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.