Electricity Tariff Increase Will Not Disrupt Economic Recovery

The government will increase the electricity tariff for households with a power of 3,500 Volt Ampere (VA) and above (R2, R3) and for government groups (P1, P2, P3). It is believed that the increase in electricity rates will not affect Indonesia’s economic recovery.

Indef economist, Abra Talattov said that the adjustment of electricity tariffs for 5 categories of 3,500 VA and above shows that the government dares to provide flexibility to PLN through tariff adjustments.

“The electricity tariff adjustment that took effect on July 1 will not disrupt the economic recovery, considering that the affected segment is about 2 million customers,” Abra said in a written statement, Wednesday (15/6/2022).

Abra stated that the R2 customers, who are considered to be affluent, are not bothered by the electricity tariff adjustment. Considering that customers already use more capable electronic equipment, such as AC consumption of more than 2 units and on average they already have a four-wheeled vehicle.

On the other hand, based on data from the Ministry of Energy and Mineral Resources launched by the BKF of the Ministry of Finance, the impact of the electricity tariff adjustment in the third quarter of 2022 is very small, projected to affect the inflation of around 0.019 percent.

Then, the 2022 compensation savings from the increase in electricity rates will reach Rp. 3.09 trillion or 4.7 percent of the total compensation.

Abra noted, referring to the total compensation of PLN 2021 which reached Rp. 24.6 trillion, 5 groups (R2, R3, P1, P2, P3) have reduced the compensation burden by around Rp. 1.7 trillion or contributed 6.9 percent of government compensation for PLN.

Regarding the impact on micro, small and medium enterprises (MSMEs), Abra said the government’s policy has actually made small and medium enterprises migrate groups of customers to industry and business.

According to him, with the shift in customer groups, MSME actors will get more attractive electricity rates. This is because the government has decided not to make tariff adjustments to industrial and business groups.

“Maybe there are upper household groups who are also MSME actors, this is actually a momentum for group migration because they can get subsidized rates. The rates are much lower than the B2 or B4 groups, in terms of the power they also get bigger, so they are even more qualified,” he said.

As previously reported, the Ministry of Energy and Mineral Resources (ESDM) continues to hold back electricity tariffs in the industrial and business sectors even though the compensation burden of PT PLN (Persero) from the two types of customers is quite wide amid the world crude oil price which has been held high until the middle of this year.

Director-General of Electricity Rida Mulyana said the step was taken to maintain the momentum for the recovery of people’s purchasing power, which has recently recovered as the Covid-19 case has slowed.