PLN to avoid tariff hike despite rising fuel prices
Urip Hudiono, The Jakarta Post, Jakarta
State-owned electric company PT PLN said that its power generation costs could increase by Rp 8.5 trillion (US$944 million) if the government goes ahead with its plan to hike domestic fuel prices by 40 percent next year.
Despite a possible surge in its operational costs, the company has promised not to burden the public by raising its rates as well, provided that the government helps secure the supply of liquefied natural gas (LNG) for its combined-cycle power plants.
"It would also help if the government reduces the import tariffs on equipment we need to develop and maintain our power plants," PLN president director Eddie Widiono told reporters on the sidelines of an electric power seminar on Friday.
"Meanwhile, for PLN's part, we will try to cut down on the oil consumption at our power plants, and increase the efficiency of our operations to prevent further losses."
PLN has planned to reduce its use of oil to less than 5 percent by 2006, by phasing out its diesel-powered generators with combined-cycle coal- and gas-fired power plants.
PLN said it would require Rp 29 trillion this year to buy crude oil, coal and LNG to run its power plants. Crude oil makes up the bulk of that at Rp 14 trillion.
Past experience shows that an increase of Rp 100 in fuel oil prices translates into an increase of PLN's annual spending by Rp 2 trillion. By using LNG, the company could save between Rp 10 trillion and Rp 15 trillion annually.
Lack of LNG, however, has forced PLN to switch to fuel oil to run many of its combined-cycle power plants, which have also reduced the life span and performance of its power plants as well.
PLN and state-owned gas company PT PGN are currently constructing LNG terminals and transmission pipes from Sumatra to supply PLN's main power plants in West Java.
Eddie acknowledged that it would be a tough challenge for PLN not to raise electricity rates, as the estimated additional power production cost would only come from the direct effects of the fuel hike alone.
"It has not included the possible rise in transportation fees of coal and gas supplied to our power plants, or the possible hike in the regional minimum wages," he said.
Another possible alternative to prevent a rate hike, Eddie said, was therefore to postpone the time PLN was supposed to achieve its breakeven point, which was planned for next year.
"PLN does not want to continue suffering losses, but the government could let it do so for the next two years to prevent a rate hike," he said.
PLN reported a loss of Rp 3.74 trillion in the first half of 2004, and a loss of Rp 2.85 trillion in the same period last year.
It also booked a foreign exchange loss of Rp 1.68 trillion during the period, after a gain of Rp 1.25 trillion a year ago.