Thu, 22 May 2003

PLN hopes not to raise rates due to strong rupiah

M. Taufiqurrahman, The Jakarta Post, Jakarta

State electricity company PT PLN said if the positive trend of the rupiah's value against the U.S. dollar stayed consistent through December, another increase in electricity charges would likely be called off.

PLN president Eddie Widiono asserted on Wednesday that stability in electricity charges was possible given the fact that 70 percent of the company's electricity generation costs were pegged to the U.S. dollar.

"Therefore, if the U.S. currency is down by 10 percent, we assume the costs of generation will drop by 7 percent," Eddie told reporters after a hearing with the House of Representatives Commission VIII.

He said that the current charge of Rp 540 (63 U.S. cents) per kilowatt hour (kWh) was still below the break-even level of Rp 630. By the end of this year, PLN originally planned to raise the charge to Rp 620 per kWh.

PLN was given permission by the government to raise its electricity charges in each quarter starting in 2001 with the aim of eliminating subsidies and making a profit by 2005.

Earlier, Director General of Electricity and Energy Utilization at the Ministry of Energy and Mineral Resources Luluk Sumiarso said that as a result of the weakening of the dollar against the local currency, electricity charges were expected to decline.

Eddie said in the beginning of 2004 the charges would reach an average of Rp 630 per kWh, and if the rupiah stood at Rp 8,000 per U.S. dollar, the price would likely be made up by the value of the rupiah.

"By that time, there would be no need for us to raise the electricity charges," he said.

Despite the promising future, Eddie said that for the current period there was no way to change the plan for increasing electricity charges because the company was still struggling to escape financial problems.

"So ... for now, there is nothing we can do as we still are suffering from losses," he said.

However, the PLN executive warned that the strengthening of the rupiah would be helpful only if it was accompanied by the stability of fuel prices.

"The dollar may be down, but we have to be cautious about the trend in oil prices," he said, adding that if PLN utilized oil as the main fuel for its power plants, the company might have to spend up to Rp 22 trillion for electricity generation.

Currently, PLN is having problems finding alternative fuel for its plants across the country. For instance, the company is experiencing difficulties procuring the less-expensive natural gas, given the lack of infrastructure to transport it.

"If the price of fuel also declines, there will be no need to hike the electricity charges," he said.