PLN to follow rules in renegotiation with private firm

JAKARTA (JP): Minister of Mines and Energy I.B. Sudjana promised yesterday that state-owned electricity company PLN would follow rules in its bid to renegotiate with private power companies over prices.

Sudjana said PLN would not force private power companies to reduce power prices, but tell them that the company could no longer afford private power at prices settled in U.S. dollars before the monetary crisis beset the region.

"It's up to private power companies whether to reject the proposal," Sudjana said after opening the Blue Sky Seminar on the use of environmentally friendly gas technology.

He said the ministry would not interfere with negotiations, but gave full freedom to PLN to deal with private power companies in a business-like way.

PLN president Djiteng Marsudi said Tuesday that PLN would not be able to purchase private power at prices settled in power purchase agreements following the sharp depreciation of the rupiah against the dollar.

PLN has to buy private power in dollars, while PLN's earnings are in rupiah.

PLN has 29 power purchase agreements which were signed before the monetary crisis affected the region, while the rupiah has lost 32 percent of its value since July, closing at Rp 3,550 yesterday.

Private power companies set prices ranging from 5.74 U.S. cents to 8.46 cents per kilowatt hour (kWh) for coal-fired power.

"PLN will go bankrupt if it has to buy power at such prices in the future," Djiteng said.

Some private power was scheduled to go on-line next year, including a 1,230-megawatt (MW) coal-fired power plant owned by PT Paiton Energy Co in Paiton, Probolinggo, East Java, and a 135- MW combined cycle power plant in South Sulawesi, owned by PT Energi Sengkang.

Observers say PLN has to raise power prices by more than 32 percent starting next year from the current average price of Rp 165 per kWh to pay for the cost of private power.

Djiteng said PLN had started renegotiating with private power companies to follow up on Sudjana's order.

However, he did not specify the new pricing scheme proposed by the company or which companies PLN was negotiating with.

The secretary-general of the Ministry of Mines and Energy, Darmoko Slamet, said separately yesterday that there was not any new pricing scheme proposed by PLN yet as the rupiah was still fluctuating. (jsk)