PLN president director Fahmi Mochtar told reporters Wednesday that there were four scenarios being considered, “all of the scenarios focus on increasing the rates by between 20 to 30 percent”.

PLN currently imposes 34 different electricity rates on five categories of customers: households, social facilities, the government, commercial business and manufacturers.

Rate increases would vary depending on   these categories, he said, “for example, the increase for small households may be less than 20 percent, while for the business customers it may be more”.

Mohamad S. Hidayat, chairman of the Indonesian Chamber of Commerce and Industry (Kadin), said tariff increases would affect  production costs and at the end of the day they would reduce local business competitiveness.

“We understand that PLN is facing problems as the rates are lower than the production cost. But, Kadin will reject the idea that this [proposed increase] is the only option. Another option should be considered,” Hidayat said.

J. Purwono, director general for electricity and energy utilization, said the proposal to raise electricity prices came from the House budgeting committee last week when it decided to revise down the government’s electricity subsidy allocation for next year from Rp 52.5 (US$5.3 billion) trillion to Rp 35.3 trillion.

“The budget committee suggests the government to study the possibility of increasing the rate by an average 20 percent next year. But, this is still a suggestion. The government and the House will discuss this further,” said Purwono.

Another decision was also made by the House committee that affects PLN plans for 2010. The committee refused PLN’s request to increase the value of the annual injection to help keep the PLN cash flow positive.

PLN proposed the House to have the government increase the capital injection next year to 8 percent of production cost instead of the 5 percent in 2009. The House rejected this, saying that a 5 percent margin was enough to keep  things running.

This decision, Fahmi said, would hurt PLN’s investment plans.

“With the 5 percent margin, PLN cannot invest according to its business plans. We must reevaluate
our plans and find other ways out,” Fahmi said.

Based on the assumption of a global oil price at $60 per barrel, PLN’s vice president director Rudiantara said one percent of total production cost would amount to Rp 1.4 trillion.

Fahmi added that, with the 5 percent margin, PLN would only able to maintain its cash flow at a  level enabling the company to avoid facing technical defaults in paying debts, but the margin will not provide much room for investment.

According to Fahmi, between 2009 and 2015, PLN will need at least Rp 80 trillion per year for investment to meet increased power demand of 5,000 megawatts per year.

PLN, meanwhile, continues to suffer losses every year. Last year, the company suffered net losses of Rp 12.3 trillion, about Rp 9 trillion of which was due to currency losses following the 2008 financial crisis, up from Rp 5.6 trillion in losses in 2007.

On Tuesday, the House passed the electricity bill into law, ending the monopoly of PLN over electricity production and distribution and allowing regional and local governments to participate with partners in production and distribution of electricity and to have a say in power rates.

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