PLN is seeking to slash the cost of the subsidy on electricity by Rp 3 trillion to 5 trillion annually through its program to use more gas and coal, rather than oil, at its power plants.

The electricity subsidy for 2010 is earmarked at Rp 37.8 trillion, but Finance Minister Sri Mulyani Indrawati has indicated that there may be more allocated, if needed.

This year’s expenditure on the subsidy was Rp 60.43 trillion.

PLN signed a signed a Gas Sales and Purchase Agreement with state gas distributor PT Perusahaan Gas Negara (PGN) for a power plant in Talang Duku, South Sumatra. PGN will supply 8 bbtud of gas to the plant for 10 years.

On Wednesday, the two companies also signed a Memorandum of Agreement on a gas sales and purchase agreement for another power plant in Belawan, North Sumatra. The plant, with a capacity of 115 megawatts (MW), is under construction.

Under the MoU, PGN will supply between 100 mmbtu and 150 mmbtu of gas to the plant from a LNG gas terminal to be built in Belawan.

PGN president director Hendi Prio Santoso said the construction of the terminal would start “immediately” after the two companies signed the agreement on gas sales and purchase.

“Production is slated [to start] in the next 24 to 30 months after the signing,” he added.

Newly appointed PLN president director Dahlan Iskan said that the construction of the Belawan plant was aimed to “put an end to the electricity deficit in North Sumatra”.

The area has seen far too many blackouts throughout the year. PLN said the area had a power capacity of 1,166 MW, but during peak hours, peak electricity demand could rise as high as to 1,247 MW.

Dahlan also said that the construction of the gas-fired power plant in Belawan was in line
with PLN’s effort to cut its oil fuel consumption. PLN is the country’s biggest consumer of oil with 25
percent of its power plants relying on oil.

“We are targeting to decrease this number to 12 percent in 2011,” Dahlan said.

The energy source diversification program is one of the new PLN chief’s planned breakthroughs. At the beginning of his tenure last week, he also promised to eliminate the subsidy for power generation.

PLN corporate secretary Ida Bagus Mardawa said that Dahlan also planned to invest in constructing more gas-powered power plants and to securing  gas supplies for the plants in 2010.

“The minister’s other plan is build small power stations in the regions throughout the country,” he added.

PLN gained more than Rp 6 trillion in net profits in the first semester of 2009 after the government allowed PLN a 5 percent margin.

“We have proposed to the government to increase our margin to 8 percent to make our financial balance healthier,” Ida said. (adh)

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