Electricity tariff up next month

JAKARTA (JP): The government yesterday announced an average increase of 7.8 percent in electricity billing rates beginning next month to raise funds for power development.

Under a presidential decree, the government has also decided to allow the state electricity company PLN to regularly adjust its billing rates every three months to cope with increases in generation costs.

Minister of Mines and Energy I.B. Sudjana told around 100 reporters at a press conference yesterday that PLN's billing rates will increase by an average of Rp 161.59 (7.39 U.S. cents) per kilowatt hour (kWh) next month from Rp 150.06 at present, with the tariff for road lighting increasing at the highest rate, 11.11 percent.

The new rates maintain a cross-subsidy mechanism, allowing small consumers to enjoy subsidies from large-scale subscribers.

"The tariff increase is important for PLN to raise funds for the power projects it requires to meet increasing demand," Sudjana said in yesterday's meeting, which was attended by Secretary General of the Ministry of Mines and Energy Umar Said, Director General of Electricity and Energy Development Artono Arismunandar and PLN's president, Zuhal.

Sudjana explained that PLN, whose status has been changed to a profit-oriented and independent firm, will need Rp 12 trillion ($5.49 billion) per annum to finance the construction of new power stations and distribution facilities, whereas its financial capability is limited.

"PLN is supposed to build new power stations with a total capacity of 9,500 megawatts (MW) in the coming five years," he said.

PLN usually finances its power projects with its own equity, government investment as well as foreign and domestic loans.

Sudjana said increasing PLN's financial capability is important because the government's financial resources will decline.

Sudjana said that the tariff adjustment, made after the latest increase in February of last year, was calculated on the basis of the one-year impacts of inflation, depreciation of the rupiah, increases in fuel prices and electricity charges provided to privately-run power generators.

"Three months after the November hikes, PLN will further adjust the tariffs," he added.

Arismunandar estimated regular adjustments every three months would likely need an increase of only around 0.10 percent or 0.25 percent.

"It is very possible that after a certain three-month period, tariffs will not rise if inflation, rupiah depreciation, fuel price developments and the private electricity charging do not hurt PLN's performance," he said.

He said that PLN's regular adjustment of electricity tariffs will be strictly supervised by a team from the Ministry of Mines and Energy and will need approval from President Soeharto.

Tariffs

Arismunandar said that the highest increases in billing rates is set for public lighting facilities, middle-class households, social institutions, hotels and some small-scale industries.

He explained that the tariff for the public lighting facilities will increase by 11.11 percent to Rp 165 per kWh, for middle-class households (with a capacity of between 501 volt amperes (VA) and 2,220 VA) by 9.96 percent to Rp 154.61 and for middle-class households by 9.87 percent to Rp 127.32.

Social institutions will face an increase of 9.86 percent to Rp 183.46 per kWh.

Tariffs for small-scale industrial plants with electricity utilization of between 14 kVa and 200 kVa will increase by 8.64 percent to Rp 175.82 per kWh.

Impacts

Both Sudjana and Arismunandar assured that the tariff adjustment will not hit the country's industries because the planned electricity tariff hikes are relatively small.

"A 10-percent increase in electricity tariffs will have an impact of only about 0.25 percent on inflation," Sudjana said.

He said increases in electricity tariffs will also encourage subscribers to consume power more efficiently.

Zuhal, meanwhile, said that the planned 7.68 percent increase will enable the company to raise a fund of Rp 240 billion in the coming five months.

"I should also caution that our electricity tariffs, which are estimated at Rp 152.50 per kWh, are the lowest in Asia," he added.

The Philippines, for example, charges Rp 225.42 per kWh, Singapore Rp 161.68, Thailand Rp 158.51, Malaysia Rp 159.41, Hong Kong Rp 181.82 and Taiwan Rp 170.41 per kWh, he said. (fhp)