PLN criticized over pricing of private electricity

PLN criticized over pricing of private electricity

JAKARTA (JP): The House of Representatives (DPR) yesterday
criticized the state electricity company PT PLN on having agreed
to purchase electricity from private power generators at levels
far higher than the average cost of its own generated
electricity.

"The absence of a pricing reference in negotiations with
private power generators has apparently caused PLN to agree on
purchasing their electricity at a very high cost," Tiop H.
Sitourus, a member of DPR's Commission VI, said in a hearing with
PLN executives here.

Citing an example, he said that PT Paiton Energy Company, a
private consortium granted a license to set up a 1,230-megawatt
(MW) coal-fired power plant in Paiton, East Java, offered PLN a
sale price of 8.3 U.S. cents (Rp 182) per kilowatt hour (kWh),
far higher than the average generation cost of Rp 107.31 at PLN's
power plants in Java.

The government, considering its funds too limited, has invited
private companies to take part in the establishment of new power
plants. Paiton Energy is one of the private firms interested in
the power development.

"PLN should, therefore, establish a yardstick for the pricing
of electricity it will buy from private generators," Sitorus
said.

Another member of Commission VI, Iskandar Mandji, warned that
allowing private generators to sell electricity at high levels
will force PLN to raise its billing rates as soon as their power
plants start operation.

Djiteng Marsudi, PLN's director for finance, said PLN had
actually bargained for the power it would by from private
generators.

Promise

In his response, PLN's president, Zuhal, promised that PLN
will set up a reference on such pricing and prepare guidelines
for improving its services to the public.

"We are considering setting a regulatory framework, under
which we will be able to control the prices to be offered by
private generators," Zuhal said.

He acknowledged that such a reference is urgent because more
private companies will be given opportunities to construct power
projects in the country.

Of the additional capacity of 13,357 MW needed in the coming
five years, 3,960 MW will be expected from the private sector and
the remaining 9,397 MW by PLN.

Zuhal said that contracts for the establishment of seven power
projects with a total capacity of 2,615 MW will be signed before
the end of this year. They are a coal-fired power plant in
Paiton, three gas-fueled stations in Serpong (West Java), Jati
(East Java) and Samarinda (East Kalimantan), two coal-fired power
plants in Tarahan (Lampung) and Amurang (North Sulawesi), as well
as one coal-fired plant in Sengkang (South Sulawesi).

Meanwhile, Zuhal told reporters yesterday that PLN also plans
to set up a joint venture with the state oil company Pertamina
early next month to operate a geothermal power generation.

"We will involve third parties in the planned joint venture,"
he said.

He is optimistic the planned venture will be competitive
compared to the private sector in selling electricity.

"I am optimistic that the venture can sell electricity to the
public at around six U.S. cents per kWh," he said.

According to Zuhal, PLN has thus far bought electricity from,
among others, PT Inalum at Rp 17.72 per kWh, PT Batubara Ombilin
at Rp 30 per kWh, PT Inco at Rp 16.70 per kWh, PT Krakatau Steel
at Rp 80.25 per kWh and PT Cikarang Listrindo at Rp 110 per kWh.
(fhp)