Minister issues new ruling on electricity tariff from coal-fired power plants

By Romel S. Gurky

Minister of Energy and Mineral Resources Ignasius Jonan has issued Ministerial Regulation No 19/2017 on utilization of coal for power plants and purchase of excess power from the plants, which among others introduces a new formula in determining tariff of electricity from mine mouth power plants sold to state-owned electricity firm PT PLN.

According to copy of the new regulation obtained by Petromindo.com on Tuesday, the tariffs of electricity from coal-fired power plants, both mine mouth and non-mine mouth, are linked to the electricity production cost base (or BPP) of PLN. The tariff of electricity from mine mouth power plants was previously based on a formula of production cost plus 15-25 percent margin.

The regulation stipulates that electricity tariff of mine mouth power plants located in region where the BPP is equal to or lower than the national average BPP, the tariff is set maximum at 75 percent of the regional BPP.

For mine mouth power plant located in region where the regional BPP is higher than the national average BPP, the tariff is set maximum at 75 percent the national BPP.

Independent power producer developing the mine mouth power plant sells the electricity to PLN under a 30-year power purchase agreement (PPA) since the commercial operation date (COD) of the plant.

For non-mine mouth coal-fired power plant, the tariff formula is linked with the BPP and the capacity of the plant.

For plants with capacity of more than 100 MW where the regional BPP is equal to or less than the national average BPP, the tariff of the electricity is set maximum equal to the regional BPP. In the case where the plant is located in region where the local BPP is more than the national average BPP, the tariff is set maximum at the national BPP.

For non-mine mouth power plants with capacity of less than 100 MW located in regions where the regional BPP is equal to or less than the national average, the tariff is set maximum at the regional BPP.

For plants located in regions where the regional BPP is higher than the national BPP, then the tariff is determined based on tender mechanism or other business to business arrangement.

The PPA for the non-mine mouth power plants is also set for a 30-year period since the COD.

Editing by Reiner Simanjuntak