Govt to increase electricity tariff next month

The Energy and Mineral Resources Ministry has formally submitted to the House of Representatives on Tuesday two proposals for power price increases, which is expected to take effect next month.

The ministry's Electricity and Energy Utilization Director General J. Purwono said that under the first scenario, the government would not raise tariff for low-income customers using between 450 to 900 volt-amperes, but tariffs for other customers would be raised by between 8 and 15 percent.

Under the second scenario, the government would raise tariffs for those consuming 450 to 900 volt-amperes by 5 percent. Thus, the tariff increase for other customers would be 1 percent lower than in the first scenario.

Purwono said the scenario was subject to legislators? approval. ?We expect there will be another discussion of the plan later this week,? he said following a hearing with the House?s Commission VII overseeing among others energy and the environmental affairs.

Purwono, however, stressed the new tariff would ?take effect in July?.

The ministry also proposed that legislators lower subsidies for electricity to between Rp 36.44 trillion (US$=Rp 9230) and Rp 50.81 trillion in 2011 from the Rp 55.15 trillion this year.

The subsidy range proposed for next year is based on three power pricing options, Energy and Mineral Resources Minister Darwin Zahedy Saleh said.

The three scenarios are: the subsidy is based on the current tariff (without an increase), with a tariff increase of 10 percent, and with a tariff increase of 15 percent.

Darwin said all the scenarios assumed an Indonesia Crude Price (ICP) of between $80 and $85 per barrel.

The government estimates that the required subsidy in 2011, if the tariff is maintained at the current level, would be between Rp 49.14 trillion and Rp 50.81 trillion.

If the current tariff is raised by 10 percent, the required subsidy would drop to between Rp 40.65 trillion to Rp 42.30 trillion. The subsidy would further decrease to between Rp 36.44 trillion and Rp 38.09 trillion if the tariff was hiked by 15 percent.

?The power subsidy will focus on poor people, those consuming between 450 and 900 volt-amperes. Rate for other customers will gradually be set in accordance with production cost and commercial rate,? Darwin said. (*)