PLN to limit hike for big industry users

JAKARTA (JP): State electricity company, PLN, president Eddy Widiyono said here on Monday that the rise in electricity rates for power-intensive industries would be limited to a maximum of 20 percent.

"We are even trying to set it below the 17.5 percent average increase planned for next month," he said at a seminar discussing proportional power rate adjustments for large industrial consumers.

Eddy asserted that PLN had formally proposed that the government limit the tariffs increase for the industries to a maximum of 20 percent.

The government and the House of Representative recently agreed to raise electricity rates by an average 17.5 percent on July 1 in a bid to help resolve the state electricity company's financial woes. The government, however, has still not announced details of the planned changes.

Many industrial consumers, especially those using a large quantity of power to support their operations, are worried that their rates will rise by much more than the 17.5 percent average.

In the the last increase, in April last year, the electricity rates for power-intensive companies rose by between 50 percent and 80 percent, far higher than the 29 percent average announced by the government.

A. Kadir, a senior executive of the Indonesian Organic Chemicals Industry Association, said the rise of more than 20 percent would destroy most of the association's members, whose electricity expenditure already represented more than 60 percent of total production costs.

He said the association's members producing caustic soda, an essential chemical for textile producers, should instead be charged lower rates given their important role in supporting other industrial activities.

Yasrif Y. Tambusai, a senior executive of the Indonesian Hotel and Restaurant Association said the country's hotel industry, which is also one of PLN's big customers, should also be given special treatment.

He said the implications of the rate increase last year still affected the financial situation of most large hotels.

"The difficulties have yet to end for the industry," he said.

Last year, electricity rates for hotels increased by 59 percent, 30 percent higher than the average electricity rate increase, he said, adding that the increase led many hotels to take massive cost-cutting measures, with some even closing down.

He suggested that the government should inform customers of planned power increases at least six months in advance to give them more time to prepare their operations for the added expense.

Yusrifal, a senior executive of the Indonesian Metal Foundry Association, also asked the government to limit the rate rise for the power-intensive metal processing industries.

He said the 80 percent rate increase imposed on the metal foundry industry in 2000 demonstrated the government's insensitivity.

Last year's rate rise caused the industry's production costs to rise by approximately 15 percent, he added.

Pande Radja Silalahi, an analyst at the Center for Strategic and International Studies said the 17.5 percent increase in electricity rates would cause an average production cost increase of 2 percent for industries.

According to him, electricity accounts for between 8 percent and 12 percent of most Indonesian industries' total expenditure.(05)