VZCZCXRO1977
RR RUEHCHI RUEHDT RUEHHM
DE RUEHJA #9867/01 2190534
ZNR UUUUU ZZH
R 070534Z AUG 06
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 8338
RHMFIUU/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHKO/AMEMBASSY TOKYO 9951
RUEHBY/AMEMBASSY CANBERRA 9798
RUEHBJ/AMEMBASSY BEIJING 3556

UNCLAS SECTION 01 OF 02 JAKARTA 009867 
 
SIPDIS 
 
DEPT FOR EAP/MTS AND EB/ESC/IEC 
DEPT PASS OPIC, EXIM, TDA 
DOE FOR CUTLER/PI-32 AND NAKANO/PI-42 
COMMERCE FOR USDOC 4430 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EPET ENRG EINV PREL ID
SUBJECT: INDONESIA POWER HIGHLIGHTS-JULY 2006 
 
¶1. Summary. On July 5, the Government of Indonesia (GOI) 
issued Government Regulation 26/2006, revising provisions 
for electricity purchases under the direct appointment 
method.  On July 18, the Minister of Energy and Mineral 
Resources issued Decree 44/2006 for the purchase of power 
under the Accelerated Energy Diversification Plan.  On July 
5, the GOI also issued Presidential Regulation 71/2006 
directing state electricity company PLN to accelerate the 
development of coal-fired plants.  On the same day, the GOI 
also issued Presidential Regulation 72/2006 creating the 
Coordinating Committee for the Accelerated Development of 
Power Plants.  On July 24, Jakarta's Muara Tawar power plant 
suspended operations due to a lack of fuel. On July 17, the 
Cilacap power plant was also down following an earthquake 
and tsunami.  This report uses an exchange rate of Rp 
9,070/USD as of July 31, 2006. 
 
Power Regulation Amended 
------------------------- 
 
¶2. On July 5, the GOI issued Government Regulation 26/2006, 
the second amendment to Government Regulation 10/1989 on 
Electricity Supply and Utilization.  The regulation revises 
provisions for the purchase of electricity from independent 
power producers.  The regulation permits the direct 
appointment of electricity producers using renewable energy 
sources and those expanding existing facilities.  Under the 
decree, the Minister of Energy and Mineral Resources will 
have the authority to establish the electricity reference 
price for directly appointed producers. 
 
¶3. On July 18, the Minister of Energy and Mineral Resources 
issued Decree 44/2006 for the Purchase of Power under the 
Accelerated Energy Diversification Program for Coal Fired 
Power Plants.  The decree establishes three types of 
reference prices for electricity produced from non-mine 
mouth, coal-fired plants.  For contracts denominated in 
Rupiah, the maximum price is Rp 520 (USD 0.057) per kwh. For 
contracts denominated in US dollars, the maximum price is 
USD 0.0495.  Alternatively, producers may choose to link 
their contract to state electricity company PLN's retail 
selling price.  In that case, the contracted price is capped 
at 70 percent of retail tariff. 
 
Table 1: 
Electricity Prices for New Coal Fired Plants 
--------------------------------------------- ------ 
Plant Size        Scenario 1 Scenario 2  Scenario 3 
                   (Rp/kwh)   (USD/kwh)   percent 
--------------------------------------------- ------ 
Up to 25 MW           520      0.0495        70 
150 MW to 150 MW      495      0.0475        65 
More than 250 MW      485      0.0450        60 
 
Note: Kwh (kilo watt hour) 
 
 
PLN to Accelerate Development of Coal-Fired Plants 
--------------------------------------------- ----- 
 
¶4. On July 5, the GOI also issued Regulation 71/2006 
directing PLN to accelerate the development of coal-fired 
plants with the goal of adding 10,000 MW of generating 
capacity to the national grid by 2009.  The GOI also gave 
PLN the task of expanding the network of transmission lines 
within the next three years.  According to the regulation, 
PLN must use an open and competitive tender process in 
selecting the contractors.  However, PLN is permitted to 
make direct appointments of contractors when they bring 
their own financing to the project.  The regulation requires 
PLN to submit monthly progress reports to the Ministers of 
State-Owned Enterprises, Finance, and Energy and Mineral 
Resources. 
 
¶5. The regulation includes a list of 10 projects in Java and 
30 projects outside the Java-Bali grid under the accelerated 
development program.  On July 10, PLN announced a request 
for proposals (RFP) for the 10 power projects on Java. 
These projects will add at least 6,900 MW supply to the 
Java-Bali grid.  According to media reports, Vice President 
Jusuf Kalla said that the government is prepared to consider 
offering comfort letters to power investors. 
 
JAKARTA 00009867  002 OF 002 
 
 
 
Table 2: 
List of Tendered Coal Fired Power Projects in Java 
--------------------------------------------- ------ 
   Project Name    Unit Generator   Location 
                        Output(MW) 
--------------------------------------------- ------ 
1  PLTU* 2 Banten   2   300-400     Labuan,Banten 
2  PLTU 3 Banten    3   300-400     Tangerang,Banten 
3  PLTU 1 Jawa      3   300-400     Indramayu, 
   Barat                            West Java 
4  PLTU 2 Jawa      3   300-400     Pelabuhan Ratu, 
   Barat                            West Java 
5  PLTU 1 Jawa      2   300-400     Rembang, Central 
   Tengah                           Java 
6  PLTU 1 Jawa      2   300-400     Pacitan, East 
   Timur                            Java 
7  PLTU 3 Jawa      2   300-400     Tuban, East Java 
   Timur 
8  PLTU 1 Banten    1   600-700     Suralaya, Banten 
9  PLTU 2 Jawa      1   600-700     Paiton, East 
   Timur                            Java 
10 PLTU 2 Jawa      1   600-700     Tanjung Jati, 
   Tengah                           Central Java 
 
Note: PLTU refers to coal fired plant 
Source: PLN 
 
¶6. Also on July 5, the GOI issued Regulation 72/2006 
creating the Coordinating Committee for the Accelerated 
Development of Power Plants.  Former Director General of 
Electricity and Energy Utilization Dr. Ir. Yogo Pratomo was 
appointed chairman.  The main function of the committee is 
to implement the GOI's above-mentioned crash program to add 
10,000 MW of generating capacity to the national grid by 
¶2009.  The committee's term expires December 31, 2009. 
 
Java-Bali Grid Updates 
---------------------- 
 
¶7.  On July 24, Jakarta's Muara Tawar power plant suspended 
operations due to a lack of fuel.  The 840 MW combined cycle 
plant was completely shut down for one day and operated at 
only 140 MW capacity in the following three days.  The Muara 
Tawar supply shortage did not cause a power deficit in the 
Java-Bali grid, but only because PLN initiated rotating 
blackouts throughout the greater Jakarta area.  Lack of fuel 
has been a persistent problem for the Java-Bali grid in the 
past few months, which industry analysts say highlights the 
need for better coordination between PLN and Pertamina. 
 
¶8. On July 17, the Cilacap power plant was also forced to 
shut down following an earthquake and a tsunami in 
Pangandaran, West Java.  The plant, which came online in May 
2006, resumed operations the next day after a PLN 
inspection.  In July, the Java Bali grid operated on an 
average reserve margin of 1,382 MW or 7.3 percent of 
installed capacity, which was a significant improvement over 
April and May though still below world best practices. 
 
Table 3: 
Selected Power Statistics (Java-Bali Grid) 
--------------------------------------------- ----- 
                                 Apr    May    Jun 
--------------------------------------------- ----- 
Capacity (MW)                   18,683 18,683 18,683 
Peak Load (MW)                  14,178 14,279 14,405 
Average Reserve (MW)               590    825  1,483 
Average Reserve margin (percent)   3.2    4.4    7.9 
 
PASCOE