PLN not to buy electricity from private power producers this year

State-electricity company PT PLN will not buy electricity produced by independent power producers this year although consumers' power demand increases, according to PLN's marketing director Eddie Widyono.

Eddie said PLN decided not to buy electricity from private power producers, although both sides had signed power purchase agreements, because the government rejected PLN's budget proposal for the purchase of private power in the 2000 budget.

For the 2000 budget, PLN proposed to the government Rp 34 trillion to finance its operation. But the House of Representatives cut the spending by Rp 7.5 trillion to become Rp 25.4 trillion.

"PLN proposed Rp 34 trillion, but the House considered the figure as a sign of inefficiency. It asked PLN to improve efficiency and cut the budget to Rp 24.5 trillion," Eddie said when visiting Bisnis's editorial office.

Because of the cut in the budget, PLN decided to cancel plan to buy electricity from private power producers, which would initially cost the electricity firm Rp 7.5 trillion.

Currently, there are at least eight power projects ready to operate this year. Combined investment for the eight power projects totals $4.8 billion. The eight power projects are Paiton I, Paiton II, Sengkang, Dieng, Pare-Pare, Gunung Salak unit 3,5 and 6, Drajat, and Wayang Windo.

Paiton Case

Eddie also said that negotiations between PLN and a consortium of Paiton I were still underway to set an acceptable selling price of electricity from the coal-fired Paiton I power project to PLN.

But negotiations had been tough as PT Paiton Energy Company was sticking to its initial demand realizing that it was backed fully by the American government, as indicated by Coordinating Minister for Economy, Finance and Industry Kwik Kian Gie.

Kwik said recently that U.S. Ambassador to Indonesia Robert Gelbard had been consistently pressing the Indonesian government to settle the Paiton I issue. Kwik said the U.S. government's intervention emerged when the government took over the Paiton case.

But Kwik said the government would not close its eyes over the criminal side of the Paiton I project. "How is it possible a project worth hundreds of million dollars was transformed into a 2.5 billion dollar project."

Eddie said negotiations centered on the selling tariffs of electricity from Paiton I to Pertamina. He noted that with the current exchange rate (of rupiah against the U.S. dollar), tariffs for Paiton I should only stay at $0.0349 per kilowatt hour (kWh).

"Because they are getting tougher and tougher, room for negotiations is getting smaller," he said.

Nevertheless, Eddie said PLN continued to pay Paiton I, at a very low tariff, under the "take or pay" agreement, in case PLN would need power supply from Paiton I.

Eddie noted that the possibility for PLN to ask electricity from Paiton I is open wide because of the increasing demand for electricity from PLN customers. He noted that electricity consumption in the past few months had been increasing by 100 megawatt per month. (*)