Coal Prices to Play Role in Power Cost Adjustment

The government plans to include coal prices in its power cost adjustment, as more than half of Indonesia's electricity will come from coal-based plants. (Antara Photo/Jojon)

By : Adinda Normala | on 12:20 PM January 27, 2018
Category : Business, Economy

Jakarta. The government plans to include coal prices in its power cost adjustment, as more than half of Indonesia's electricity will come from coal-based plants.

The current adjustment scheme takes into account the rupiah exchange rate, the Indonesian crude oil price and inflation, resulting in a variable electricity price charged to customers. Electricity rates are adjusted every three months.

"We will reformulate [the scheme] by including the reference price for coal, as its use [in power production] will probably reach 60 percent," Energy and Mineral Resources Minister Ignasius Jonan said during a meeting with the House of Representatives on Thursday (25/01).

He added that the Indonesian crude oil price variable was not relevant, as oil is no longer a popular energy source. The current scheme was implemented in 2015.

According to the government's electricity procurement business plan for 2017-2026, diesel-based power plants will contribute only 0.4 percent to the country's energy mix. The contribution from coal will be 50 percent, followed by 26 percent from natural gas with and 22.5 percent from renewables.

Domestic power plants consumed only 97 million metric tons of the 461 million tons of coal Indonesia produced last year.

The Ministry of Energy and Mineral Resources and the Coordinating Ministry for Economic Affairs are designing the new adjustment scheme.

"We are now discussing it, we're trying to be realistic," Ignasius said.

The government has decided to keep electricity prices stable in the first quarter of the year, but pressure is mounting to increase them, as the global oil price is now 50 percent higher than the government's initial forecast.

Customers who subscribe for 450-volt-ampere (VA) power will pay Rp 415 per kilowatt-hour, while 900 VA power subscribers will pay Rp 605 per kWh. Meanwhile, nonsubsidized subscribers of 900 VA and above 900 VA will pay Rp 1,352 per kWh and Rp 1,467 per kWh, respectively.

Administered prices are one of the major drivers of inflation and can significantly affect the country's purchasing power, which last year did not rise significantly due to increased electricity tariff adjustments in the first half of the year.

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