State-owned Perusahaan Listrik Negara (PLN) announced an interim agreement that could finally resolve the protracted dispute with IPPs that have developed projects in the country.

The 10-month agreement, signed with the developers of the Paiton I project, will see PLN purchasing power from the plant at a reduced rate of Rp2450/kWh ($0.32/kWh) while a permanent settlement is negotiated. Each side also agreed not to file any litigation for the duration of the agreement. The foreign-backed, $2.5 billion Paiton I is owned by Edison Mission Energy, Mitsui & Co , GE and Indonesian firm PT Batu Hitam Perkasa.

After Indonesia’s President Wahid ordered a negotiated settlement to the dispute, the situation has improved. Along with strong attempts at resolving the power purchase contract dispute with the 27 IPPs in Indonesia, the government also plans a 29 per cent increase in electricity tariffs this year.