In the months leading up to the presidential election in April, the government looks to keep electricity affordable for most people by controlling the price of coal.
Bambang Gatot Ariyono, the mineral and coal director general at the Energy and Mineral Resources Ministry, said his office had no plan to revise its policy on coal at least until the end of this year.
Currently, the price of coal that is used to fuel most of stateowned electricity firm PLN’s power plants is capped at US$70 per ton.
“We will continue the DMO policy [25 percent from total production], including the price cap [$70] just as stipulated in the ministerial regulation,” he said, referring to the obligation for coal miners to sell a quarter of their output to PLN, known as the domestic market obligation (DMO).
As of December 2018, data from the ministry show that PLN purchased 95 million tons of coal at a price of $70 or less per ton, exceeding the target of 92 million tons.
The ministry’s electricity director general, Andy Noorsaman Sommeng, said he believed the DMO for coal and the coal price cap for PLN should suffice to prevent electricity prices from rising.
“Fortunately, in recent months, the global price of crude oil has been low at around $60 dollars per barrel. PLN had been worrying about its finances when the oil price stood at $80 dollars per barrel,” he said recently.
PLN announced $1.22 billion in losses as of the end of the third quarter of 2018, compared to Rp 3.04 trillion in profit in the corresponding period of 2017.
Andy added that the energy ministry’s regulation on the utilization of natural gas for power plants, which sets the maximum gas price at 14.5 percent of the Indonesian Crude Price (ICP), had also helped take the pressure off PLN.
According to government planning, natural gas will contribute around 20 percent of the fuel for PLN power plants in the period of 2018-2027, making it the secondmost important energy source for the power producer.
Andy said that, aside from keeping electricity affordable for the people, containing the power price was also meant to entice global investors, especially for the industrial sector that needs competitive electricity prices.
“If electricity is cheap, then [industries] will create products with competitive prices, and that will boost their exports,” he said.
As of December 2018, the electricity rates for small businesses to big industries was 7-8 US cents per kilowatt hour, making Indonesia one of the most competitive markets in Southeast Asia.
Investment into the electricity sector amounted to $11.28 billion last year, falling 7.6 percent short of the target.
PLN finance director Sarwono Sudarto said the firm’s financial performance had been helped by the DMO policy and the coal price cap at $70 per ton.
“As an internal measure [to help with the obligation to keep electricity prices fixed], we will continue our own efficiency measures, such as cutting the electricity transmission cost by placing power plants near the energy source,” he said separately.
Energy expert Fabby Tumiwa, who is also the executive director of local energy think tank Institute for Essential Services Reform (IESR), said the policy to keep electricity cheap was not in line with the government’s plans for renewable energy.
“Coal-fueled power plants will generate cheaper electricity as they get help from the DMO policy [including the price cap],” he said, adding that renewable energy producers were hard-pressed to compete on prices with coalfired power plants.
Source: Jakarta Post, 15 January 2019