New Electricity Subsidy Scheme Reaps Protests

TEMPO.CO, Jakarta - The government's plan to change the new scheme for electricity subsidy received protests. The scheme is not something new and is considered ineffective due to Indonesia's high number of inefficient power plants.

Iwa Gurniwa, a professor of Faculty of Engineering, University of Indonesia, said that said that cost of electricity provision (BPP) has been really high because of the large consumption of fuel oil. "The cost is larger than the rate imposed to the people," he said yesterday.

The government plans to change the electricity subsidy scheme next year by linking a Performance-Based Regulatory (PBR) target for state power company PT PLN (Persero), replacing the old cost margin scheme that is deemed non-profiting for PLN; making it difficult for the company to have production efficiency.

Iwa said the PBR scheme will only burden PLN's performance—a company with a lot of old and problematic power plants. According to Iwa, the government should not only requires efficiency, but also press the fuel consumption of PLN's each plant. "The trick is by providing enough gas supply to PLN," he said.

Meanwhile, Freddy Saragih, head of fiscal risk management at the Finance Ministry's Fiscal Office, said the PBR scheme will actually encourage PLN to increase efficiency, improve service quality, and lower production costs to obtain profit margins.

"Indirectly, [the scheme] will create a system of reward and punishment for PLN's achievements," he said yesterday.

The PBR scheme, he said, has been applied in many developed countries including England, New Zealand, France, and Spain, as well as developing countries such as Brazil, Argentina, and the Philippines. In the ASEAN region, electricity providers in Malaysia, Thailand, and the Philippines have applied PBR scheme.

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