Govt Urges PLN to Drop Take-or-Pay Scheme

Summary

The Energy Ministry asked PT Perusahaan Listrik Negara (PLN) to no longer use the take-or-pay (ToP) scheme in power purchase agreements (PPAs) with independent power producers (IPPs). Secretary General of the Energy Ministry Rida Mulyana said that the burden of purchasing electricity from IPPs is relatively large and may still increase along with contracts from the 35,000 megawatts (MW) electricity program.

“We really respect the existing contracts, but because this concerns the national interest, we urge the contract signers to no longer sign ToP. The electricity supply is also in excess,” Rida said on Tuesday.

Rida explained that in the past, the government implemented the ToP scheme to spur the development of power plants by the private sector because Indonesia still lacked electricity. However, PLN is already oversupplied. Therefore, the government will encourage the implementation of the take-and-pay contract scheme. “We only pay for what we use. We will go in that direction, so it’s pure business like supply and demand in the market,” he said.