PLN defends policy on electricity rate hike
A'an Suryana, The Jakarta Post, Jakarta
State electricity company PT PLN asserted on Tuesday that an increase in electricity charges was badly needed to spur investment in the power sector.
PLN's president Eddie Widiono maintained that new investment was necessary to allow more Indonesian people to enjoy electricity services.
Currently, according to Eddie, only some 55 percent of Indonesia's total population of about 220 million people enjoy electricity services, while the rest remain in darkness at night.
"Through the policy, PLN raises funds from the people who have been enjoying electricity services, and invests them so that others can enjoy the same services. I think that is fair," Eddie told The Jakarta Post.
PLN has been permitted by the government to raise its charges in each quarter starting in 2001 with the aim of bringing the rate to the commercial level of 7 U.S. cents per kilowatt hour (kWh) in 2005.
In a telephone interview, Eddie said the company had made no new investments since 1998 due to the lack of funds.
The 1997 financial crisis, which resulted in the decline of the rupiah against the dollar and has brought the country's economy into the doldrums making it harder for Indonesian companies to obtain loans from international financing institutions.
It has dealt a serious blow to PLN, which had depended on foreign loans prior to the crisis.
"Due to the lack of funds, we need to 'empower' ourselves to meet our needs in the power sector," said Eddie.
Meanwhile, an independent expert, Dadan Umar Daihani of Trisakti University criticized PLN's policy, saying it was unfair that PLN burdened the public.
The need to invest may be partly legitimate, he said, but added that PLN must have other reasons behind the increase, namely to cover its excessive production costs and to meet its financial obligations to the independent power producers (IPPs).
Dadan said the financial obligations have roots in the power purchase agreements signed by PLN and the IPPs in the 1990s, which were found out later to be dubious deals.
He said the prices in the contracts were marked up and PLN signed the contracts under pressure from former President Soeharto's family and its cronies who partnered with the IPPs.
"The corruption must be revealed, and PLN must try harder to get fair prices for the power produced by the IPPs.
"It is unfair that the people now have to share PLN's financial burdens which are a result of their own doing and the past government's sins," said Dadan.
During the interview, Eddie also countered criticism aired by the non-governmental organizations (NGOs) who said the commercial rate of 7 cents per kWh set by PLN was too high, compared to the rate of between 5 cents and 6 cents per kWh in other Southeast Asian countries.
Eddie said the criticism was misleading, because the rates were not comparable.
According to Eddie, fuel components in other countries were much cheaper than in Indonesia. For example in Malaysia, the state electricity company could buy gas for $1.6 per million British Thermal Unit (MMBTU), while PLN must buy it at a rate of $2.5 per MMBTU from state oil and gas company Pertamina.
This has raised PLN's production costs and PLN, therefore has to transfer the burden to the public, according to Eddie.