Expert finds irregularities in PLN's costs<\/p>\n
A'an Suryana, The Jakarta Post, Jakarta<\/p>\n
A noted expert called on Thursday on state electricity company
\nPT PLN to cancel its plan to keep increasing power prices to the
\nlevel of 7 U.S. cents per kilowatt-hour by 2005, saying the price
\ntarget was too high.<\/p>\n
The target could be lowered, should PLN be willing to improve
\nits efficiency, said professor of industrial technology at
\nprivate Trisakti University Dadan Umar Daihani.<\/p>\n
In his presentation to an energy seminar here, Dadan found
\n\"irregularities\" in PLN's production costs.<\/p>\n
The irregularities, which were mostly caused by PLN's
\ninefficiencies, had lifted PLN's production costs, which, in
\nturn, had raised PLN's prices to the public, Dadan said.<\/p>\n
\"PLN must strive to end the irregularities and promote
\nefficiency, so that the public can ultimately enjoy a fair power
\nprice,\" Dadan told participants to the seminar.<\/p>\n
One of the irregularities was the high costs paid by PLN for
\nnon-power generation activities.<\/p>\n
Citing Purnomo Yusgiantoro in his book The Economy and Energy:
\nThe Practice and Theory, Dadan said a power price could be deemed
\n\"fair\" if 75 percent of the price paid was to cover power
\ngeneration costs and the remaining 25 percent was for non-power
\ngeneration costs, including transmission and distribution.<\/p>\n
This means the ratio between the power price, or production
\ncost, to power generation cost should be about 133 percent.<\/p>\n
However, Dadan found that, since a couple of years ago, the
\nratio had risen sharply. In 1996, the ratio was 167 percent and
\nit reached a staggering 321 percent in 2000.<\/p>\n
Another irregularity that Dadan discovered concerned the
\npurchasing of fuel to generate electricity.<\/p>\n
PLN was known to have paid more for gas compared with other
\nstate enterprises, said Dadan.<\/p>\n
The firm bought natural gas from various domestic sources at
\n$2.45 to $3 per million British thermal units (MMBTU), while
\nother industries bought it more cheaply.<\/p>\n
Fertilizer, petrochemical and steel companies, for example,
\nbought natural gas in 1998 at $1 to $1.5, $2 and $0.65 to $2
\nrespectively.<\/p>\n
\"It is ironic. PLN, which operates as a public service, had to
\nbuy fuel at rates much higher than other businesses that are less
\nstrategic to the public,\" said Dadan.<\/p>\n
He asserted that, in order to be efficient, PT PLN had to make
\nevery effort to trim its production costs: The lower the
\nproduction cost, the lower PLN's selling price could be to the
\npublic.<\/p>\n
\"Only in this way can the public benefit from a fair price,\"
\nhe added.<\/p>\n
Cash-strapped PLN has operated a quarterly rate increase
\npolicy since 2001, aimed at bringing electricity rates to 7 cents
\nby 2005.<\/p>\n
The controversial move, which was taken following financial
\nlosses following the 1997 economic crisis, was aimed at improving
\nits financial soundness as well as allowing it to accumulate
\nfunds for new investment.<\/p>\n
However, the policy has drawn sharp criticism from various
\nmembers of the public, who consider it unfair. They have accused
\nPLN of raising its prices partly to cover for its inefficiencies.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/expert-finds-irregularities-in-plns-costs-1447893297",
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