State Power Utility PLN Seeks Efficiency Savings as Power Costs Soar

State Power Utility PLN Seeks Efficiency Savings as Power Costs Soar

State power utility Perusahaan Listrk Negara faces a daunting task as it aims to improve efficiency amid

concerns over soaring electricity costs.

Nur Pamudji, PLN’s president director, said the firm was working on instituting plans to keep costs down and

improve efficiency amid the growing impact of energy subsidies on state finances.

Nur said the spiraling bill for electricity subsidies was due to rising energy prices, a factor that PLN has

little control over.

“Non-fuel costs, which PLN has full control of, only increased by 3 percent, which is lower than inflation,”

Nur told the Jakarta Globe in an interview in the capital on Wednesday.

According to PLN’s 2011 financial statement, the firm spent Rp 120 trillion ($13 billion) on fuel and

lubricant, almost two-thirds of its total expenditure and 43 percent more than it spent in 2010.

The electricity subsidy may swell to Rp 89.1 trillion this year, far higher than the Rp 65 trillion set aside

in the state budget. The government had previously planned to increase electricity prices to cut the power

subsidy bill, but the move was rejected following widespread protests.

Nur said the government needed to formulate a better, more targeted subsidy policy.

Critics have said that fuel and energy subsidies are wasteful given that medium- and high-income households

benefit more than poor people do.

Another plank of the government’s energy policy is to invest in diesel as a fuel for PLN generators.

Nur said improving the types of fuel used, including less reliance on carbon-based fuels and sourcing more

renewable energy, would reduce the cost of the subsidy.

Last year, gasoline accounted for 23 percent of PLN fuel purchases.

“By the end of the year, the figure will be 13 percent, while the contribution of cheaper coal will be

increased to 50 percent from last year’s 43 percent,” said Nur, who replaced State Enterprise Minister Dahlan

Iskan as PLN chief in 2010.

The company, he said, needed to secure fuel at its source, which would reduce the reliance on intermediaries.

“Not only will it reduce the price, but it will also ensure a steady supply of energy for PLN,” Nur added.

PLN has tried to secure its coal at the source and intends to do the same with gas, as state-controlled gas

distribution firm Perusahaan Gas Negara has a near monopoly.

He also suggested that PLN had become more efficient in its attempt to bring electricity to Indonesia’s 240

million people.

“According to a World Bank report, the amount of electricity lost along PLN’s transmission and distribution

lines dropped to 9.9 percent in 2010 from as high as 16.5 percent in the past. It is lower than India’s 27.2

percent and Brazil’s 16 percent,” he said.

Nur said that he was optimistic the figure could be reduced further as the country plans to invest heavily in

transmission and distribution lines.

That would cost an estimated Rp 566 trillion, he added.

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