The Indonesian Employers Association called on the government to review a plan to increase the electricity tariff by 10 percent next year, arguing the state-controlled electricity company should instead move to a cheaper source of fuel.
“If the government increases the basic rate for the electricity tariff by 10 percent in 2013, that will burden the local industry,” said Franky Sibarani, a senior official at the association known as Apindo on Tuesday.
The government is considering a plan to raise the basic electricity rate by 10 percent starting on Jan. 1, 2013, in a bid to boost the financial standing of state-controlled electricity company Perusahaan Listrik Negara.
Franky said that as an alternative to raising tariffs, operational costs at PLN could be trimmed. “PLN must increase its efforts to replace gasoline with coal, which is cheaper,” said Franky.
Corporate buyers on Tuesday finally gave in to a decision by state-controlled gas distributor Perusahaan Gas Negara to raise the price of gas, but gained a commitment that they would receive a consistent supply and a guarantee that the price will not increase again for at least two years.
According to an open letter from PGN, the gas price for industry buyers in Jakarta, Bogor, Bekasi, Karawang and Banten rose to $10.10 per million British thermal units (mmbtu) on May 1, up from $6.80.
The government is in the midst of seeking a more efficient fuel to generate power. It has ordered PLN to use gas- and coal-powered plants, because diesel is deemed too expensive.
But PLN faces supply constraints given producers’ preference for exporting gas due to higher prices received and Indonesia’s lack of infrastructure to distribute it from producing facilities to consumers.
Meanwhile, PLN is struggling to find funds to build coal-fired power plants. New 10,000-megawatt coal-fired power plants proposed by the government are only partly completed.
But Fabby Tumiwa, an electricity analyst, said PLN needs the price increase so that banks will lend to it.
“If the margin is cut it will reduce PLN’s financial bankability,” Tumiwa said.
He argued the tariff rise was just enough to cover the fuel costs and the government should also increase the subsidy for PLN.
The government has set the annual electricity subsidy at Rp 78 trillion ($8.27 billion), which includes the planned 10 percent tariff increase.
Without the price increase, a senior official at the Mines and Energy Ministry said, the government would have to dip further into the state budget, needing around Rp 100 trillion for the electricity subsidy.
Antara & JG