Arbitration agency PLN's best option

Arbitration agency PLN's best option

JAKARTA (JP): State electricity company PLN should ask an
international arbitration agency to settle its dispute with gas
and power suppliers over payment, an analyst said yesterday.

Energy analyst Iskandar Mandji said the move would be the best
alternative for PLN, which has not been able to fully pay its gas
and power suppliers following the rupiah's sharp depreciation
against the dollar.

"PLN should declare itself in a force majeure situation and go
to an arbitration agency for a solution to its dispute with gas
and power contractors over payments," Mandji said.

Force majeure refers to a situation in which a party cannot
fulfill a contract because of unexpected occurrences beyond its
control.

All purchasing contracts with gas and power suppliers are
based in U.S. dollars. The sharp fall in the rupiah against the
U.S. dollar to 8,500 at present from 2,450 before the crisis has
caused increases in gas and power prices in rupiah of more than
300 percent.

The government extended a subsidy of Rp 1.25 trillion (US$156
million) to PLN to help it settle gas and power payments, but the
money was only enough to cover three months from January to March
this year.

The government has advised PLN to renegotiate payments with
its gas and power suppliers because it would not extend further
subsidies to the company.

PLN president Djiteng Marsudi recently said negotiations had
not amounted to anything because PLN insisted on paying its
contractors at an exchange rate of Rp 2,450 to the U.S. dollar.

PLN has tried to increase its revenue amid the crisis by
raising electricity tariffs by 7.78 percent as from April
payments.

A PLN spokesman said the company would continue applying the
new tariffs despite the government's delay in increasing fuel
prices.

PLN has also proposed an increase in the basis for raising
electricity tariffs but the government has yet to approve the
proposal. (jsk)