PLN revises budget for 2008 due to increases in fuel prices

State owned electricity firm PT Perusahaan Listrik Negara is revising its budget for next year following the increases in fuel prices, Kompas reported on Tuesday.

PLN?s Director of Generation and Primary Energy Ali Herman Ibrahim was quoted as saying that the company had to change all assumptions in its 2008 budget following the rise in coal, gas and oil prices.

The firm has set coal price for next year at Rp 425,000 per ton (1US$= Rp 9,350). However, in the recent auction to supply PLN?s coal-fired Suralaya power plant, suppliers set their prices at between Rp 490,000 and Rp 495,000 per ton.

The 2007 state budget assumes coal price at Rp 346,000 per ton. The realized price however reaches Rp 380,000 per ton .

PLN needs 24 million tons of coal for its power plants next year. The firm will have to spend Rp 10.2 trillion to purchase the commodity based on the price assumption of Rp 425,000 per ton. The cost will however rise to Rp 11.76 trillion based on the price assumption of Rp 490,000 per ton.

Coal accounts for 20 percent of PLN?s fuel costs next year which are estimated to reach Rp 51 trillion.

Oil-based fuels account for 60 percent of the fuel costs.

The increases in the prices of primary fuels will increase PLN?s power generation costs, Ali said without elaborating.

The firm together with the government has set the power generation costs at between Rp 896 and Rp 930 per kWh and average selling price at Rp 621,69 per kWh for next year.

Meanwhile, PLN?s Deputy Director of Primary Energy Tony Agus Mulyanto said since no new power plant was scheduled to come on stream next year, PLN would maximize the operation of the existing power plants to meet the nation?s power needs.

?As a result, the power plants that use oil-based fuels which should be kept idle will have to fully operate. The needs of oil-based fuels will increase,? he said, adding that the portion of oil-based fuels in the total volume of PLN?s fuel consumption might increase to 32 percent from 27 percent.

Electricity subsidy is estimated to reach Rp 43 trillion this year, up from the previous estimation of Rp 32 trillion. The government has allocated an electricity subsidy of Rp 31 trillion in the 2008 budget.

Gas price has also increased. PLN set gas price at US$2.95 per MMBTU in its 2008 budget. However, the prices of gas for new contracts have risen to an average $4 per MMBTU. The firm has agreed to buy gas at $4.5 per MMBTU for its Muara Tawar power plant and $4.58 per MMBTU for its Tambak Lorok power plant.

Fabby Tumiwa, Director of the Institute for Essential Service Reforms, said the government should prepare scenarios to increase electricity rate as a result of the increases in fuel prices and PLN?s power generation costs. (*)