Deputy Minister says penalty for non-performing IPPs necessary
Friday, January 6 2017 - 01:47 AM WIB
Petromindo|Lucky
Deputy Minister of Energy and Mineral Resources Arcandra Tahar said that penalty for independent power producers (IPPs) failing to deliver their power plant projects on time or the power plants fail to perform as promised is necessary to help ensure power supply in the country.
Arcandra said on Thursday that the penalty is also necessary to ensure fairness in the industry as state-owned electricity firm PT PLN is also subject to a take or pay clause if the utility fails to purchase power as set out in the power purchase agreement (PPA) signed with the IPPs.
He added that the penalty system is an internationally standard practice applied by other countries, and would help prevent ?non-credible? companies from participating in power plant tender.
As reported by this portal on Wednesday, the Ministry of Energy and Mineral Resources is a drafting a new regulation on penalty for non-performing IPPs. Director General of Electricity at the ministry Jarman said that the penalty will be included in new PPAs to be signed by IPPs and PLN. IPPs will be given penalty if they fail to meet the commercial operation date (COD) schedule of their power plant projects. The IPPs will also be given penalty if the power plants fail to perform as promised in the PPA.
Arcandra said that the penalty will be equal to the cost to be incurred by PLN in getting power supply to replace the electricity failed to be delivered by the IPPs.
Some, however, said that the penalty for the IPPs is unfair as completion of power plant projects depend on many factors including the tough and lengthy process of completing land acquisition or necessary permits from the government.
Editing by Reiner Simanjuntak