PT PLN seeking govt approval for rate increase

State electricity company PT PLN is seeking government approval for an increase in power rates of between 2 percent and 3 percent, starting in January next year.

PLN president Kuntoro Mangkusubroro said on Wednesday that the increase would apply to low-income household consumers, who were excluded from the last increase.

In April the government raised electricity prices by an average of 29.43 percent for household, business and industrial consumers.

Low-income households with a consumption of less than 900 kilowatt per hour -- constituting about 86 percent of PLN's customers, or 24 million households -- were exempt from the price hike.

Raising power rates, Kuntoro said, would help bridge the deficit of PLN's production costs and its electricity selling price.

"The subsidy from the government totals Rp 3.9 trillion, this means that we are selling power below its production cost," Kuntoro told reporters after a hearing with House of Representatives Commission VIII for energy affairs.

The state company buys electricity from independent power producers at anaverage of 6 U.S. cents (about Rp 680 at the current exchange rate) per kilowatt per hour (kWh), much higher than its average selling price of Rp 240 per kWh.

"One way to reduce our losses is to raise prices," Kuntoro said.

Reducing subsidy spending was part of an agreement with the International Monetary Fund (IMF), which is providing the country with a US$5 billion aid package under a three-year economic program.

House member Irwan Prayitno said that any further price hike must first undergo House evaluation.

"First we evaluate the current situation and see whether the public is ready for a price hike, then we'll discuss the amount and the timing," Irwan said.

However, Irwan estimated that there was an equal chance of the proposal being approved.

"While the public seems unprepared, PLN can no longer afford to lose more money," he explained. (*)