Minggu, 16 Desember 2018

The Simplification Trap

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  • TEMPO.CO, Jakarta - President Joko Widodo must halt the plan to simplify the classification of consumers of nonsubsidized household electricity. The move proposed by the Ministry of Energy and Mineral Resources and the state electricity company (PLN) will open the door to wastage of energy because the maximum electricity supply will rise to 5,500 volt-amperes (VA).

    The program will also cause budgetary problems for PLN, which will have to pay the Rp27 trillion cost of replacing the meters known as miniature circuit breakers for 13 million consumers. Eventually, all nonsubsidized consumers, both prepaid and postpaid, with supplies of 900 VA, 1,300 VA, 2,200 VA, 3,500 VA and 4,400 VA will become 5,500 VA consumers. Those with a 5,500 VA or 12,400 supply will all receive a 13,200 VA supply.

    This simplification will also affect the public because people will have to replace installations in their homes. Many householders use thin cables, which will be a fire hazard if they are used to carry 5,500 VA.

    This seems more of an endeavor to use up electricity capacity, which will increase from the present 56,000 megawatts to 79,000 megawatts in 2019 when the new generating capacity of 35,000 megawatts will come online. Because the implementation of this has not been properly thought through, the government is currently unsure what to do with the excess supply, especially since PLN will have to pay a ‘take or pay’ fine if it does not absorb at least 80 percent of the electricity generated by the private sector. To prevent wastage, the electrification program, especially outside Java, must be balanced with the development of industry to absorb the existing electricity supply.

    By increasing the supply to homes, domestic consumption will rise. Although the Energy Ministry has guaranteed that tariffs will not rise, higher consumption will mean larger bills. At present, the basic tariff for 1,300 VA is Rp1,467.28 per kilowatt-hour (kWh), while for a 900 VA supply it is Rp1,352 per kWh. The fixed subscription fee will also stay the same.

    It is difficult not to suspect that this plan is a stealthy strategy by PLN to increase income after the president decided not to raise the basic electricity tariff before the end of the year. This plan also appeared at a time when PLN is reported to be in difficulty because of its debts from projects. The company’s finances are in a dire state. Finance Minister Sri Mulyani sent a letter to State Minister for State-owned Enterprises Rini Soemarno and PLN Director Sofyan Basir about these debts. The letter, which stated that PLN was at risk of defaulting on its debt repayments, was leaked in September. One reason for the size of the debt was PLN spending on projects to generate an additional 35,000 megawatts.

    As of June this year, PLN had booked income of Rp122 trillion. Compare this with the company’s obligations of Rp128 trillion, with an additional Rp186.09 trillion due for repayment in the next three years. Given this debt, it seems that PLN will have to tighten its belt. PLN must not look for easy solutions, especially those that trap consumers, as a way of boosting its income by increasing the electricity supply to homes. Of the 66.63 million consumers of electricity, 85 percent are householders.

    Rather than trying this method, the energy ministry should ask PLN to focus on improving efficiency. It must find strategies other than those it has implemented to date, beyond simply cutting production costs. The government should reexamine PLN’s ambitious 35,000 megawatt program, which is costing the company so much.

    Read the full article in this week's edition of Tempo English Magazine