Like subsidized fuel oil (BBM), Indonesian electricity tariffs are below the economic price.

Economics & Macro

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Adi Ahdiat 30/08/2022 12:20 WIB

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According to PLN data, from 2017 to 2021, the average Indonesian electricity selling price or tariff was lower than its economic price.

Average Indonesia Electricity Costs and Tariffs (2017-2021)

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Like subsidized fuel oil (BBM), Indonesian electricity tariffs are below the economic price.

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Average Indonesia Electricity Costs and Tariffs (2017-2021)

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Since mid-2022, the government has frequently discussed the price of national fuel (BBM) being lower than the economic price or the actual cost. However, this is not only applicable to fuel; it also applies to electricity tariffs.

According to PLN data, from 2017 to 2021, the economic price/Cost of Provision (BPP) of electricity was higher than the average national selling price/electricity tariff, as detailed in the graph.

"Currently, the economic electricity tariff is around Rp1400-Rp1500 per kWh. However, with government subsidies channeled through PT PLN, subsidized consumers only need to pay around Rp400-Rp600 per kWh," PLN explained in its 2021 Annual Report.

PLN also stated that the economic price of electricity continued to increase in 2022, along with the soaring price of fossil energy commodities.

"This year, we are facing global turmoil that has resulted in an increase in the Cost of Provision (BPP) of electricity. Every US$1 increase in the Indonesian Crude Price (ICP) results in a Rp500 billion increase in BPP," PLN explained in a press release on its official website on June 13, 2022.

To cover the difference between the economic price and the selling price of electricity, in 2022 the government allocated approximately Rp293.5 trillion in energy compensation.

However, based on the 2023 State Budget (RAPBN 2023), next year's compensation budget will be significantly reduced. This indicates that electricity tariffs are likely to increase again in the near future.

Editor : Adi Ahdiat

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."