Electricity charges up despite stronger rupiah

The Jakarta Post, Jakarta

Public utility PT PLN will increase power charges by an average of six percent this month as part of its government- sanctioned quarterly rate hike policy.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro told reporters on Monday that the recent strengthening of the rupiah against the U.S. dollar had helped ease PLN's cost burden, but current electricity charges were still lower than PLN's production costs.

As such, PLN still had to raise its charges to cover its losses, the minister said.

"Based on our calculations, the economic level of electricity charges for July should be Rp 630 per kilowatt hour (kWh). Now, the rate is still Rp 560 per kWh," he was quoted by Antara as saying after a meeting with the House of Representatives' energy commission.

The government and PLN have repeatedly said that the economic level for electricity charges is 7 U.S. cents per kWh.

PLN pays about 70 percent of its costs, including the purchase of fuel, power supplies from private power firms, and spare parts for its power plants in U.S. dollars, while it sells its power in rupiah. Thus, any increase in the value of the U.S. dollar will add to PLN's financial burden, while the rise in the rupiah's value will cut its costs. The state firm plunged into financial trouble following the sharp depreciation of the rupiah against the dollar at the start of the economic crisis in 1997.

The rupiah has strengthened against the U.S. dollar by about 9 percent from 8,900 in the beginning of the year to 8,200 today.

Early this year, the government issued a decree allowing PLN to increase electricity charges quarterly by an average of six percent.

The policy was aimed at helping increase PLN's revenue -- so as to reduce the government's subsidy to the company -- and to send signals to foreign electricity investors that the government was committed to making the country's power industry profitable.

Purnomo said the government would still allow PLN to raise its power charges in the next quarter.

He noted, however, that should the rupiah further strengthen to above 8,000 per dollar over the rest of the year, power charges were also likely to reach economic levels by the end of the year.

"If an economic level is reached in 2003, there will be no need to raise electricity charges next year," Purnomo said.