Surging coal prices undermine PLN's efficiency program

The soaring global coal prices are undermining state electricity company PT PLN's pledge to improve its operational efficiency by cutting its dependency on oil-based fuels and boosting coal usage to fire its power plants.

PLN president director Dahlan Iskan said Thursday that currently, surging coal prices had posed the most dangerous threat to his company as it would increase the company's operational costs and affect the electricity tariff rate.

“Increased coal prices hugely influence PLN's operational costs. We have to buy coal at international market prices although Indonesia is among the largest coal producers in the world,” he said over the phone.

Dahlan added that climbing coal prices might “influence people as a whole”, but declined to explain whether the company would raise the basic electricity tariff to deal with ballooning operational costs.

“Now, we're focusing our energy on finding solutions to prevent the negative impacts of high coal prices,” he said.

The Indonesian Coal Mining Association (APBI) forecasts that domestic coal consumption may reach 78 million tons in 2011. Of that amount, 50 million tons of coal will be utilized to fire PLN's power plants across the country.

According to the Oil and Gas Directorate General at the Energy and Mineral Resources Ministry, the coal reference price stands at US$112 per ton, up 8.6 percent from $103.41 per ton in December.

APBI executive director Supriatna Suhala predicted that the price would stay at between $120 and $130 this year.