PLN costs will stay high, despite rate hike

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Although lawmakers have approved a government plan to raise electricity rates 15 percent next year, state electricity company PLN will likely see little relief, as surging gas prices will continue to pressure its operating costs, according to a PLN official.

Suryadi Mardjoeki, the chief of PLN’s oil-based fuels and gas division, said in Jakarta on Wednesday that PLN would pay more for gas, which comprises the a substantial portion of the firm’s energy mix.

“The government has decided to increase the price of natural gas sold by KKKS [oil and gas production sharing contract holders]. As a consequence, gas prices for PLN will also automatically increase,” Suryadi told reporters over the telephone on Wednesday.

Suryadi said that several of PLN’s natural gas suppliers have increased prices, including PT Hess Indonesia, PT Medco Energy, Pertamina Hulu Energy (PHE) and Perusahaan Gas Negara (PGN).

According to Suryadi, Hess has increased prices from US$2.38 to $5.10 per British thermal unit (mmbtu), Medco increased prices from $2.42 to $4.45, PHE from $3 to $6, and PGN from $6.3 to $10.

PLN’s basic operating costs are expected to swell from about Rp 192.64 trillion (US$20.22 billion) in 2102 to Rp 218.17 trillion in 2013.

PLN told lawmakers at a recent hearing at the House of Representatives that 71 percent of the firm’s basic operating costs was spent on oil, gas and coal to fuel the company’s power plants.

According to PLN estimates, the firm will spend Rp 112.75 trillion to buy fuel in 2013, an increase of Rp 9.94 trillion from Rp 102.81 trillion in 2012.

Contacted separately, the deputy director of the ReforMiner Institute, Komaidi Notonegoro, told The Jakarta Post that PLN’s increased basic operating costs could not solely be attributed to increasing natural gas prices.

“We can see several indicators that pinpoint PLN’s inefficiencies, such as slow progress on its electrification acceleration program, called the 10,000-Megawatt [MW] fast track program,” Komaidi said.

The 10,000 MW fast track program was launched in 2006 and was set to for completion in 2011. Delays led the government to postpone the deadline to 2014.

Other indicators of PLN’s inefficiencies were a failure to reduce the share of oil in its fuel mix according to its stated target and piling debts, according to its 2012 first quarter financial report, Komaidi said.

A report from the Supreme Audit Agency (BPK) said that PLN had “financial inefficiencies” topping Rp 36 trillion due to poor management of its energy mix, said Komaidi.

Lawmakers on House Commission VII overseeing energy sector agreed on Monday to a government plan raise electricity rates 15 percent by the end of 2013.

However, the lawmakers raised several concerns, particularly on what they termed as poor performance from PLN in improving electricity production.

—JP/ Rabby Pramudatama