The soaring global coal prices are undermining state electricity company PT PLN’s program to improve cost efficiency through the operation of more coal-fired power plants in order to reduce its dependence on oil.
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 the international market prices although Indonesia is among the largest coal producers in the world,” he said over the phone.
Dahlan continued that climbing coal prices might “influence people as a whole”, but declined to explain whether the company would further raise the basic electricity tariff or not deal with ballooning operational costs.
PLN has been under fire recently due to its plan to remove a cap on power tariff hikes for industries. The company argues that it has to lift the cap because not all industries enjoy that facility and it may be accused of violating the 1999 Business Competition Law for applying discriminatory tariffs.
In July 2010, the Energy and Mineral Resources Ministry introduced new electricity tariffs through a ministerial decree. The decision directly drew massive criticism from businesses because the new rate had caused between 20 and 30 percent increase in their electricity costs.
As a compromise, the government, the House and Representatives and PLN agreed to cap the power tariff hike for industries at 18 percent.
The Indonesian Coal Mining Association (APBI) forecasts that the domestic coal consumption may reach 78 million ton 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 (Rp 1 million) per ton, up 8.6 percent from $103.41 per ton in December.
The APBI predicts that the global coal prices would stay at between $120 and $130 this year.
PLN primary energy director Nur Pamudji said in a press statement that his company had found difficulties in making price agreements with coal suppliers. The suppliers demanded that PLN pay higher due to soaring prices at the international market, he added.
“The government should regulate the coal prices for domestic consumption, because it has the right to do that,” said Pamudji, citing the 2009 Mineral and Coal Mining Law stipulating that the government take full control of the country’s minerals and coal. APBI executive director Supriatna Suhala told reporters that soaring coal prices had put PLN in a very difficult position.
“There’s no short-term solution for PLN because it has no room to increase tariffs. But for the long-term, it should boost efforts to diversify energy sources to alternative energies such as nuclear and geothermal,” he said.