolution or bankruptcy.

c) The Seller fails to perform or comply with terms and conditions of the Contract within 60 days since the Buyer issues a written notice.

In case the Seller or the Seller’s lender is unable to remedy the event (that affects contract performance) within 60 days even though lots of efforts are made, the Seller or the Seller’s lender shall be granted an extension of the remedial work for a maximum of one year since a written notice about the event is issued. The Seller should keep completing the remedies to the event as soon as possible unless otherwise as prescribed in Article 5 under this Contract.

d) The Seller fails to carry out the payment for a non-disputing amount under the Contract when due and such failure keeps lasting for more than 90 days without proper reasons.

dd) The Seller rejects effect of part or whole of the Contract.

e) The Seller seriously violates its commitments as prescribed in Article 10 under this Contract.

3. Events to affect contract performance by the Seller

...

...

...

b) The Buyer fails to perform or comply with terms and conditions of the Contract within 60 days since the Seller issues a written notice.

In case the Buyer or the Buyer’s lender is unable to remedy the event (that affects contract performance) within 60 days even though lots of efforts are made, the Buyer or the Buyer’s lender shall be granted an extension of the remedial work for a maximum of one year since a written notice about the event is issued. The Buyer should keep completing the remedies to the event as soon as possible unless otherwise as prescribed in Article 5 under this Contract.

c) The Buyer fails to carry out the payment for a non-disputing amount under the Contract when due and such failure keeps lasting for more than 90 days without proper reasons.

d) The Buyer rejects effect of part or whole of the Contract.

dd) The Buyer seriously violates its commitments as prescribed in Article 10 under this Contract.

4. Process of remedial work for events affecting contract performance

a) In case an event affects the contract performance, the affected party shall make a written notice to the party that causes the event (hereinafter referred to as ‘the affecting party’) and its lender. In case the affected party cannot deliver a written notice to the affecting party’s lender, the affected party may request the affecting party to make a written notice about the event to its lender. The affecting party and its lender should cooperate together in remedying the event.

b) The affecting party’s lender may appoint a third party or act as a replacement for the affecting party to carry out remedial work but a written notice should be made to the affected party. In this case, the replacement should not increase financial burden on the affected party. The affected party should accept the replacement or appointment of a third party for the remedial work by the lender.

5. Compensations for damage

...

...

...

b) The affected should prove the loss, level of damage caused by the event and the direct interests that the affected party would have received if the event had not occurred.

6. Suspension of contract performance

In case the event cannot be remedied according to Clause 4, this Article, the affected party may keep requesting the affecting party to carry out the remedial work or suspend contract performance by delivering a prior notice to the affecting party. After the choice on suspension of contract performance is made by the affected party under this Contract, the parties shall be exempted from contractual obligations except the cases as stated in Clause, this Article and the affected party may request compensations for the caused damage from the affecting party.

If the Seller is the affected party that chooses to suspend contract performance, the damages shall be calculated as the Seller's amount of electricity actually generated for one preceding year until the time of suspension.

Article 7. Dispute settlement

1. In case a dispute arises under the Contract, the party that initiates the dispute (hereinafter referred to as ‘the disputing party') should make a written notice to the other party about content of the dispute. The parties shall be responsible for settling the dispute within 60 days since the disputing party issues the written notice. For disputes on payment of expenses, the parties shall be responsible for organizing discussion within 15 days. The parties may carry out negotiations on extension of discussion for settlement of the dispute.

2. In case the two parties can not settle the dispute within the period of time as prescribed in Clause 1, this Article, the two parties may transfer the case to Electricity Regulatory Authority or other arbitration agencies agreed by both parties for the settlement of the dispute according to relevant law provisions.

Article 8. Entrusting, transfer and re-structuring

1. Entrusting and transfer

...

...

...

In case the Seller transfers or entrusts contract performance, a written approval should be obtained from the Buyer except in the case that the Seller entrusts part or whole of the contract to the lender for the purpose of getting loans, purchasing facilities or constructing power plant. If the Seller’s entrusted portion has a value approximately equal to operatable equipment, that entrusting shall be legal under this Contract.

Within five years since the two parties complete procedures on entrusting and transfer, the entrusting or transferring party should make a written notice to the other party about the entrusting or transfer.

2. Re-structuring

In case the re-structuring of electricity sector affects rights and obligations of the Seller or the Buyer under this Contract, the contract performance shall be transferred to other receiving units. The Buyer shall be responsible for ensuring that the receiving units continue to fulfill obligations for purchase or distribution of electricity as well as other rights and obligations under this Contract.

Article 9. Participation in electricity market

1. Rights to participate in electricity market

The Seller as owner of small hydropower plants meeting requirements as prescribed in Article 9 hereof shall have the right to choose to participate in electricity market.

2. Termination and liquidation of Contract to participate in electricity market

To participate in electricity market, besides currently applying the avoidable cost tariff schedule and having signed the PPA, the Seller should sign an agreement with the Buyer for termination and liquidation of the Contract ahead of time according to terms and conditions of the Contract signed between the two parties and relevant law provisions;

...

...

...

1. Amendments to Contract

The parties should not make any amendment or supplement to this Contract unless otherwise as agreed in writing with confirmations from the parties’ competent persons.

2. Responsibility for cooperation

The Seller shall be responsible for performing legal procedures in relation to power plants. The Buyer shall be responsible for cooperating with the Seller in obtaining licenses, permission and approvals from competent state agencies for plant location, fuel, control of natural resources, investment, transmission or delivery of electricity, ownership and operation of power plants, including provision of additional documents and implementing other necessary legal activities to fulfill the parties’ obligations.

3. Completed contract

This Contract is an agreement finalized and signed between the parties and supersedes related information or issues previously discussed.

4. Applicable laws

Interpretation and execution of this Contract are instructed in the laws of Vietnam.

5. Waiver of rights

...

...

...

6. Notices

Any notice, invoice or information exchanged during the implementation of this Contract should clearly specify date of establishment and relevance to the Contract. Notices, invoices and information exchanged should be made in writing and delivered by post or facsimile. Notices, invoices and information exchanged should be delivered to following address:

a) The Seller: General Director, ________________,________, Vietnam;

b) The Buyer:, ________________,________, Vietnam;

c) For notices including notices of appointment of lender, the parties may specify the sender’s address or other recipients’ according to the manner as prescribed in this Clause.

8. Confidentiality

The Buyer agrees to keep confidential all the information of power plants as prescribed in the annexes, except in the case that such information is previously announced by the Seller and Electricity Regulatory Authority.

9. Contract termination

This Contract shall be terminated in following cases:

...

...

...

b) One party may terminate the Contract if the other party fails to perform its obligations under the Contract for a period of one year as a result of force majeure. In this case, the termination of contract shall be instructed in Clause 5, Article 5 under this Contract.

c) When the Seller participates in electricity market.

Article 11. Commitments

The two parties shall undertake to execute this Contract as follows:

1. Either party shall be legally established to perform business in Vietnam.

2. Signing and execution of this Contract by either party shall accord with requirements of electricity operation license issued by competent agencies and other law provisions.

3. Either party shall not have any legal or administrative acts to hinder or affect the execution of the Contract by the other party.

4. This Contract stipulates legal and compulsory obligations of the parties according to terms and conditions of the Contract.

5. The signing and execution of this Contract by either party shall not violate any term and condition of the other contract or part of the document of the other contract to which such party is a participant.

...

...

...

REPRESENTATIVE OF THE SELLER

(Job title)

(Signature and stamp)

(Full name)

REPRESENTATIVE OF THE BUYER

(Job title)

(Signature and stamp)

(Full name)

...

...

...