Govt nixes power rate rise

Govt nixes power rate rise

Fitri Wulandari, The Jakarta Post, Jakarta

The government has finally decided not to increase electricity
rates for the October-December period this year, amid strong
public opposition ahead of next year's general elections.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro
said the decision was taken to help ease the burden of low-income
people, and in consideration of the stabilized rupiah.

"The government decided there's no need to increase
electricity rates," he told reporters late on Tuesday, adding
that President Megawati Soekarnoputri issued Presidential Decree
No. 76/2003 on the cancellation of October's hike plan.

Presidential Decree No. 89/2002 permitted state electricity
company PLN to raise electricity rates each quarter starting
early 2002 until 2005, when the average rate is expected to reach
7 U.S. cents per Kilowatt hour (Kwh), a rate that would allow the
ailing PLN to enjoy a profit.

The rate hike policy has been strongly protested by various
parties.

House of Representatives Commission VIII on mining and energy
recently urged the government to cancel the rate hike, arguing
that the rapid appreciation of the rupiah against the U.S. dollar
should have eased the financial burden of PLN, whose operational
costs are mostly in dollar terms. The lawmakers also argued that
the current average rate at Rp 574 per Kwh, or 6.79 U.S. cents,
was already near the commercial value of 7 cents.

Purnomo had indicated earlier that the government might not
increase the power rates if the rupiah stabilized at between Rp
8,200 and Rp 8,300 per U.S. dollar.

The rupiah has averaged 8,300 to the dollar for the past
several months.

Purnomo said yesterday the government would take the
development in the rupiah into account when deciding on the
electricity rates for next year. "There's an indication that the
rupiah will strengthen further."

According to a PLN report, the company would have suffered
some Rp 300 billion in losses this year if the government had
decided not to increase the power rates for the October-December
period.

If the power rate increase had been approved, the average cost
would have reached Rp 610.62, or 7.18 cents per Kwh.