Jonan rejects coal price formula proposed by PLN

By Thomas Sembiring

Minister of Energy and Mineral Resources Ignasius Jonan has turned down a proposal from state-owned electricity firm PT PLN to apply a cost plus margin formula in determining price of coal for power plants.

Jonan said on Thursday that the cost plus margin formula is an outdated concept as it does not encourage both coal producers and power plant operators to strive for efficiency. He added that the cost factor in the formula is prone to be manipulated by coal producers.

He said that the ministry is currently drafting a policy on coal price for coal-fired power plants which he promises to accommodate the interest of PLN but is also fair to coal producers.

The cost plus margin formula is currently applied in determining coal price for mine mouth coal-fired power plants. The margin is set at between 15 and 25 percent.

PLN has previously proposed the cost plus margin formula so as to avoid sharp fluctuation in the price of coal for power plants.

Editing by Reiner Simanjuntak