Fri, 12 Sep 2003

Govt might cancel October electricity hike

Evi Mariani, The Jakarta Post, Jakarta

The government might cancel the quarterly electricity rate increase in October in a bid to help create political stability ahead of next year's general election.

"We also might not increase electricity rates next year," Minister of Energy and Mineral Resources Purnomo Yusgiantoro told lawmakers during a hearing on Thursday with House of Representatives Commission VIII for energy.

Purnomo hoped the rupiah would stabilize at between Rp 8,200 and Rp 8,300 per U.S. dollar to allow the government to take this option.

The rupiah has averaged 8,300 to the dollar over the past several months. Late Thursday it was Rp 8,465 to the dollar.

Purnomo said there were three options open to the government.

First, the government could increase power rates next month as planned. Second, it could choose not to raise power rates, and third, it could increase power prices only for certain categories of customers.

The ministry's Director General of Electricity and Energy Utilization Luluk Sumiarso said the government would make a decision latter this month.

Previously on Tuesday, House Commission VIII urged state electricity company PLN in a hearing to "review the rate increase policy", saying current rates were already too high.

PLN Eddie Widiono insisted that power rates would be increased in October, but promised to delay next year's hike if the government so requested due to political stability concerns during the general election.

PLN has been raising power rates by 6 percent each quarter since the beginning of 2002, as permitted as per presidential decree. Despite widespread protest in January this year, the quarterly price hike was not canceled, although the government was forced to cancel its plan to increase fuel prices.

Strapped for cash, the PLN has said it would continue to raise power rates until after 2005, when the rates are expected to reach 7 U.S. cents per kilowatt hour (kwh), reasoning the 7-cent level is the standard price in many countries for a power company to gain a profit.

According to PLN, the average power rate now stands at Rp 585.17 or 6.88 cents per kWh. Should PLN and the government increase power rates in October, the average price would reach Rp 610.62, or 7.18 cents per kWh.