House, govt agree on average 29.43% hike in power rates

JAKARTA (JP): The government reached agreement on Friday with the House of Representatives' special team on electricity rates to propose an average rate increase of 29.43 percent starting April 1.

Legislator Pramono Anung, who led the team, said they also agreed to protect low-income households with maximum electricity feed of 900 kilowatts per hour.

"We're still discussing the 29 percent rate hike, but 90 percent of us have agreed on that," Pramono said at his office.

The increase is below the 35 percent proposed by the government. The coverage of the subsidy is also expansion from the government's initial proposal to cover only households consuming a maximum of 450 kWh.

Pramono said by increasing the range of the subsidy, the government would protect 86 percent of PLN's customers, totaling some 24 million households.

Under the team's proposal, the electricity rate for households with 1,300 kWh would rise 33.28 percent, and households with 2,200kWh would face an increase of 38.41 percent.

Rates for businesses with 1,300kWh and 2,200kWh would be increased 26.88 percent and 33.98 percent respectively.

Industrial consumers would face the highest rate jump, ranging from 53.72 percent to 76.19 percent.

Despite the electricity rate increase, Pramono said electricity company PLN would still suffer about Rp 3.9 trillion (US$540 million) in losses.

He said the House team and the government also agreed to extend Rp 3.9 trillion in electricity subsidies to PLN to cover its losses.

Of the total allocated electricity subsidy, Rp 2.1 trillion will be used to subsidize household electricity rates and Rp 1.8 trillion to finance PLN's new investment in infrastructure for new customers.

The government agreed with the International Monetary Fund to progressively lift subsidies on electricity and fuel in the 2000 budget year that runs from April 1 through Dec. 31.

Pramono said to reduce the level of electricity subsidies in the future, PLN needed to follow efficiency measures recommended in an audit by Arthur Andersen.

The audit found PLN could have saved Rp 1.12 trillion per annum through more efficient running of the company.

Pramono said PLN would be able to save Rp 200 billion in maintenance costs if it followed Arthur Andersen's recommendations.

If PLN managed to lower prices of gas it used to operate its power plants, Pramono said, PLN would be able to save Rp 454 billion.

Aside from the electricity subsidy, Pramono said the House team asked the government not to raise prices of diesel solar energy. If the government retains the current prices of diesel solar, he said PLN would be able to save Rp 740 billion.

Based on the team's calculation, the government must provide an additional Rp 660 billion to include 900kWh consumers under the subsidy program.

"By not increasing prices of diesel solar, the government could subsidy consumers of up to 900kWh," he said.

Pramono added the proposal would depend on the assumed oil prices in the 2000 budget, in which the government previously assumed oil prices would average $18.

"We proposed to raise the oil price assumption from $18 to $20 for which we expect an additional revenue of Rp 2.6 trillion," he said.

The additional revenue would be enough to finance the subsidy on diesel solar and kerosene.

Pramono said the increase in the assumed oil prices had already been approved by the House's budget committee.

The team plans to complete its recommendations on rate increases on Monday. (03)