Private electricity at 3.6 cents very unlikely: PLN president
Thursday, May 10 2001 - 04:30 AM WIB
The president of state electricity company PT Perusahaan Listrik Negara (PLN), Eddie Widiono, said PLN would consider the proposals from legislators for a new tender of electricity generators to get lower prices of electricity from private producers.
Nevertheless, Eddie said that it would very unlikely to get private electricity at 3.6 U.S. dollar per kilowatt per hour (kWh) using the current formula of 20 year-sale contract, noting that investors needed a proper rate of return on their investment.
He noted that it may be attractive to offer a longer period of sale contract of say 30 years to 40 years to investors. But again, it must be calculated carefully, because the longer the period, the more risks investors have to bear.
"Considering the long-term return on investment, it seems impossible to get electricity prices of below 4 U.S. cents per kWh because the longer period the more risks they would bear, but on the other hand, their investment needs a certain rate of return. With this condition, I'm not sure there are investors interested in building new generators here," Eddie said in Bandung on Wednesday (May 9).
Eddie made the statement in response to proposals by two legislators from the House of Representatives' Commission VIII on energy and mining, Pramono Anung and Husni Thamrin, that PLN open new tender for the development of new power generators in Java and Bali to prevent possible power glut in the two islands by year 2003.
Both legislators said PLN must make it clear since the beginning of the tendering of new power plants that it could only buy electricity from any power producers at 3.6 U.S. cents per kilowatt hour (kWh).
Eddie also revealed that PLN still wanted the government to increase basic electricity tariffs starting September, 2001, so that it would not reduce the government's subsidy burden and improve PLN's finance.
To reduce the impacts of the increase, PLN has proposed that the government increase basic electricity tariffs gradually, namely 2 percent per month. (*)