PLN mulls raising rate to 8 U.S. cents per kwh in 2004

State electricity firm Perusahaan Listrik Negara (PLN) is hoping to increase the benchmark rate for its power from 7 U.S. cents per kilowatt-hour (kWh) at present to 8 cents in 2004, PLN’s president director Eddie Widiono said.

“According to our calculations, the economic rate for the electricity in 2004 will be around 8 cents per kWh,” Eddie told Bisnis Indonesia newspaper on Thursday in Jakarta.

Acccording to Eddie, PLN made such a conclusion after taking into consideration of four factors, namely production costs, taxes, rupiah’s depreciation and profits for shareholders.

Meanwhile, director general for electricity and energy utilization at the Ministry of Energy and Mineral Resources, Luluk Sumiarso, said on Thursday that PLN was free to make such a proposal but a thorough examination was needed to find out whether the economic rate of electricity should be at that level.

“If there is a change, and we have to see what kind of change it is. We have to jointly calculate (the economic rate) and the calculation should be transparent for the public.” Luluk said.

The government decided on September 30, 2003 to delay its plan to raise power rates for the October-December period this year after the rupiah strengthened and due to its determination to help ease the burden of the poor people.

PLN said however that it would lose Rp 800 billion this year due to the decision.

The government has actually allowed PLN to raise power rates by an average of 6 percent each quarter since early last year to reach the 7 cents per kWh level -- which was considered by PLN as the ecomomic rate for its power. Today, PLN's power rate is slightly lower than 7 cents per kWh.

Many experts, however, believed the economic rate for PLN's power was only 5 cents per kWh. They accused PLN of purposely setting a high benchmark rate for its power in order to cover its ineffiencies and losses resulting from its contracts with independent power producers. (*)