T

he government’s plan to cap gas prices under the domestic market obligation (DMO) scheme has become uncertain as top officials have yet to confirm the idea, which experts consider as helpful to maintaining affordable access to electricity.

Deputy Energy and Mineral Resources Minister Arcandra Tahar said on Friday he had yet to receive information about the plan, stressing that gas prices remain in accordance with existing regulations.

“I don’t know [about the plan], I have no information on it. I will ask the [Electricity Directorate General] about the plan again,” he told the press.

Energy and Mineral Resources Ministerial Regulation No. 45/2017 on the utilization of natural gas for power plants stipulates that the standard gas price is 14.5 percent of the Indonesian Crude Price, which currently stands at around US$60.

Hence, state electricity firm PLN, which is prohibited from increasing electricity prices until 2019 by the government, faces fluctuating gas prices while also suffering from an increasing financial burden.

The idea to cap the gas price under the DMO scheme was first voiced last month by the ministry’s electricity director general Andy N. Sommeng. However, Andy recently said the ministry would deliver the idea through a shortcut by implementing a business-to-business (B2B) scheme.

“The minister [Energy and Mineral Resources Minister Ignasius Jonan] wants it fast, so we will try to go through a B2B scheme that assigns PLN to negotiate with gas contractors,” he said on Thursday.

Andy added the government considered that the plan would positively impact the upstream sector as gas companies that had been operating for 30 years had reached break-even point.

“They [30-year-old gas firms] just have to pay the maintenance costs of the gas wells. Even if they want to conduct [exploration], the cost won’t be that high. Hence, the gas price should be lowered,” he said.

The Electricity Directorate General calculated that the ideal gas price for power plants is $7 per million British thermal units (mmbtu), lower than the current price of around $10 to $11 per mmbtu.

However, Andy did not disclose further details on the regulation or agreement to seal the price cap plan under the DMO mechanism.

On the price cap idea, PLN’s director for corporate planning Syofvi Roekman could not be reached for comment on Friday. However, she was quoted by kontan.co.id on April 24 as saying that PLN was on the same page with the government about capping gas prices under the DMO.

“We want it [the plan to cap gas price under the DMO],” she said.

Meanwhile, the Finance Ministry’s budget director general Askolani echoed Arcandra’s statement that he had yet to receive any blueprint from the Energy and Mineral Resources Ministry on the price cap idea.

Komaidi Notonegoro, the executive director of Jakarta-based mining research group ReforMiner Institute, concurred that an idea to cap the gas price under the DMO was the safest option to ease PLN’s financial burden.

“I think it [the plan] is needed because if the gas price is affordable for PLN, the company should also be free to adjust its electricity prices,” he said.

However, Fahmy Radhi, an energy observer from Gadjah Mada University, begged to differ as he said the previous DMO scheme on coal prices was adequate to ease PLN’s financial burden as the commodity contributed more than half to the company’s electricity production.

Moreover, he said current high gas prices were due to the lack of pipe infrastructure to connect the upstream sector to industrial consumers directly, coupled with the existence of middlemen in gas sales.

“I will be on the same page with the government if it [capping gas prices] is for industry as gas is its essential raw material. The high gas price has been hampering their competitiveness in the global market” he said.