PLN wants to raise power rates 12 percent
The Jakarta Post, Jakarta
State utility company PT Perusahaan Listrik Negara (PLN) is seeking government approval to increase electricity rates by an average of 12 percent next year to help offset higher fuel costs, company executives say.
During a hearing with lawmakers on Monday, Parno Isworo, PLN finance director, said the company wanted to increase power prices to Rp 659 (about 7 US cents) per kilowatt hour, from the current price of Rp 588.
The last time PLN raised power rates was in 2003, by an average of 6 percent a quarter, in response to the government's gradual cut of the fuel subsidy.
PLN's spending on fuel has begun to take a toll on the company's balance sheet following the government's move last March to increase fuel prices by an average of 29 percent.
Higher fuel prices have a major impact on PLN as oil currently accounts for about 60 percent of the fuel used by PLN's power plants.
Parno said it was necessary to increase power rates for the company to improve its revenue by 21 percent during the year, and help it return to the black for the first time since 1998, according to Bloomberg data.
The company last year suffered Rp 2.02 trillion in losses.
Assuming rates are raised, Parno added, the company would turn its losses into a net profit of Rp 486 billion next year, thanks to increased revenue of Rp 75 trillion.
For this year, with no power rate increases scheduled, the company's revenue is estimated to reach Rp 62 trillion.
Critics have repeatedly said that PLN should use natural gas rather than oil in order to provide cheaper electricity.
They cite studies saying that while PLN must spend Rp 510 (6 US cents) to produce one kilowatt hour of electricity using oil, that cost would be cut to only Rp 200 if it used natural gas.
PLN has formulated plans to phase out its diesel-powered generators, but the firm's officials have repeatedly said it will take time to replace the existing diesel generators with gas or coal-fired power plants.
While the operating costs of coal and gas-fired power plants are less than diesel generators, the former are much more costly to construct.
The company has said that it will be able to increase the use of natural gas to fuel its power-generating plants to about 40 percent, from about 27 percent at present, by 2007.
Meanwhile, the company also announced that rotating blackouts due to reduced power supplies, which were supposed to end in June, would be extended until June 9.
PLN previously said work on gas lines connecting BP Plc.'s offshore Northwest Java field would cut gas supplies to the 500- megawatt PLTGU Muara Karang and the 1,100-megawatt PLTGU Tanjung Priok power plants, which supply the Java-Bali power network, by up to 385 megawatts from May 23 to June 6.