Vietnam considers pass-through price mechanism for LNG-fueled power

Vietnam’s Ministry of Industry and Trade has proposed a pass-through mechanism that will allow LNG purchase prices to directly impact the retail selling prices of LNG-fueled power, starting August 1.

The proposal is part of a draft decree and other documents being prepared by the ministry on management of LNG-fired power plants.

The decree and documents have been sent for appraisal to the Ministry of Justice with the aim of submitting to the government later this month.

The decree is also part of implementing the national power development plan VIII (PDP VIII) and attracting investment for producing LNG-fired power.

This, in turn, is part of efforts to ensure stable and diverse energy sources, the ministry has said.

Under the PDP VIII, Vietnam targets having 23 gas-fired power plants with a combined capacity of 30,424 MW by 2039. This will include 10 plants of 7,900 MW capacity using domestic gas and 13 others of 22,524 MW using LNG.

The ministry has said that it is seeking a legal framework similar to what has been approved for the Nhon Trach 3 and Nhon Trach 4 LNG-fired power plants and those using gas extracted from the nation’s Block B and Blue Whale gas fields.

The ministry has clarified that there are two options with the mechanism it is proposing. The first one will have power generation units purchase gas on their own and authorities would consider the pass-through mechanism case by case.

The second option is a general pass-through mechanism for all power plants. It has said that the second choice is the optimal one because it would have more positive impacts on the society, economy and environment.

In May, the ministry fixed the base price for LNG-fired power produced by combined cycle gas turbine thermal power plants at VND0-2,590.85 per kWh (10.56 U.S. cents).

It clarified that the figure does not include VAT, and that VND2,590.85 is the ceiling price. Based on this figure, state utility Vietnam Electricity (EVN) and power generation units will negotiate power prices further, it said.