PT PLN seeking govt approval for rate increase

JAKARTA (JP): State electricity company PT PLN is seeking government approval for an increase in power rates of between 2 percent and 3 percent, starting in January next year.

PLN president Kuntoro Mangkusubroro said on Wednesday that the increase would apply to low-income household consumers, who were excluded from the last increase.

In April the government raised electricity prices by an average of 29.43 percent for household, business and industrial consumers.

Low-income households with a consumption of less than 900 kilowatt per hour -- constituting about 86 percent of PLN's customers, or 24 million households -- were exempt from the price hike.

Raising power rates, Kuntoro said, would help bridge the deficit of PLN's production costs and its electricity selling price.

"The subsidy from the government totals Rp 3.9 trillion, this means that we are selling power below its production cost," Kuntoro told reporters after a hearing with House of Representatives Commission VIII for energy affairs.

The state company buys electricity from independent power producers at an average of 6 U.S. cents (about Rp 680 at the current exchange rate) per kilowatt per hour (kWh), much higher than its average selling price of Rp 240 per kWh.

"One way to reduce our losses is to raise prices," Kuntoro said.

Reducing subsidy spending was part of an agreement with the International Monetary Fund (IMF), which is providing the country with a US$5 billion aid package under a three-year economic program.

House member Irwan Prayitno said that any further price hike must first undergo House evaluation.

"First we evaluate the current situation and see whether the public is ready for a price hike, then we'll discuss the amount and the timing," Irwan said.

However, Irwan estimated that there was an equal chance of the proposal being approved.

"While the public seems unprepared, PLN can no longer afford to lose more money," he explained.

Malaysia

Meanwhile Indonesian Mineral Resources and Energy Minister Purnomo Yusgiantoro said that Indonesia had offered to sell electricity to Malaysia through a 170-km-long underwater cable network from Riau to Johor, Malaysia,

Purnomo said Indonesian President Abdurrahman Wahid raised the proposal with Malaysian Prime Minister Mahathir Mohamad during their meeting in Langkawi on Tuesday.

"Dr. Mahathir said he would consider the matter," Purnomo was quoted by AFX Asia as saying.

Riau has sizable coal deposits, and Indonesia is willing to set up a coal-powered power station in Riau to supply electricity to Malaysia, he said.

The area could produce some 5,000 MW of electricity, Purnomo said.

PLN president Kuntoro said that such a project would be economically viable.

"It's possible, because we have a project in Riau that we've been thinking of for quite some time, it's the Cirenti project," he told reporters in Jakarta.

He said that Cirenti had enough coal to make the development of a power plant feasible.

By using an underwater cable, he said, Indonesia could sell electricity to Malaysia.

"We've been thinking about developing the Cirenti project for about 10 years," he added.

Kuntoro could not estimate the project cost, but added that it would have to involve independent power producers, as PLN was unable to commit for large investments.

PLN is one of the worst performing state companies with losses soaring to Rp 11.58 trillion (US$1.3 billion) in the first semester of this year.

Kuntoro further assured that selling power to Malaysia under the Cirenti project would not hurt domestic power supplies.

He said that power demand in Riau would be unable to absorb Cirenti's capacity, so some could be sold to Malaysia. (bkm)