House allows PLN to raise tariff by 20 percent next year

The House of Representatives (DPR) has approved state electricity company PT Perusahaan Listrik Negara's (PLN) proposal to increase its basic tariff rate to a maximum of 20 percent next year.

The vice chairman of the House?s Budgetary Commission Suharso Monoarfa said the approval for the 20 percent increase in the electricity tariff was made on Thursday. ?The House agreed to increase the rate because the current average tariff of Rp 626 (1US$ = Rp 10,125) per kilo watt hour (kWh) was still far below its economic price,? he added.

He, however, said that the House would let the government to decide which groups of customers that would have to pay higher rates next year to ensure that the tariff increase would not burden the poor.

Finance Minister Sri Mulyani Indrawati had said that the government would be quite careful in raising the electricity tariff to ensure that the tariff increase would not affect the economy which was about to recover from the financial crisis.

The House also agreed to increase the profit margin for PLN to 5 percent next year from 2 percent this year to enable the government to lower the electricity subsidy, Suharso said.

At the same time, House approved a cut in the electricity subsidy to Rp 37.8 trillion next year from Rp 48.2 trillion this year, he added.

PLN had earlier proposed an increase in the profit margin to at least 8 percent to improve its financial performance and to ensure that with such financial condition, it is healthy enough to raise loans from banks to finance its new electricity projects.

PLN?s President Director Fahmi Mochtar said with a margin of 5 percent, PLN would not be able to make new investment. ?If we want to invest in accordance with the initial plan, we need at least a margin of 8 percent and a subsidy of Rp 48.3 trillion,? he said. (*)