PLN to save $2b in efficiency program

State-owned electricity firm PT Perusahaan Listrik Negara (PLN) expects to cut production costs by Rp 20 trillion (US$2.06 billion) this year on lower oil-based-fuel consumption at its power plants, Jakarta Post reported Thursday.

Vice President Director Rudiantara said recently PLN expected total production costs to drop from Rp 160 trillion in 2008 to Rp 140 trillion this year.

?We?ll save about Rp 20 trillion, mainly from using less oil-based fuels in our energy mix,? Rudiantara said.

?We?re taking advantage of both lower oil consumption and lower oil prices,?

Fuel expenditure accounts for 70 percent of PLN?s total spending, he went on, making efficiency in energy consumption a crucial part of the company?s financial performance.

In the first half of this year, PLN?s power plants used up 445 million kiloliters oil-based fuels, down from 5.93 million kiloliters the same period last year.

?In the first six months of 2009, we saved about Rp 9.4 trillion on fuel," said Murtaqi Syamsuddin, PLN?s Director for Java and Bali.

He added most of the savings came from PLN?s plants on the two islands, as most plants elsewhere were still highly dependent on oil-based fuels.

PLN estimates that by the end of the year, its consumption of oil-based fuels will be 7.91 million kiloliters, down from 11.32 million kiloliters last year.

Regardless of the improved efficiencies, PLN?s financial condition is unlikely to improve significantly, Rudiantara said.

He pointed out the efficiency effort would only reduce the subsidy provided by the government, but would not see the company book a profit.

?Since the power rates remain financially unviable, the efficiency efforts will only reduce our dependency on the government?s subsidy;? Rudiantara said.

Electricity rates are set by the government

The average rate is Rp 650 per kilowatt hour (kWh), while this year?s average production cost is estimated to be somewhere between Rp 1,100 and Rp 1,300 per kwh, Rudiantara said. (*)