PLN told to pay market rates
Leony Aurora, The Jakarta Post, Jakarta
A working committee of the House of Representatives' budget commission has decided to retain the subsidized fuel quota set for state power firm PLN, as a result of which the company will have to pay market prices for overquota fuel.
PLN will have to pay for some 3.1 million liters of additional supply based on market prices in July -- more than double the price of subsidized oil, working committee member A. Ramson Siagian said on Thursday.
"With this policy, we can save some Rp 5.7 trillion ($552 million) on fuel subsidy spending," he said, referring to a decision taken at a meeting between the committee and PLN, the Ministry of Finance and state oil and gas firm PT Pertamina on Wednesday evening.
The legislator said that with the cut, the government's spending on oil-based fuel subsidies would decline to Rp 113.7 trillion compared to the Rp 119.4 trillion calculated earlier based on Pertamina's spending and revenue figures. The budget deficit, he added, would also decline to Rp 23.4 trillion, or 0.88 percent of gross domestic product.
The committee's decision will be forwarded to the budget commission, which has the power to decide whether a second revision of the 2005 state budget is necessary.
PLN needs 11.44 million kiloliters (kl) of oil to generate power this year, higher than its allocated quota of 8.35 million kl.
PLN president director Eddie Widiono said on Wednesday that even with subsidized prices for the rest of the year, the utility would need an additional Rp 15 trillion from the government to cover its costs.
The company booked net losses of Rp 2.02 trillion in 2004 but managed to record operating income of Rp 2.56 trillion, the first time this account was in the black since the monetary crisis in 1997 prompted a string of annual losses.
In the 2005 state budget, subsidies for the poor are set at Rp 4.1 trillion. The House's energy commission recommended on Aug. 25 that these subsidies be increased to Rp 8.7 trillion in a second revision of the budget.
PLN is not at liberty to increase electricity charges as these are set by the government.
Separately, Eddie said on Thursday that the company had prepared three scenarios for hiking power charges against a backdrop of the government's plan to raise oil-based fuel prices in the coming months, Antara reported.
The first scheme was to keep pace with fuel price movements. "If oil prices go up, power charges will too ...," said Eddie, as quoted by the news agency.
The second option was to adjust prices automatically at set times despite fluctuations in fuel prices, while the third was to employ a combination of both approaches.
PLN resorts to more expensive oil to produce power if the electricity produced by utilizing hydropower, geothermal energy, gas and coal proves to be insufficient.
The company usually cranks up its oil-fired plants when power demand jumps during the peak hours of 5 p.m. to 10 p.m. Although oil-fired plants contribute only some 30 percent of the country's total power-generating capacity, they account for some 70 percent of the nation's total generating costs.