Procurement News Notice |
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| PNN | 3081 |
| Work Detail | State-owned electricity firm PLN is demanding a brand new electricity pricing formula as the current one is based on crude prices and the company has moved away from power generation based on diesel-fueled power plants. PLN has suggested to the government that a new formula to calculate electricity rate adjustments be established to include other energy sources, such as gas and new renewable energy sources. At present, electricity rates are determined every month based on a combination of the foreign exchange value of the rupiah compared to the US dollar, the inflation rate and the Indonesia Crude Price (ICP). However, the country has vowed to stop using petroleum to fuel power plants in an effort to be more environmentally friendly, as evidenced in PLN’s 2016-2025 business procurement plan (RUPTL) and the government’s ambitious 35,000 megawatt (MW) procurement project. PLN director for corporate planning, Nicke Widyawati, said that the current formula was old-fashioned and did not consider the fact that diesel-fueled power plants only made up a small percentage of the total power plants in the country. “In the old formula we only calculated it based on petroleum fuel. However, now it only makes up around 6.7 percent of all power plants,” she said following a meeting at the Energy and Mineral Resources Ministry. Diesel-fueled power plants only accounted for 7 percent of the total energy mix by May this year, according to data provided by PLN. The largest portion of power plants was mostly fired by coal, at 54.6 percent, closely followed by natural gas-fueled power plants at 25.7 percent. The only portion smaller than diesel was currently provided by geothermal power plants at a measly 4.4 percent. “We suggested it yesterday [Tuesday], but the only one who has the authority to change it is the Energy and Mineral Resources Ministry. We were just giving our input,” she said. A day before, PLN president director Sofyan Basir indicated that it would be helpful to use gas prices as a base as it would fuel a large portion of the country’s energy production in the next decade. The government intends to procure an additional 80,538 MW by 2025, according to the RUPTL. Most of the electricity, 34,801 MW, will still be produced by coal-fueled power plants, closely followed by gas-fueled power plants at 18,915 MW. No additional electricity from diesel-fueled power plants will be procured. Meanwhile, Institute for Essential Services Reform (IESR) executive director Fabby Tumiwa questioned PLN’s motivation for wanting to get the rate adjustment formula changed, especially as it has been unnecessary to continue having a rate adjustment every month because PLN purchased all of its energy under long-term contracts. Instead, he said the government should implement a performance-based ratemaking (PBR) system, which will adjust PLN’s revenues based on its performance. It would force PLN to be more efficient by making it more careful about the power plants it builds, as they would have to work for the long term. This was especially important since PLN would be receiving subsidies for new and renewable energy sources worth about Rp 1.3 trillion. “If PLN chooses just any power plant, the efficiency will be low, making fuel consumption higher.” |
| Country | Indonesia , South Eastern Asia |
| Industry | Energy & Power |
| Entry Date | 03 Sep 2016 |
| Source | http://www.thejakartapost.com/news/2016/08/26/pln-asks-price-adjustment-formula-change.html |
