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Get Ready for Higher Electrical Rates?

Indonesian State Electricity Board Desperately Needs More Funds. Is Bali Due for Higher Rates?

(8/31/2009) The State Electricity Board (PLN) is in desperate need of more funds to cover operating deficits and undertake a much needed expansion of the Indonesian power grid.

The House of Representatives has recently increased the subsidies paid by the government to PLN, while PLN president director, Fahmi Mochtar, has declared his desire to raise electrical tariffs both moves intended to put the Company in a better position for what has been termed a "fast track" energy program.

Mochtar remain uncommitted as to the amount of increase he will seek in electrical tariffs, claiming the final decision on any increase rests with the Minister of Energy.

However, in approving the recent increase in price subsidies from 5 to 8 percent, the House of Representatives specifically stipulated PLN woulkd not be allowed to raise electrical rates.

Yet, government subsidies - even at higher levels of 8% - are certain to be insufficient to cover continuing operating losses sustained by PLN which currently sells electricity for Rp. 640 (US$0.063) per kilowatt hour that it produces at a cost of Rp. 1,100 (US$0.10.8) per kilowatt hour.

Barred from raising electrical tariffs and strapped for cash, PLN is preparing to sell US$150 million in bonds at the end of the current year.

PLN is also seeking government approval for a new plan to charge higher tariffs in Java and Bali areas considered "quality service areas." Current regulations specify that electrical rates must be uniform in all areas of the country.

Last year PLN recorded losses of Rp. 13.1 trillion (US$1.3 billion).

Related Article

[Bali Braces for Higher Electricity Rates].