House approves new electricity subsidy scheme

The Jakarta Post ,  Jakarta   |  Fri, 04/04/2008 1:17 AM  |  Headlines

Households and offices with an electrical load capacity of 6,600 watts or more may face higher electricity bills from next month, under a new government subsidy scheme approved by the House of Representatives.

The scheme essentially adopts a reward-punishment mechanism, where such households and offices will be prevented from receiving subsidies if their electricity consumption rises above 1,034 kilowatts per hour (kWh).

Nonsubsidized electricity costs between 17 and 22 percent more than normal rates.

House Commission VII overseeing energy and mineral resources approved the scheme on Thursday, saying it was more realistic than an earlier plan, called the "incentive-disincentive" program, proposed by state-owned firm PT PLN.

Under that program, PLN had planned to fine all households and offices by increasing their normal rates by up to 160 percent if their electricity uses exceeded the limits, regardless of electrical load capacity.

PLN had to drop the plan as most commission members disapproved it on the grounds it would impose too great a burden on consumers and increase inflationary pressure.

Under the new scheme, PLN is expected to reduce government subsidies on its operation by up to Rp 2.7 trillion (about US$296 million).

The government is currently trying to cut back subsidies amid growing pressure from soaring global oil prices. Other efforts to cut back subsidies include the conversion of households from kerosene to gas, as the latter requires lower subsidies than kerosene.

"Customers who do not reduce their electricity consumption will be required to pay an additional nonsubsidized fee," Energy and Mineral Resources Minister Purnomo Yusgiantoro told reporters after a hearing with the commission.

He said the remaining one-month period would be used to announce the new electricity rates regulation and to distribute free energy-saving lightbulbs.

Last week, House Commission VII approved the government-proposed allocation of electricity subsidies worth Rp 61.01 trillion for 2008, even though PLN itself requires total subsidies of Rp 66.01 trillion to support its operations.

To cover the Rp 5 trillion shortfall, PLN will take several measures, such as reducing administrative and managerial losses and converting fuel for generators from high-speed diesel to marine fuel oil and gas.

PLN expects these measures to generate Rp 2.3 trillion, with the other Rp 2.7 trillion coming from the new subsidy mechanism.

Director general for electricity and energy utilization Jack Purwono said at the Thursday hearing the Rp 2.7 trillion target could only be achieved if at least 33 percent of households and offices with a capacity of 6,600 watts and above consume less than 1,034 kWh.

"If none of them consumes under the threshold, PLN will gain only Rp 1.4 trillion from the payment of additional nonsubsidized rates.

"If they all consume below that level, PLN will enjoy Rp 4.2 trillion in additional income," he said.

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