Thông tư 57/2014/TT-BCT

CIRCULAR

REGULATIONS ON METHOD AND SEQUENCE OF FORMULATION AND ISSUANCE OF ELECTRICITY GENERATION COST FRAME 

Pursuant to the Government’s Decree No. 95/2012/NĐ-CP dated December 12, 2012 defining the functions, tasks, entitlements and organizational structure of the Ministry of Industry and Trade;

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

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

At the request of Director of Electricity Regulatory Authority,

The Ministry of Industry and Trade promulgates the Circular regulating method and sequence of formulation and issuance of electricity generation cost frame.

Chapter I

GENERAL PROVISIONS

Article 1. Scope and regulated entities

1. This Circular regulates method and sequence of formulation and issuance of electricity generation cost frame.

2. This Circular applies to the following entities:

a) Generating units in possession of power plants connected to the national electricity system with total installed capacity more than 30 MW, power plants with installed capacity from 30 MW and under volunteering to join electricity market except multi-target strategic hydropower plants, oil-fired power plants, independent power plants using renewable energy (wind, geothermal heat, tides and biomass) and other power plants with private mechanism regulated by the Prime Minister, The Ministry of Industry and Trade or competent state management agencies;

b) Other relevant organizations or individuals;

Article 2. Interpretation of terms

In this Circular, some terms are construed as follows:

1. Net capacity means installed capacity converted to positions of measurements serving payment of electricity bills between electricity sellers and buyers (kW);

2. Standard power plant means a thermo-electric plant with capacity of popular assemblies determined in the national electricity development planning that represents a type of thermo-electric plant with the same electricity generation technology, configuration, used fuel and is used to calculate electricity generation cost frame for such power plant.

3. Number of operation hours at maximum capacity (T­_max) means the number of hours of operation at maximum capacity in a year averaged over the lifetime of Standard Power Plant and prescribed in Appendix 1 hereof (hour).

4. Total initially approved investment means the total investment enclosed with an initial fundamental design approved by competent agencies as prescribed in the Government’s Decree No. 12/2009/NĐ-CP dated February 02, 2009 on management of investment and construction projects or alternative documents.

5. Settled investment capital means all the lawful costs used during the investment to put the project into operation, being finalized and audited according to the law provisions. Lawful costs mean the costs used within the scope of approved design, cost estimation including amendments and supplements in accordance with the signed contract and law provisions. Settled investment capital must be within the total investment approved (or revised) by competent authorities.

Chapter II

METHOD OF FORMULATION AND ISSUANCE OF ELECTRICITY GENERATION COST FRAME

Article 3. Principles of formulation of electricity generation cost frame

1. The electricity generation cost frame is the range of value from 0 (zero) to ceiling level of each type of thermo-power plants, hydropower plants formulated and issued on an annual basis.

2. For thermo-power plants: Ceiling cost is the electricity generation cost of Standard Power Plant with types of technology and capacity as prescribed in Article 4 hereof. Method of determining electricity generation cost of Standard Power Plant is instructed in Articles 5, 6, 7 and 8 hereof.

3. For hydropower plants: ceiling cost is formulated on the basis of annual avoidable costs according to the method prescribed in Article 9 hereof.

Article 4. Standard power plants

Standard Power Plant is stipulated for each type of technology and equipment according to ranges of capacity as follows:

Article 5. Method of determining electricity generation cost of Standard Power Plant

Electricity Generation cost P^NĐ (VND/kWh) of Standard Power Plant is calculated with the following formula:

P^NĐ = FC + FOMC + VC

Where:

FC: Average fixed cost of Standard Power Plant is determined according to the method prescribed in Article 6 hereof (VND/kWh);

FOMC: Fixed operation and maintenance cost of Standard Power Plant is determined according to the method prescribed in Article 7 hereof (VND/kWh);

VC: Variable cost of the year of application of cost frame of Standard Power Plant is determined according to the method prescribed in Article 8 hereof (VND/kWh);

Electricity generation cost of Standard Power Plant does not include transport of key raw materials.

Article 6. Method of formulation of average fixed cost of Standard Power Plant

1. Average fixed cost FC (VND/kWh) of Standard Power Plant is the component to recover investment cost and calculated with the formula:  

Where:

TC_VĐT: Investment and construction capital of Standard Power Plant (excluding VAT) annually converted and determined according to provisions set out in Clause 2 of this Article (VND)

A_bp: Annual average electricity at the point of delivery determined according to provisions set out in Clause 5 of this Article (kWh).

2. TC_VĐT (VND) is calculated with the formula 

Where:

SĐT: Investment rate of Standard Power Plant is determined according to provisions set out in Clause 3 of this Article (VND/kWh);

P_t: Total net capacity of Standard Power Plant (kW);

n: Economic life of Standard Power Plant as prescribed in Appendix 1 enclosed herewith (year);

I: Financial discount rate of Standard Power Plant is determined according to provisions set out in Clause 4 of this Article (%).

3. Investment rate is the investment in one (01) kW of Standard Power Plant (on average) on the basis of the total initially approved investment capital or settled investment capital. Component costs of investment rate include:

a) Construction costs including costs of construction of works and work items; demolition and removal of dated architectural structures; leveling construction site; construction of makeshift works, auxiliary works serving construction, makeshift houses at site for residence and managing construction;

b) Costs of equipment include costs of purchase of technological equipment, training in plant operation; installation, test and adjustment, transport, insurance, taxes and other related charges;

c) Costs of compensation for site clearance and relocation according to competent state agencies’ decision; costs of reinforcement of work foundations;

d) Project management costs including costs of organizing and implementing project management from establishment of the project till the project is completed and put into operation;

dd) Investment and construction costs including costs of hiring consultants on survey, design, construction supervision, examination and verification and other relevant costs;

e) Other costs including working capital during test run of the plant, loan interests, costs of getting loans during the construction period and other necessary costs;

g) Provisional costs including costs of additional quantity of work and provision for slippage in prices during the construction period;

4. Financial discount rate i (%) applying pre-tax nominal Weighted Average Cost of Capital is calculated with the following formula:

Where:

D: Proportion of loan in total investment as prescribed in Appendix 1 hereof (%);

E: Proportion of contributed capital in total investment as prescribed in Appendix 1 hereof (%);

n: Economic life of Standard Power Plant as prescribed in Appendix 1 enclosed herewith (year);

n_D: Average time of paying debt prescribed in Appendix 1 enclosed herewith (year);

R_d: Loan interest determined according to Point a of this Clause (%);

r_e: Pre-tax rate of return over contributed capital determined according to Point b of this Clause (%);

a) Loan interest r_D (%) is calculated on the basis of Weighted Average Cost of Capital interest rate of local and foreign currency loans with the following formula:

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

Where:

D: Proportion of foreign currency loan in total loan as prescribed in Appendix 1 hereof (%);

D: Proportion of local currency loan in total loan as prescribed in Appendix 1 hereof (%);

r_dF: Foreign currency loan interest rate is determined by adding average value of US dollar interest rate swap (10-year term) in 36 consecutive months preceding to the year of issuance of cost frame on London interbank market (LIBOR swaps) and annual average bank service fee, guarantee fee and relevant tax (3%) or promulgated by the Ministry of Industry and Trade in the electricity generation cost frame (%/year).

r_d,D: Local currency loan interest rate is determined by adding average Vietnam dong deposit rate (12-month term) intended for individuals in five consecutive years preceding to the year of issuance of cost frame, determined at September 30 annually, by four commercial banks (Joint stock commercial Bank for Foreign Trade of Vietnam, Vietnam Joint Stock Commercial Bank for Industry and Trade, the Joint Stock Commercial Bank for Investment and Development, Vietnam Bank for Agriculture and Rural Development, or lawful successors to these banks) and annual average bank service fee (3.5%) or promulgated by the Ministry of Industry and Trade in the electricity generation cost frame (%/year).

b) Pre-tax rate of return over contributed capital r_e (%) calculated with the following formula:

Where:

r_e,pt: Post-tax rate of return over contributed capital is 12%;

T: Average enterprise income tax rate during economic life of Standard Power Plant determined according to the State’s applicable regulations (%).

5. Annual average electricity at the point of delivery A_bq (kWh) of Standard Power Plant calculated with the following formula:

A_bq = P_t x T_max

Where:

P_t: Total net capacity of Standard Power Plant (kW);

T_max: Number of operation hours at maximum capacity (hour).

Article 7. Method of formulation of fixed operation and maintenance cost of Standard Power Plant

1. Fixed operation and maintenance cost FOMC (VND/kWh) of Standard Power Plant is the component to recover costs of major repair, workforce, and other annual fixed operation and maintenance costs calculated with the following formula:

Where:

TC_FOM: Total fixed operation and maintenance cost of Standard Power Plant is determined according to provisions set out in Clause 2 of this Article (VND);

A_bp: Annual average electricity at the point of delivery of Standard Power Plant determined according to provisions set out in Clause 5, Article 6 hereof (kWh).

2. Total fixed operation and maintenance cost TC_FOM(VND) of Standard Power Plant is calculated with the following formula:

TC_FOM = SĐT x P_t x k

Where:

SĐT: Investment rate of Standard Power Plant as determined in Clause 3, Article 6 hereof (VND/kWh);

P_t: Total net capacity of Standard Power Plant (kW);

k: Proportion of operation and maintenance cost in the investment rate of Standard Power Plant as prescribed in Appendix 1 hereof (%);

Article 8. Method of determination of variable cost of Standard Power Plant for the year of enforcement of cost frame

1. Variable cost of Standard Power Plant for the year of enforcement of the cost frame (VC) is the component to recover costs of fuel and other variable costs calculated with the following formula:

VC = HR x P_nlc x (1+f)

Where:

VC: Variable cost of Standard Power Plant (kW);

HR: Fuel loss rate calculated at load level prescribed in Appendix 1 hereof in kg/kWh or BTU/kWh;

F: Percentage of total cost of operation, secondary fuel - materials and other variable costs for electricity generation compared with cost of key fuel and prescribed in Appendix 1 hereof (%);

P_nlc: Cost of key fuel of Standard Power Plant and not including cost of transport; for coal-fired power plant, cost of loss, management, and insurance (if any) is included; in case the cost of transport specified in the fuel supply contract can not break down, the cost of key fuel is determined according to the price laid down in the contract for purchase of key fuel; P_nlc is calculated in VND/kg or VND/BTU.

Article 9. Method of determining ceiling cost of hydroelectric Plant

Ceiling cost of Hydroelectric Plant P^NĐ (VND/kWh) is calculated with the following formula:

Where:

ACT_bq,j: Average avoidable cost in the North, Middle and the South according to the avoidable cost rate annually announced by Electricity Regulatory Authority as prescribed in the Ministry of Industry and Trade’s Circular No. 32/2014/TT-BCT dated October 09, 2014 regulating sequence of formulation and enforcement of avoidable cost rate, promulgation of specimen power purchase agreement (PPA) to small hydropower plants, or alternative documents;

t_i: Proportion of electricity produced by season and hour in the year as prescribed in Appendix 1 hereof (%);

Chapter III

SEQUENCE OF FORMULATION AND PROMULGATION OF ELECTRICITY GENERATION COST FRAME

Article 10. Sequence of formulation and promulgation of electricity generation cost frame

1. Before November 01 annually, Vietnam Electricity shall be responsible for:

a) Based on actual figures from PPA negotiation and provisions set out in Articles 5, 6, 7 and 8 hereof, calculating electricity generation cost for thermoelectric power plants with capacity more than 200 MW expected to operate in the following year or in the process of negotiation on PPA with Vietnam Electricity ;

b) Documenting calculations of electricity generation cost for aforementioned power plants as prescribed in Article 11 hereof and making submission to Electricity Regulatory Authority for examination;

2. Within five working days since receipt of the documentation of calculations of electricity generation cost for power plants as specified in Point a, Clause 1 hereof, Electricity Regulatory Authority shall be responsible for conducting inspection of eligibility of the documentation submitted for approval. If necessary, Electricity Regulatory Authority shall issue a written notice to Vietnam Electricity for supplements or amendments, or explanations of issues contained in the documentation.

3. Within 20 working days since receipt of eligible documentation, Electricity Regulatory Authority shall be responsible for:

a) Conducting examination of electricity generation cost for power plants submitted by Vietnam Electricity;

b) Selecting standard power plants, net capacity of selected power plants converted to level of capacity as prescribed in Article 4 hereof;

4. Electricity Regulatory Authority shall be responsible for calculating ceiling cost of hydropower plants according to the method as prescribed in Article 9 hereof.

5. Before December 31 annually, Electricity Regulatory Authority shall be responsible for making submission of electricity generation cost frame for the next year to the Ministry of Industry and Trade for approval and making public announcement on Electricity Regulatory Authority’s website. In case electricity generation cost frame for the next year is not announced, current electricity generation cost frame shall be temporarily applied.

Article 11. Request for approval for electricity generation cost for formulation of cost frame

Application for approval for electricity generation cost of power plants includes:

1. Written statement, calculations made by Vietnam Electricity on electricity generation cost of power plants specified in Point a, Clause 1, Article 10 hereof.

2. Table of data for calculation of electricity generation cost of aforementioned power plants as prescribed in Appendix 2 hereof accompanied by tabular calculations prepared in excel format file.

3. Documents related to aforementioned data;

Chapter IV

IMPLEMENTARY PROVISIONS

Article 12. Implementation

1. Annually, Electricity Regulatory Authority shall be responsible for conducting examination of electricity generation cost frame and making submission to the Ministry of Industry and Trade for approval.

2. Annually, based on actual performance of the PPAs or suggestions from generating units, Vietnam Electricity and if necessary, Electricity Regulatory Authority shall revise the table of data used for calculation of electricity generation cost for Standard Power Plant as prescribed in Appendix 1 hereof, make submission to the Minister of Industry and Trade for consideration and promulgation before October 01 annually.

Article 13. Effect

1. This Circular takes effect since February 03, 2015.

2. Under this Circular, provisions as set out in Articles 3, 4, 5, 6, 7, 17, 18, Clause 1, Article 24, Clause 1, Article 25 of the Minister of Industry and Trade’s Circular No. 41/2010/TT-BCT dated December 14, 2010 regulating method of determination of electricity generation cost; sequence, procedures for formulation and issuance of electricity generation cost frame and approval for PPA are hereby annulled.

3. Difficulties that arise during the implementation of this Circular should be reported to Electricity Regulatory Authority for consideration or handling within competence or making the report to the Ministry of Industry and Trade for decision./.

APPENDIX 1

DATA USED FOR CALCULATION OF ELECTRICITY GENERATION COST FOR STANDARD POWER PLANTS AND CEILING COST OF HYDROPOWER PLANTS (Enclosed with the Ministry of Industry and Trade’s Circular No. 57/2014/TT-BCT dated December 19, 2014)

I. Data used for calculation of electricity generation cost of standard power plants

II Data used for calculation of ceiling cost of hydropower plants

Proportion of electricity produced by season, hour in the year (%) determined as follows:

Number of peak, normal, and low hours is prescribed in the Ministry of Industry and Trade’s Circular No. 16/2014/TT-BCT dated May 29, 2014 regulating electricity price or alternative documents.

APPENDIX 2

MAIN DATA OF STANDARD POWER PLANTS (Enclosed with the Minister of Industry and Trade’s Circular No. 57/2014/TT-BCT dated December 19, 2014)