Tue, 11 Oct 1994

Periodic increases in electricity cost planned

JAKARTA (JP): There will be no more shocking hikes in electricity costs in the future. Instead, increases will be phased in at frequent intervals, an official of the Ministry of Mines and Energy said yesterday.

Artono Arismunandar, the Director General for Electricity and New Energy Sources, was quoted by the Antara news agency as saying that the government is now considering raising electricity costs periodically, probably every three months.

The issue has already been discussed with the House of Representatives (DPR) and is now being considered by the government.

Past electricity cost hikes always led to protests by consumers -- household users as well as industry -- because they were imposed every 18 months or two years. Once, the hike even averaged 20 percent. This approach also caused inflationary pressures because the hikes were usually followed by increases in fuel prices, transport fares and eventually to overall costs of living.

"This is only a proposal to the government. Whether or not it is endorsed will be decided by a presidential decree," Artono said.

He explained that the proposal calls for a new formula in which the prices of electricity are raised automatically every three months without burdening users excessively.

A maximum 0.05 percent increase every three months is considered to be reasonable, he said.

The formula takes into account such factors as the costs of generating electricity, the inflation rate and the rupiah exchange rate, he added.

If the proposal is endorsed, then the hikes in electricity prices can be imposed by the state electricity company PLN and no longer must await a presidential decree as is the current practice, he added.

The government's plan to hike the electricity prices was discussed during a closed door meeting on Saturday at the House of Representatives (DPR) attended by the Minister of Mines and Energy, PLN President Zuhal and members of the House's Commission VI which oversees energy, according to the Republika daily newspaper yesterday.


A number of legislators said in response to the plan that PLN should first strive to improve its efficiency and look for cost- saving measures instead of passing on the burden to consumers.

Tadjuddin Noer Said, a member of the House's Budgetary Commission, was quoted by the Antara news agency as saying that there must be "greater transparency" in the way the government manages strategic industry, including the electricity sector.

Tadjuddin said a more open mechanism would allow the House to exert influence on the way vital services such as electricity are priced.

The government last raised electricity prices in February 1993 by an average of 13 percent.

The electricity rates are designed in such a way that the wealthier members of society and the giant users pay more than the less well to do under the "cross subsidy" system.

The government has also began to allow private firms to build and operate power plants but reserves the right to fix the prices charged consumers. (emb)