Circular No. 08/2025/TT-BCT dated February 1, 2025 on the method for determining the generation costs of power plants during the period prior to participation in the competitive electricity market for certain types of power plants

CIRCULAR

ON THE METHOD FOR DETERMINING THE GENERATION COSTS OF POWER PLANTS DURING THE PERIOD PRIOR TO PARTICIPATION IN THE COMPETITIVE ELECTRICITY MARKET FOR CERTAIN TYPES OF POWER PLANTS

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

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

The Minister of Industry and Trade hereby issues this Circular on the generation costs of power plants during the period prior to participation in the competitive electricity market for certain types of power plants.

Chapter I

GENERAL PROVISIONS

Article 1. Scope and regulated entities

1. This Circular details Clause 4, Article 51 of the Electricity Law No. 61/2024/QH15 on the method for determining the generation costs of power plants during the period prior to participation in the competitive electricity market.

2. This Circular applies to Vietnam Electricity Corporation and power plants under Vietnam Electricity Corporation during the period prior to participation in the competitive electricity market, including:

a) Strategic multipurpose hydropower plants;

b) Power plants operating in coordination with strategic multipurpose hydropower plants to support system regulation, as listed by the Ministry of Industry and Trade;

c) Other power plants that cannot determine the electricity generation service price.

Article 2. Interpretation of terms

For the purposes of this Circular, the terms below shall be understood as follows:

1. Strategic multipurpose hydropower plant refers to a hydropower plant listed among the large-scale power plants of special economic, social, defense, and security importance as approved by the Prime Minister in Decision No. 2012/QD-TTg dated October 24, 2016, or its replacement decision.

2. Year N refers to the calendar year commencing on January 1 and ending on December 31 of the same year.

3. Year N-1 refers to the calendar year immediately preceding Year N.

4. Year N-2 refers to the calendar year immediately preceding Year N-1.

Chapter II

METHOD FOR DETERMINING ANNUAL GENERATION COSTS

Article 3. Principles for determining annual generation costs

The annual generation costs of power plants specified in Clause 2, Article 1 of this Circular shall be determined based on the principle of ensuring full recovery of actual, reasonable, and legitimate costs necessary for electricity production and business operations, in accordance with the technological type of the power plant. These costs do not include the standard profit margin determined under the Government Decree regulating the mechanism and timeframe for adjusting the average retail electricity price.

Article 4. Method for determining annual generation costs

1. The total generation cost of a power plant for Year N (C_N) is determined using the following formula:

C_N = C_VL + C_TL + C_KH + C_DVMN + C_SCL + C_TC + C_K+ C_NL+ C_GT

Where:

a) C_VL: The material costs for Year N are determined based on the audited data from Year N-2 by an independent audit firm, excluding any extraordinary and abnormal costs incurred in Year N-2 (if any). These costs are adjusted annually based on the average Consumer Price Index (CPI) of the three most recent years prior to the cost determination period, as published by the central statistical agency. Additionally, reasonable projected costs arising in Year N that were not accounted for or not fully accounted for in Year N-2 shall be included.

b) C_TL: The labor costs for Year N include total wages and wage-related expenses such as electrical safety allowances, health insurance, social insurance, unemployment insurance, and trade union fees, determined in accordance with relevant legal regulations;

c) C_KH: The depreciation costs for Year N are determined based on the value of existing fixed assets and the projected assets to be put into operation in Year N, following the regulations on the management, utilization, and depreciation of fixed assets issued by the Ministry of Finance or other competent authorities.

d) C_DVMN: Outsourced service costs in Year N (VND)

The outsourced service costs in Year N exclude purchased electricity costs and are determined based on audited data from Year N-2 by an independent audit firm, excluding any extraordinary and abnormal costs incurred in Year N-2 (if any). These costs are adjusted annually based on the average CPI of the three most recent years prior to the cost determination period, as published by the central statistical agency. Additionally, reasonable projected costs arising in Year N that were not accounted for or not fully accounted for in Year N-2 shall be included.

dd) C_SCL: Major repair costs in Year N are determined based on the estimated repair items for Year N as approved by the competent authority.

e) C_TC: Financial costs in Year N (VND)

Financial costs in Year N include total interest expenses, bond issuance costs, financial lease expenses, and loan-related fees payable in Year N. These costs are determined based on contracts, legally binding documents, and projected loans for production and business activities in Year N. Foreign exchange rate differences, if any, shall be determined in accordance with financial accounting regulations.

g) C_K: Other monetary costs in Year N (VND)

Other monetary costs in Year N include land lease fees, resource taxes, environmental service fees for forests, fees for water resource exploitation rights, various taxes, fees, meal allowances as per regulations, and other monetary expenses.

Land lease fees, resource taxes, environmental service fees for forests, water resource exploitation rights fees, various taxes, fees, and meal allowances shall be determined in accordance with prevailing regulations.

Other monetary costs of the power plant in Year N shall be determined based on audited data from Year N-2 by an independent audit firm, excluding extraordinary and abnormal costs in Year N-2 (if any). These costs shall be adjusted annually based on the average Consumer Price Index (CPI) of the three most recent years prior to the cost determination period, as published by the central statistical agency. Additionally, reasonable projected costs arising in Year N that were not accounted for or not fully accounted for in Year N-2 shall be included.

h) C_NL: Fuel costs in Year N (VND) shall be determined based on input parameters used for planning electricity supply and national power system operations for Year N and/or fuel purchase contracts.

i) C_GT: Deductions from cost price in Year N include revenues from the liquidation and sale of fixed assets and materials anticipated in Year N.

2. For costs determined based on data audited by an independent audit firm in Year N-2, if audited data from Year N-1 is available, these costs shall be calculated based on the audited data from Year N-1. Vietnam Electricity Corporation shall be responsible for establishing the cost estimates for Year N for dependent-accounting power plants newly commissioned or newly transferred.

3. If major repairs of power plants specified in Clause 2, Article 1 of this Circular are conducted centrally through a dependent accounting repair unit under Vietnam Electricity Corporation, the costs of this unit shall be determined in the same manner as other dependent accounting power plants specified in Clause 1 of this Article.

Article 5. Documents for calculating annual generation costs

1. The reports on the economic and technical performance of power plants specified in Clause 2, Article 1 of this Circular shall be prepared by September 30 and estimated for completion by December 31 of Year N-1, including:

a) Reports on electricity output delivered and average fuel consumption rates for Year N-1;

b) Reports on production and business results, including cost data for power plants specified in Clause 2, Article 1 of this Circular, completed as of September 30 and estimated until December 31 of Year N-1.

2. The cost explanations and calculations for Year N for power plants specified in Clause 2, Article 1 of this Circular shall include:

a) Explanations and tables detailing material costs, outsourced service costs, and other monetary costs estimated for Year N-1 and projected for Year N, as specified in Points (a), (d), and (g), Clause 1, Article 4 of this Circular;

b) Explanations and tables detailing labor costs as specified in Point (b), Clause 1, Article 4 of this Circular;

c) Explanations and tables detailing major repair costs for Year N, as specified in Point (đ), Clause 1, Article 4 of this Circular;

d) Explanations and tables detailing depreciation costs and financial costs for Year N, as specified in Points (c) and (e), Clause 1, Article 4 of this Circular.

3. Supporting documents:

a) Audited financial statements for Year N-2 conducted by an independent audit firm, including the balance sheet, income statement, cash flow statement, and explanatory notes;

b) Summary of labor data for Year N-1 and the plan for Year N;

c) Report on major repair works conducted in Year N-1 and projected repairs for Year N;

d) Fuel purchase contracts and other relevant documents.

4. If audited financial statements for Year N-1 are available, the cost data for Year N-1 specified in Clause 2 of this Article shall be updated based on the audited financial statements for Year N-1.

Chapter III

IMPLEMENTATION

Article 6. Responsibilities of the electricity regulatory authority under the Ministry of Industry and Trade

1. Review the annual generation costs of power plants specified in Clause 2, Article 1 of this Circular in the electricity pricing plan.

2. Provide guidance and resolve any issues arising during the process of calculating the annual generation costs of power plants specified in Clause 2, Article 1 of this Circular.

Article 7. Responsibilities of Vietnam Electricity Corporation

Vietnam Electricity Corporation shall be responsible for implementing the provisions of this Circular.

Article 8. Entry into force

1. This Circular comes into force as of February 1, 2025.

2. Circular No. 26/2017/TT-BCT dated November 29, 2017, of the Minister of Industry and Trade on the method and procedure for determining the annual costs and electricity prices of strategic multipurpose hydropower plants, shall be repealed.

3. Clause 3, Article 4 of Circular No. 09/2024/TT-BCT dated July 30, 2024, of the Minister of Industry and Trade on calculation of the average electricity selling price, shall be repealed./.