T

he government has reaffirmed plans to increase power rates by 15 percent starting January next year, saying the hike will allow it to reduce subsidies by up to Rp 8 trillion.

During a hearing with lawmakers from House Commission VII overseeing energy and mining, Energy and Mineral Resources Minister Darwin Zahedy Saleh proposed lawmakers allocate Rp 41.02 trillion for power subsidies in 2011.

“This figure is proposed based on the assumption that a policy to increase power rates by 15 percent will be introduced as of January next year.

“If this policy is not carried out, the required subsidies could reach Rp 49.14 trillion,” Darwin said.

He added that the proposed budget was had been formulated with several other assumptions, including the Indonesian Crude Price (ICP) at US$80 per barrel, and the rupiah at Rp 9,300 per $1.

The subsidy figure was also formulated based on an estimate of power usage reaching 153.85 Terra Watt Hours (TWh).

State power firm PT PLN is the sole power distributor in Indonesia. PLN said a significant growth in power consumption had been seen since the first semester of this year.

The company produced 83.3 TWh of power in the first semester of this year, representing an 11 percent increase from the production in the same period last year. The company had only anticipated a growth of 7 percent.

Currently, all PLN customers pay subsidized power rates, except those households with an allocated capacity of 6,600 volt amperes (VA) or more.

On July 1, the government and House of Representatives increased power rates by 10 percent on average, anticipating a power subsidy deficit of Rp 4.8 trillion.

However, the policy drew strong criticism from businessmen because of a miscalculation made in the corresponding government regulation.

Business associations said the increase was in fact far higher than what had been promised, with increases between 39 and 101 percent.

In response to the criticism, the government agreed to revise the regulation and capped the increases at 18 percent.

The increase does not apply to customers whose power capacity is between 450 VA and 900 VA.

Darwin said the government was still formulating a power increase policy for 2011.

“We will continue to protect low-income earners, but we are still discussing the formula. Our commitment is to switch the pricing subsidy to a direct subsidy,” he said.