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PLN to set power purchase prices for independent producers
State power company PT PLN holds the mandate to set power purchase prices to buy electricity produced by its (IPP) business partners, aiming at flexibility amid the dynamics of economic circumstances, a state official says
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State power company PT PLN holds the mandate to set power purchase prices to buy electricity produced by its (IPP) business partners, aiming at flexibility amid the dynamics of economic circumstances, a state official says.
The director general for elec-tricity and energy utilization at the Energy and Mineral Resources Ministry, J. Purwono, said that the rights were based on the Energy and Mineral Resources Ministry’s Regulation on the Guideline for Power Purchase Prices for Cooperatives
or other Independent Power Producers (IPPs), which was enacted last week.
“[The reason behind the regulation is] so that the prices do not hinder investment. The investment climate establishes the standard for price setting, namely that there should be good prices [in the eyes of investors] while, at the same time, these conform with [social] order,” Purwono said.
IPPs are playing a big role in PLN’s second-phase 10,000 MW crash power program, expected to start power production in 2014.
IPPs are expected to generate about 40 percent of this total capacity. The first-phase program was launched in 2006 to meet the increasing demand for electricity nationwide, especially for the Java-Bali system. All the power plants in the first 10,000 MW program belong to PLN.
Earlier this year government announced it would set the standard for power purchase prices at US$ 5.8 to 8 cents per KWH.
Purwono said that the setting of purchase prices was determined by various indicators, including the type of power plants, their locations, and their capacities; as well as macro economic indicators: The level of local content, fuel prices and quality and foreign exchange rates.
“[This is the reason why] PLN can set different prices for different business deals,” he said.
However, Purwono added that PLN should first receive government’s agreement before implementing the prices.
He said that the government will play a bigger role in determining the parameter for power purchase prices.
The IPP, he added, and power purchase price, could be established through several mechanisms, including open bidding, direct appointment or direct selection.
