The principles for determining the electricity generation prices of power plants must be established based on the reasonable and legitimate costs of the investor, ensuring the overall economic viability of the project to maintain its stability and long-term development.

New Circular No. 07/2024/TT-BCT by the Ministry of Industry and Trade on Methods for Determining Electricity Generation Prices and Power Purchase Agreements.

The Ministry of Industry and Trade has recently issued Circular No. 07/2024/TT-BCT, which outlines the methods for determining electricity generation prices and the terms of power purchase agreements. This circular applies to power plants operating in Vietnam that are connected to the national grid, as well as other relevant organizations and individuals.

Principles for Determining Electricity Generation Prices: The determination of electricity generation prices for power plants must adhere to two main principles: Firstly, based on the reasonable and legitimate costs incurred by the investor over the entire economic life of the project and Secondly, the Internal Rate of Return (IRR) on financial investments must not exceed 12%.

Components of Electricity Generation Prices: The electricity generation price must ensure the following two components:

Power Purchase Agreement Price: This is the price agreed upon by the seller (the power generation unit owning the power plant) and the buyer (Vietnam Electricity or its designated representatives, such as the Northern Power Corporation, Central Power Corporation, Southern Power Corporation, Hanoi Power Corporation, Ho Chi Minh City Power Corporation, major electricity consumers, and other wholesale electricity buyers as per the electricity market regulations). This price is constructed according to the method specified in Article 4 of this circular.

Specific Connection Price (if any): This is the price agreed upon by the seller and the buyer and is determined according to the method specified in Article 8 of this circular.

Excluded Costs: Costs not included in the electricity generation price are:

• Value-added tax (VAT)
• Water resource tax
• Fees for the rights to exploit water resources
• Payments for forest environmental services
• Environmental protection fees for solid waste and industrial wastewater (applicable to thermal power plants)
• Other taxes, fees, and monetary charges as stipulated by competent state management agencies (except for taxes and fees already included in the electricity generation price plan).

This circular takes effect from June 1, 2024.

This bulletin is intended solely to inform about newly issued legal regulations and is not intended as advice or for application to specific cases.

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