Enough legal basis, will do it immediately?

The Ministry of Industry and Trade has just sent the latest report to the Prime Minister on researching and building a direct power purchase agreement (DPPA) mechanism between renewable energy power generation units and large electricity users.

In this report, the Ministry of Industry and Trade continues to present two cases of direct electricity trading between renewable energy generators and large electricity users in the production group.

Case one is buying and selling electricity through private lines invested by private individuals, case two is buying and selling electricity through the national grid.

In case one, the power generation unit and large electricity customers when buying and selling electricity are not limited in terms of conditions such as capacity, output, connection voltage level, purpose of electricity use...

In this case, the Ministry of Industry and Trade believes that: The implementation has a full legal basis for implementation, therefore, the Ministry of Industry and Trade will guide the units in accordance with current legal regulations.

For the second case, electricity is bought and sold through the national grid system between the power generator and the customer. In this case, the power generator and the power buyer still have to go through the electricity retailer (currently monopolized by EVN).

The requirement is that the power generation unit owning the wind or solar power plant must be connected to the national power grid and have an installed capacity of 10MW or more.

"The proposed DPPA mechanism will be implemented in two phases. During the period when the Law on Prices and related guiding documents have not yet taken effect, model 1 will be implemented first, then the legal document system will be completed to switch to model 2," the Ministry of Industry and Trade explained.

Model 2, as mentioned by the Ministry of Industry and Trade, is a large customer and a power generation unit signing a difference-type forward contract (a type of derivative financial contract) similar to model 1. The power generation unit participates in the electricity market and connects to the national grid to sell electricity output to the competitive wholesale electricity market, receiving revenue from the electricity market at the spot wholesale electricity market price for the entire mobilized electricity output.

Commenting on this proposal, the Ministry of Finance stated that: The mechanism of differential forward contracts has not been regulated in legal documents. In order to have a basis for determining the value-added tax mechanism of this type of contract, the Ministry of Industry and Trade is requested to study and submit to the competent authority to issue regulations on the mechanism of differential forward contracts in legal documents.

Accordingly, the Ministry of Finance proposed to remove the regulation assigning the Ministry to guide the value-added tax mechanism of the contract.

The Ministry of Industry and Trade accepts the opinion of the Ministry of Finance on the necessity of supplementing the content of regulations on differential futures contracts in legal documents to apply the guidelines on value-added tax mechanism. This content has been supplemented by the Ministry of Industry and Trade in the dossier proposing to amend the Electricity Law and is being sent to the Ministry of Justice for appraisal.

Meanwhile, the Ministry of Justice stated that: The Electricity Law does not have a specific provision assigning the Government to regulate this content in detail ( DPPA mechanism - PV ), so it is necessary to clarify the legal basis and the authority to issue the Government's Decree (in accordance with the provisions of the Law on Promulgation of Legal Documents). On the other hand, due to the unclear legal basis and policy content, after an initial review, the Ministry of Justice found that the proposal to draft a decree under the simplified procedure is unfounded.

Previously, in report No. 105/BC-BCT dated July 25, 2023 sent to the Prime Minister, the Ministry of Industry and Trade proposed to issue the DPPA mechanism in the form of a Government decree. However, based on comments from the Ministry of Justice, to ensure a full legal basis, the Ministry of Industry and Trade proposed that the Prime Minister consider adding provisions on this mechanism to the Electricity Law (amended).

The Ministry of Industry and Trade has proposed to buy and sell electricity directly, not through EVN . The Ministry of Industry and Trade has just reported to the Prime Minister on studying and building a mechanism for buying and selling electricity directly between renewable energy generators and large electricity users, including an option that can be through a separate line, not managed by EVN.

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