Govt 'won't raise power rates' in 2005

Govt 'won't raise power rates' in 2005

Rendi A. Witular, The Jakarta Post, Jakarta

The two fuel price increases this year will not make the
government increase electricity rates in 2005, despite increased
production costs for state power utility PT Perusahaan Listrik
Negara (PLN), a minister says.

"There will be no hike in electricity rates this year since it
would burden the public at a time when the government just
increased fuel prices. The best time to raise the rates will be
next year," Coordinating Minister for the Economy Aburizal Bakrie
said on Thursday after a coordination meeting with Vice President
Jusuf Kalla.

When the government raised fuel prices on March 1 by an
average of 29 percent, PLN had considered increasing electricity
rates as fuel costs made up about 40 percent of the firm's
production costs.

Unlike other industries, PLN still pays subsidized prices for
some of its oil-based fuel supply.

The company uses oil-based fuels to fire up power plants if
electricity produced by utilizing hydropower, geothermal, gas and
coal proves to be insufficient.

Although oil-fired plants contribute only around 30 percent of
the country's total power capacity, close to 70 percent of the
nation's total power generation costs are attributed to petroleum
fuels.

Aburizal said the delay would mean the government would have
to increase its fuel subsidy allocation for power generation.

Based on the state budget's second revision, the fuel subsidy
for electricity is set at Rp 12.5 trillion (US$1.21 billion).

To increase power rates, PLN needs to get approval from the
government and the House of Representatives.

The last time PLN raised power rates was in 2003 by an average
of 6 percent for every quarter -- a result of the Megawati
Soekarnoputri government's commitment to gradually reduce fuel
subsidies.

The government abandoned the commitment as the last year's
general elections drew near.

Aburizal said additional month-on-month inflation resulting
from the fuel price hikes and higher consumption during Ramadhan
could reach between 2 and 3 percentage points.

He expected the full-year inflation level to hover at between
11 percent and 12 percent.

"We have estimated a higher inflationary environment this
year. But we are upbeat inflation levels will be lower, at
between 7 percent and 8 percent, next year," Aburizal said
without elaborating further.