PROPER ELECTRICITY PRICING IS BLESSING IN DISGUISE

Wrong pricing policy had its impact on ful­filling electricity need, including electricity for the industrial sector and household. Lesson leant was that wrong pricing policy of electricity might cause two third of a nation to collapse. For comparison was electricity problem and average economic growth of the Philippines. Economic growth fell from 7% to 4%. The Directorate General of Elec­tricity, Ministry of Energy and Mineral Resources [ESDM] Jarman disclosed to Business News some time ago.

The Ministry of ESDM was stepping up in­tegrated electricity supply management. Operational Management permit application for powerhouse build­ing was also made efficient. 40 percent of the need for generators was managed by the Government. The system applied in the past to meet electricity need was subsidy. ""The industry pays only 60 percent because the rest is subsidized. But the problem is that companies tend to be reluctant to build their own powerhouses. I see it as a sign of wrong policy. We are trying to subsidize the engine to ensure sustain­ability of the industry."

Powerhouses for industry based on Power Wheeling [PW] which did not rent PLN transmission for distribution, was still permissible provided by open access. PW operation belonging to private compa­nies prevented non-open access. Power generating in open air environment must be with open access. "For operational permit, the power wheelingh model must serve industrial estate.

The Ministry was also was also trying to in­crease power supply for the mineral-and-coal [Miner­ba] industry. According to the Law No. 4/2009 on Minerba, companies were obliged to build smelters. Clearly the Law encouraged industrial downstream­ing and processing of value added mining. "Develop­ers can operate smelters with low system, using PLN transmission."

Electricity could be transmitted through PLN transmission by power wheeling system, which was a system run by private generators to industrial es­tates using the existing network, operated with power regulators to ensure efficiency of system. The Power Wheeling Scheme had been applied in Water Powered Generator [PLTA] Sungai Kayan 600 MW in North Kalimantan innaugurated by Susilo Siswou­tomo, Deputy Minister of ESDM in January 2014 last which was designed to serve cement industry in East Kalimantan.

If there was no transmission, the private sec­tor could still build but with open access system. The Ministry was still scheming up regulation, including rules for power wheeling because the facilities would soon motivate industrial estates to build their own powerhouses. Power Wheeling was an operational model in which the owner acted as captive power. He rented PLN transmission transmit the electricity generated. Current was transmitted to different locations includ­ing factories. The permit holder of integrated areas rented PLN transmission.

The transmission system was built outside the business area, or the company bought the system from other companies through PLN networking rent­al. "For example power wheeling run by a smelter owner in the middle of an island. At the same time they had water resource in another location. The dis­tance is far, but on the same island. So power wheel­ing could be put at work and there must be a trans­mission. PLN can hold command afield" Siswoutomo said.

The Ministry would apply the private equity system for assurance of power supply, which could support industry with environmental control. "Indus­trial activities must be in industrial estates. Environ­ment could be supportive, logistics be effective and efficiency be enhanced and current supply need not be subsidized."Siswoutomo remarked.

The Ministry planned to withdraw electricity subsidy for industry. This was in accordance with Law No 30/2007 on energy. The law on subsidy only applied on marginal people. Household consumers of 450 - 900 ampere category would not be subsidized. Wirhdrawal of subsidy would be run by stages. "We already had cancelled subsidy for middle category subscribers: hotels, offices, luxurious homes etc."

The Ministry admitted that cancellation of subsidy must be gradual. Electricity subsidy was giv­en because the industry was not running their own powerhouses, while in fact it could increase cost ef­ficiency because industries consumed power in high quantity the new system would manage cost by transmitting power to companies in one area. "Other countries had applied this system."

Electricity transmission to industrial estates including smelters had run, the system located on the coastline in Kalimantan. The ministry was encour­aging other industries to build the same facilities. In­dustries with their own generator should attain break even or make profit in four years; they could even sell power to third parties. An example was PT Tambang Batubara Built Asam/PTBA in Tanjung Enim, South Sumatra was already able to enhance efficiency in electricity financing. "Other coal miner companies like Adaro had run survey. The need for electricity was close to the available resources they must be used or else the current from existing resources would be idle or wasted. Power utility might bring profit up to 20 percent."

In case of industrial estates located in the middle of an island, electricity was not impossible to procure. In the past, generators In an archipelago location was only possible with gas powered gen­erator, but such was very costly. The expense for building Steam Powered Generators was still more efficient in the regions.

The overall picture of national electricity in­dustry was as follows: Total capacity of generators by March 2014: 49.630 MW [ PLN 72%, IPP 21%, PPU 4 % and non oil- fuel 3 % The growth of electricity consumption in 2013 came to 7.8% of capac­ity. In the previous year growth increased to 8.5%. The electrification ratio for 2013 was 80.51%.

Electricity consumption for 2013: 188 kWh [household 41%, industry 34%, public 6%] Energy mix generators in 2013 consisted of: coal 51.6%, gas 23.6%, oil-fuel 12.5%, water powered 7.7%, thermal heat 4.4%. Next year by Electricity Procure­ment Plan [RUPTL]. PT PLN increased electrification ratio to 85% by ministrial approval. (SS)

Business New - May 9, 2014