PLN to limit hike for big industry users

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)