Sudjana sets rules for power price renegotiations

Sudjana sets rules for power price renegotiations

JAKARTA (JP): Minister of Mines and Energy I.B. Sudjana
announced yesterday rules for state-owned electricity company PLN
to follow during its price renegotiations with private power
producers.

Sudjana stated that the capacity factor -- or the volume of
power -- to be bought by PLN from private producers should not
exceed public demand.

He further stipulated that the price of private power should
not be higher than PLN's selling price to the public and that
private power producers should sell 10 to 20 percent of their
stocks to PLN subsidiaries.

Finally, he said PLN's engineers should take part in the
development and operation of power projects.

"These four rules should be taken as principles to be followed
by PLN in its negotiations with private power producers so that
the social mission of PLN can still be visible in private power
projects," Sudjana said after opening a leadership seminar at the
Veteran Pembangunan Nasional University, in South Jakarta.

Sudjana recently ordered PLN to renegotiate the prices for
power it bought from private power companies to avoid PLN from
going into bankruptcy following the sharp depreciation of the
rupiah against the dollar.

PLN buys private power in dollars, but sells the power to the
public in rupiah.

PLN has signed power purchase agreements with 29 private power
companies, which are controlled by a small number of
conglomerates, foundations and politicians in consortia with
foreign power companies.

Under the current contracts, private power prices range from
5.73 US cents to 8.4 cents. PLN sells the power for Rp 170 (4.3
cents).

PLN predicted that it would suffer a Rp 1.5 trillion loss if
it had to buy private power at current contract prices.

PLN's president Djiteng Marsudi recently told the House of
Representatives that the company would not only renegotiate its
power prices but also other contract terms, including the volume
of power it was obliged to buy and the involvement of PLN's
subsidiaries in the projects.

None of the 29 private companies contracted with PLN currently
fall in line with the outlines set out by Sudjana.

PLN only has a stake in the Asahan hydropower project in North
Sumatra through its subsidiary PT Pembangkitan Tenaga Listrik
Jawa Bali II (PJB II).

According to its current power purchase contracts, PLN has to
buy 80 percent of the private companies' power producing
capacity.

Two of the private power plants that recently have been
connected to the PLN power grid -- the 135-Megawatt (MW) Sengkang
combined cycle power plant in South Sulawesi and the 165-MW Salak
geothermal power plant in West Java -- are currently negotiating
with PLN.

Another power plant scheduled to be connected to PLN's grid
next year is the Private Paiton I coal-fired power plant with a
1,230 MW capacity.

Djiteng said at the House that PLN had offered to buy 30
percent of the two power plants' production capacity rather than
80 percent.

The remaining 70 percent of the power produced at both power
plants would be pooled and bought by PLN at a tender price.

PLN also offered to buy the power at 15 percent below PLN's
selling price.

Sudjana said yesterday he still was allowing PLN to
renegotiate independently, but warned that the government would
intervene if PLN did not make satisfactory headway.

"We (the government) will enter the renegotiations, if (PLN)
was not able to do that," he said. (jsk)