Government to raise electricity tariffs by 24 percent next year

The government plans to increase the electricity tariffs by 24 percent next year as part of the long-term program to put the country?s electricity tariff to "commercial level" or the level which can provide profit margin to investors.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said in Jakarta on Wednesday that planned increase in the electricity tariff by six percent for every three months or 24 percent for the whole year would be much lower than those proposed by state owned electricity company PLN.

PLN has proposed to raise the electricity tariff by 10 percent for every three months or 30 percent for the entire year in 2003, up from 24 percent this year. The company wants bigger increase next year to avoid another increase in 2004 when the country will hold general elections. If the electricity tariff is increased in 2004, it could cause a political problem.

The increase is part of PLN?s program to make the electricity sector more attractive to foreign and local investors. At present the electricity tariff is below the production cost and this makes the sector unattractive for investment.

With such a program PLN hopes that the electricity tariff would reach the so-called commercial level in 2005 so that more and more investors will enter the sector. The lack of private investment can cause a serious crisis in the country?s electricity supply. (*)