KEN suggests new coal price formula for mine mouth power plants

The National Exploration Committee (KEN) has called for a revision of Minister of Energy and Mineral Resources Regulation No 9/2016 on the formula to determine coal price for mine mouth power plants to help end differences between the ministry and state-owned electricity firm PT PLN.

KEN said in a press statement issued Tuesday that coal production cost of miners should be determined by independent consultant approved by both the ministry and PLN.

Production cost will determine the price of coal dedicated for mine mouth power plants, which in turn affect the price of electricity to be purchase by PLN.

According to Ministerial Regulation No 9/2016, the price of coal dedicated for mine mouth power plant projects are determined based on a formula of coal production cost plus 15-25 percent margin. This is a revision from the previous 25 percent margin set under Ministerial Regulation No 10/2014. But PLN insisted that the margin remains high given the current drop in coal price. The ministry has argued that coal miners must also get attractive price to encourage them to continue exploration activities to help maintain reserves for future supply.

KEN suggested that for small scale coal-fired power plant with capacity of between 7 MW and 25 MW, the 15-25 percent margin should be maintained, as the small power plants require coal of only between 35,000 and 125,000 tons per year, and that the coal is unlikely to be supplied by miners located far away from the projects, and also not by large mining firms.

The committee said that for large coal-fired power plant projects, with capacity of 100 MW-1,000 MW), considering that the coal suppliers will be large miners, the coal price should be determined based on business to business deal, but still supervised by the ministry.

Editing by Reiner Simanjuntak