Mon, 08 Mar 2010

From: The Jakarta Globe

By Reva Sasistiya
In a move likely to enrage lawmakers and the Ministry of Energy, state electricity utility PT Perusahaan Listrik Negara said on Sunday that it had resumed charging wealthy customers higher power rates because it needed an additional Rp 2 trillion ($216 million) in revenue to maintain operations.

PLN increased rates for high-end users in January but suspended the increase last month amid an outcry from consumer groups and demands by the Ministry of Energy that it first seek approval from the House of Representatives and better inform the public.

It apparently did neither, though PLN president director Dahlan Iskan said the company had alerted the 378,000 affected households - those with a capacity of 6,600 to 10,500 volt amperes installed - of the rate increase. He said PLN, which depends heavily on government subsidies, was leaning on wealthier customers to cover its revenue gap.

“We have informed all the affected customers of the increase,” Dahlan said, adding that it had resumed higher rates in February, although he did not specify a date.

The new tariff requires high electricity-consuming households to pay more if their consumption exceeds 50 percent of the national average. Any amount above that level would be charged at market rates of Rp 1,380 a kilowatt per hour, rather than the government’s subsidized rate of Rp 630.

Although PLN agreed to temporarily suspend the increase last month, its move to quietly reinstate it is likely to anger customers in Jakarta, given the utility’s failure to keep the lights on late last year due to technical problems.

According to the State Budget Law, PLN must consult the House before raising rates. But under the Electricity Law, the power rate is set by the government with approval from the House.

PLN says it has been losing money for years because it’s forced to sell electricity at below cost, with rates up to 30 percent lower than in neighboring countries. In 2008, it posted a record deficit of Rp 12.3 trillion. Last year, however, it recorded a rare profit of Rp 6.6 trillion, mostly due to an increased government subsidy.

Regardless, PLN has tried many strategies to circumvent price controls. It received a slap on the wrist from the Energy Ministry in June 2009 for raising connection charges in Java and Bali by 300 percent without informing affected consumers or clearing it with the House.

A Golkar lawmaker on House Commission VII overseeing energy issues was furious to hear about the increase and said the legislature may sanction the utility for the unauthorized hike.

“We did not just ask PLN to disseminate information [about the hike], but to conduct due diligence and report to us,” Satya Widya Yudha said on Sunday.

It was up to the House to decide whether it’s necessary to charge affluent customers more for electricity, he said.

The state has allocated Rp 35.3 trillion for electricity subsidies in the 2010 state budget, though PLN had requested Rp 50 trillion.

Seeking ways to reduce funding, the government is also pushing to increase the utility’s margin on electricity sales to 8 percent from the current 5 percent.

The electrical utility is unlikely to find many sympathetic ears in the House given its backdoor rate increase.

“PLN had long been spoiled with subsidies and margin increases and we always gave them whatever they wanted,” Satya said. “Now they continue with the increase even without our approval.”