Electricity tariff hike

It’s almost certain that next month the country’s electricity tariff would be hiked significantly to save the loss-making state-owned monopolist PT Perusahaan Listrik Negara (PLN).
The House of Representative (DPR) could prevent the hike if they agree to allocate more subsidies for PLN in the 2006 state budget. But if the already approved allocation of 15 trillion rupiah subsidy is maintained, electricity tariff could increase by minimum of 30%.
PLN simulations in October 2005 stated that a 29% tariff hike should be implemented if the company received 21.68 trillion rupiah of subsidy and a 39% hike at 12.98 trillion rupiah of subsidy.

Why PLN needs subsidy? The company argues that it should sell power below the production cost while oil and gas should be paid at market price. In contrast with Pertamina which claimed net profit of more than US$1 billion last year, PLN booked total loss of almost US$600 million in the first half of 2005. PLN’s overdue payments to Pertamina have reached US$600 million.So, here’s the deal, PLN said. “Give us subsidised oil and gas, the electricity tariff hike would be smaller.”

But BUMN Watch, NGO that specialized in monitoring (?) state-owned enterprises, said today that consumers should reject the tariff hike as PLN’s performance is poor, rampant of corruption and mark-ups. One example, BUMN Watch raised the question on police's ignorance over a report on mark-up power plant project in South Sumatra that cost the state of around 100 billion rupiah (US$10 million) in loss.

Imagine that the investigation is not going to happen before the next electricity bill arrived at your door. A 30% electricity hike could cause a severe blow to energy-intensive businesses as they can't easily pass on the higher production costs to consumers.

Cement producers have warned consumers of a gradual increase in price this year as energy makes up 40% of production costs. Electricity alone makes up 20% of cement's production costs.

Textile producers are facing massive layoffs this year as energy costs accounts for almost 30% of production costs in spinning factories and 18% in the weaving factories. That's one thing, cut costs. They would surely pass on the electricity tariff hike to consumers.

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