PLN plans long term contract for industries
PLN plans long term contract for industries
JAKARTA (JP): State owned electricity company PT PLN is
planning to offer large industrial users special power rates
under long term contracts to better ensure their power supply.
PLN president Kuntoro Mangkusubroto said on Thursday that his
company was drafting long term contracts that would offer
corporate users better service at a higher price.
"If our customers want electricity of better quality, PLN can
supply them that under long term contracts," Kuntoro told
reporters after signing an agreement with cement producer PT
Indocement Tunggal Prakasa for the supply of up to 80 Mega Volt
Ampere by the year 2006.
He said that in turn, the company would charge customers a
premium price in accordance with the quality it would provide.
PLN has been warning the government that inadequate expansion
of electricity infrastructure would be a threat to the country's
power supply in the near future.
According to the company, power demand growth has returned to
its pre-crisis level of 12 percent a year, and would soon
outstrip current power supply capacities.
PLN's director for marketing and distribution Eddie Widiono S.
said that it was unlikely PLN would invest in new infrastructure
just to cope with higher power demands.
"We will not simply follow the demand, but will instead try to
serve that demand as efficiently as possible," he said.
Long term contracts, he continued, would include calculations
to minimize the risks of foreign exchange fluctuations.
"Beneath the long term contracts lies PLN's wish to match its
U.S dollar dominated costs with the revenues in rupiah," he
explained.
A large portion of PLN's costs is set in U.S dollar rates. In
particular the purchase of electricity from independent power
producers (IPP), and natural gas from state owned oil and gas
company Pertamina.
As for customers, Eddie went on, the long term contracts offer
better price stability.
He said that by signing the contract, a company is exempted
from paying the government set basic power rates, which could
rise to even above the company's contracted rates.
He said that PLN hoped to see basic power rates hiked
to 7 U.S. cents per kilowatt per hour (kWh) from the present rate
of about 3 U.S. cents per kWh.
"Of course there is no obligation for anyone to enter a long
term contract, companies can still use the basic power rates," he
added.
Eddie said that power rates could either be fixed throughout
the contract's period or pegged to a certain variable.
The contracts' terms and conditions, he said, would vary with
each company, since PLN planned to negotiate them individually.
"We are waiting for input from different business
associations, as they know best what their industries need," he
explained.
He said that export oriented industries had different concerns
compared to those that sold their products domestically.
PLN's plan to offer long term contracts, comes after the state
company just completed negotiations with several large corporate
users on their overdue electricity bills.
Last year, several industrial associations protested their new
power rates, which raised by the government in April last year by
53 percent to 72 percent.
The hike prompted many industrial users, textile companies
among others, to refuse to pay the total amount of their bills.
According to PLN, last year's overdue payments owed by
customers nationwide have cumulatively reached Rp 600 billion
(US$63.1 million), of which Rp 400 billion is owed by only 29
firms.
PLN threatened to cut off their power supply, but Kuntoro
advised that an agreement on payment of the overdue bills had
been reached. (bkm)