Govt plans to raise electricity tariffs by 16% for business

The government plans to increase electricity tariffs for commercial buildings and manufacturers by up to 16 percent, The Jakarta Post reported on Friday.

In a study presented to the Indonesian Employers Association (Apindo), the ministry of energy and mineral resources said it was considering two options for the tariff increase.

In the first option, the tariff for commercial buildings would be increased by between 12 and 16 percent, while the tariff for manufacturers would be increased by between 6 and 15 percent.

In the second option, the tariff for commercial buildings would be increased by between 12 and 15 percent, while the tariff for manufacturers would be increased by between 6 and 13 percent.

The tariff range in the second option is slightly higher than in the first one, because the first option would involve raising the tariff for low-income customers by 5 percent whereas the second option would not.

The ministry said the increase was mandated by the law on the revised 2010 state budget. The allocation for electricity subsidy in 2010 was Rp 55.1 trillion, but the budget for electricity provision is still in deficit by Rp 4.8 trillion. The law mandates the government offset the deficit by increasing rates by 10 percent starting from July this year.

?We will try our best to manage the tariff increase so this does not hurt the competitiveness of industries;? Energy and Mineral Resources Minister Darwin Zahedy Saleh said.

As of the first quarter of 2010, state power monopoly PT PLN recorded that it had 40,572,832 customers in total. Of those, 1,803,632 were commercial buildings and 48,122 were manufacturers.

The rates for all PLN customers are still subsidized by the government. PLN needs around Rp 1,400 to produce 1 kilowatt-hour of energy, while the tariff is set at Rp 529 per kilowatt-hour for large-scale manufacturers, Rp 615 per kilowatt-hour for medium-scale manufacturers and Rp 811 per kilowatt-hour for large commercial buildings.

Apindo chairman Sofjan Wanandi said businesses basically rejected the power tariff increase.

?We expect to be given room to breathe as we are now preparing ourselves to face free trade agreements with China and India,? he said.

Sofjan conceded that although the tariff had to increase eventually, the association wanted the government to scrap all power consumption-related penalties imposed on industry. Currently, industries are required to pay 1.5 times higher than the usual rates for peak hour consumption if consumption is 50 percent higher than previous average consumption.

Sofjan said that, in some areas, the power tariff was determined in business-to-business schemes between PLN and businesses. ?We want this practice to be scrapped as well. We want the same tariff applied to a1l,? he said.

The plan to raise the tariff is subject to legislative approval. (*)