Lawmakers on House Commission VII overseeing energy and mining approved an increase in electricity rates by 15 percent by the end of 2013.

The increase will be implemented gradually, by between 3 to 4 percent a quarter starting in January, to lessen the impact on consumers, given traditionally intense public opposition to utility rate increases.

Under the government’s plan, the increase will not apply to small households and businesses rated to use between 450 and 900 volt-amperes (VA).

With the rate hike, the House and the government have agreed to allocate Rp 78.6 trillion (US$8.27 billion) for electricity subsidies for 2013, according to Commission VII chairman Sutan Bathoegana of the Democratic Party.

Without the hike, the subsidy would have soared by as much as Rp 92.52 trillion.

Indonesia — with the highest economic growth rate in Asia in the second half of this year, after China and India — has not increased electricity rates since 2010.

Commission VII lawmaker Effendi Simbolon from the Indonesian Democratic Party of Struggle (PDI-P) said that the opposition party had several concerns on the increase, particularly related to what he called the poor performance of state power company PT PLN in improving electricity production.

Debate on PLN’s inefficiency was the primary reason behind the deadlock, according to Effendi, who said that PLN has also not been efficient “in managing its piling debts”.

PLN has accumulated debts of Rp 367 trillion as of the first half of 2012, which mostly went to finance new power plants under the government’s accelerated program to build a host of 10,000-Megawatt (MW) power plants in less than five years to prevent electricity shortages.

Separately, when asked if the increase would effect inflation, Finance Minister Agus Martowardojo said that if the actual increases were in line with the proposal, inflation might only increase by 0.3 percent.

The finance minister said the rate increase would allow the government increase its budget for capital expenditures by as much as Rp 7 trillion to a total of Rp 200 trillion in the 2013 budget.

In a separate meeting, Commission VII also agreed to raise the nation’s subsidized fuel quota by 4.04 million kiloliters (KL), or by around 10 percent of this year’s original quota of 40 million kiloliters, which was only sufficient until September.

With the additional allocation, the total government expenditures for the fuel subsidies for 2012 will be raised by 11.6 percent to Rp 153.4 trillion.

“We’ve approved the additional subsidized fuel as well as 0.22 million tons of three-kilogram LPG [liquefied petroleum gas] cylinders,” Commission VII member Achmad Farial said as he read the lawmaker’s determination.

However, Achmad said that the quota would be increased only after the government underwent an audit by the Supreme Audit Agency (BPK).

Commission member Satya W. Yudha said the lawmakers’ approval should be followed up by several additional requirements to be determined by the House.

“We want to ensure that the additional quota will be enjoyed by people who really deserve it,” Satya said.

The lawmaker said that the government must take stiffer measures to prevent fuel hoarding based on reports from the downstream oil and gas regulator BPH Migas.

BPH Migas recorded that hoarding has been rife in regions such as Palembang in South Sumatra; Batam, Riau Islands; East Kalimantan; and Surabaya, East Java.

As fuel prices in Indonesia are far cheaper than in neighboring countries, smugglers have had brisk business in illicit cross-border sales.

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