PLN to continue PPA review policy despite protest

Petromindo|Khalsa

Director General of Electricity at the Ministry of Energy and Mineral Resources Andy Noorsaman Sommeng said that the state-owned electricity firm PT PLN will continue its move to review power purchase agreements (PPAs) on coal-fired power plant (PLTU) projects despite recent opposition from a senior minister and some industry leaders.

Bisnis Indonesia quoted Andy as saying Monday that the move is part of efforts by PLN to help bring down the electricity supply cost (BPP), which hopefully could help ensure more affordable electricity tariffs for consumers.

?Of course (the PPA review policy) will be continued so that tariff (of electricity) will be affordable to the public,? he told the paper.

He, however, said that the PPA review policy will only affect PLTU projects which have yet to start construction or have yet to obtain the business feasibility guarantee letter (SKJU) from the Ministry of Finance.

Andy sent a letter on November 3 to PLN requesting the state utility firm to review PPAs on large scale PLTU projects in Java which have yet to start construction or have yet to obtain the SKJU in a bid to bring down the tariff of electricity from the projects to be lower or at least equal to 85 percent of the local BPP of PLN where the project is located. PLN said it wants to bring down the electricity tariff from PLTU projects to be lower than 6 US cents per kWh. The company has managed to lower the tariff of PLTU Cirebon expansion project (1,000 MW) to 5.5 cents per kWh from more than 6 US cents per kWh, and is in negotiation with Bakrie Power and Malaysia?s YTL Corp to lower the tariff of electricity from the planned PLTU Jawa-3 project.

The move by PLN to review the PPA on PLTU projects have been protested by the Indonesia Private Power Producers Association (APLSI), who said that it would undermine investment climate in the power sector.

PLN President Director Sofyan Basir said on November 20 he plans to expand the PPA review policy to include PLTUs which have been in operation for more than 10 years if their electricity tariffs are ?too expensive.?

On November 23, Coordinating Minister of Maritime Affairs Luhut B. Panjaitan, who also oversees the Ministry of Energy and Mineral Resources, demanded PLN to discontinue the PPA review policy, saying it would undermine investment climate in the sector.

But PLN Director of Strategic Procurement 2, Supangkat Iwan Santoso was quoted by Bisnis Indonesia as saying Monday that the PPA review policy will only affect PLTU projects which have yet to start construction. (*)