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PLN opts for rate adjustment rather than compensation
PLN received compensation of Rp 23.17 trillion (US$1.63 billion) from the government in 2018 to cover its financial losses.
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Fix it fast: Several technicians of state-owned electricity company PLN replace a damaged isolator in Jakarta. PLN hopes it will be allowed next year to adjust its electricity prices to cover financial losses. (The Jakarta Post/Dhoni Setiawan)
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tate-electricity firm PLN hopes the government will allow it to make a price adjustment or continue its compensation scheme next year to offset financial losses.
PLN finance director Sarwono Sudarto said after a hearing with the House of Representatives in Jakarta on Thursday last week the compensation scheme would be needed if the government did not allow the company to raise electricity prices next year.
“We hope there will be a compensation if there is no rate adjustment. Without the compensation it will be hard for us to deal with the impact of external factors [global crude price, inflation and currency exchange],” he said. PLN sold its electricity below the electricity supply costs (BPP) following a request from President Joko “Jokowi” Widodo in 2018.
The low price policy was criticized by observers as part of Jokowi’s populist policy to win votes in the May presidential election. As a consequence, PLN booked Rp 18.50 trillion (US$1.22 billion) in losses as of the end of the third quarter of 2018.
At the end of the year, the government disbursed compensation of Rp 23.17 trillion (US$1.63 billion) in the third quarter.
The company expects to receive similar compensation this year as it has to maintain its current price until the end of 2019. However, the government has not decided whether the compensation will continue next year.
Sarwono of PLN further said that without a compensation scheme, the only way to reduce the financial deficit would be to improve efficiency such by improving the net plant heat rate.
