DPR agrees to hike electricity charges by 17.47%

JAKARTA (JP): The House of Representatives agreed with the government on Monday to raise electricity rates by an average of 17.47 percent starting July 1.

The rate increase, which was lower than the government's initial proposal of 20 percent, was decided upon during a debate between the House state budget task force and the finance ministry over the revision of the 2001 state budget.

"We agree to raise the electricity rate by an average of 17.47 percent," said the head of the House state budget task force Benny Pasaribu.

The House also decided that household customers with an installed capacity of 450 VA (volt ampere) would not have to pay the higher rate as long as their consumption rate was not more than 30 kilo watt hours per month.

The government proposed the power rate increase to reduce the government subsidy of electricity as part of measures to help maintain the 2001 state budget deficit at a safer level.

The House last week approved the government's plan to raise fuel prices by an average of 30 percent in the middle of this month. The government also planned to increase value added tax to 12.5 percent from 10 percent.

The House decided that the subsidy of electricity costs in 2001 would be set at Rp 4.7 trillion, compared to the initial government proposal of Rp 5.6 trillion. The state-owned electricity company PLN agreed to cover the remaining Rp 900 billion burden, to be included as additional losses to the company.

Several industries had earlier expressed objection to the government plan to raise fuel prices and electricity rates, arguing that the measures would send many manufacturing businesses into bankruptcy due to the current difficult economic conditions.

Meanwhile, director general of financial institutions of the finance ministry Darmin Nasution said that the highest rate increase would be incurred by the R-1 household customers and I-3 industry customers categories, PLN's largest customer group, which would see a compounded rate increase of 32.2 percent.

The R-1 category covers household customers with an installed capacity ranging from 450 VA to 2,200 VA.

Darmin said that the customers with an installed capacity of greater than 2,200 VA would see a lower rate increase of around 5 percent.

He said that this was made possible because the rate in this category of customers already surpassed the average cost of producing the power.

Meanwhile, one legislator, Amir Siregar, rejected the proposal. He argued that PLN had failed to fulfill demand from households in North Sumatra province for the installation of the 450 VA capacity.

But PLN president Heddie Widiono said that the problem occurred because PLN could no longer increase the power supply in the "critical" North Sumatra area due to the lack of investment in new power plants.

Heddie said that if PLN was forced to increase the power supply without new investment, there could be a problem of instability in power voltage.

"Under normal conditions, PLN could connect 2-3 million new customers per year with an investment of around US$3 billion. Right now we don't have the money. Our single source of investment funds currently comes from the state budget ... which is less than Rp 1 trillion," he said, adding that PLN's target for 2001 was to only have 1.3 million new customers particularly in areas which are not suffering a power crisis.

"In critical areas, like it or not, we have to limit the number of new customers," he said.

"How long this (condition) will prevail, will largely depend on how fast we can make new investment in power plants, and on power rates," Heddie said.

The government plans to gradually increase the country's power rates with the outlook of creating a power rate level by 2004 that would attract new investment to the country's power sector.

"If the electricity rates are not (attractive), no one will lend money to us (for new investment)," Heddie said.

He also said that the new investment was needed to improve PLN's service to its customers. He said that PLN needed around US$28 billion in new investments over the next 10 years to help improve the service to its 28 million customers throughout the country. (rei)