NGO backs decision on power rates

NGO backs decision on power rates

Fitri Wulandari, The Jakarta Post, Jakarta

A non-governmental organization praised on Friday the
government's decision not to increase power rates this year,
dismissing worries that the measure would make the country
unattractive to power investors.

The Working Group on Power Sector Restructuring (WGPSR) said,
at current rates, state power firm PT Perusahaan Listrik Negara
(PT PLN) would still be able to earn a handsome profit and the
country would remain attractive to power investors.

"The present rates do not only allow PLN to cover its
production costs but also to accumulate profit for investment in
the future," WGPSR's coordinator Fabby Tumiwa told The Jakarta
Post on Friday.

PLN's current power rate is Rp 574 or 6.79 U.S cents per
kilowatt-hour (kWh), while PLN's production costs range from 5.5
cents to 6 cents.

The government has decided not to increase power rates for the
whole year in spite of the existence of Presidential Decree No.
89/2002, which permits PLN to raise its rates each quarter, from
early 2002 to 2005, until the rate reaches 7 cents per kWh -- a
level that PLN claims as "profitable".

Citing the WGPSR study, Fabby said PLN now had Rp 6 trillion
in depreciation funds, which it could use to upgrade its old
power plants. Under the current tariff, PLN would also earn total
revenue of Rp 65 trillion to Rp 70 trillion this year.

PLN needs around Rp 10 trillion to build complete power
infrastructure, including power plants and a transmission and
distribution network.

"PLN could also seek loans," Fabby said.

Earlier, Yogo Pratomo, director general of electricity and
energy utility at the Ministry of Energy and Mineral Resources,
who is also a PLN commissioner, said PLN had spent Rp 15 trillion
last year and expected to spend a similar amount on investment
this year.

Fabby said should the rupiah hold stronger against the U.S.
dollar this year, PLN would cut much of its costs and as such get
more funds for investment to improve the quality of its services.

"So far, PLN still has to prove to consumers that its services
are reliable," he said.

With regard to foreign investors, Fabby believed the new power
rate policy would not scare away investors as the current price
was already profitable for them.

Investors cared more about contractual certainty and the
investment climate, he said.

"They want to see if PLN would buy the electricity they
produced. They would also want to assess if investment risks in
Indonesia were still high," Fabby said, adding that most
investors believed that investment risks in Indonesia had
decreased, given macroeconomic stability and a stronger rupiah.