THE PRICE OF ELECTRICITY IN INDONESIA

Persistent shortages of electric power and of capital to fund power sy stem expansion have recently prompted the Indonesian government to all ow the private sector to supply electricity. Price has become a contro versial issue-both the retail price private producers would charge the public, and the wholesale price at which they would sell in bulk to t he state utility, PLN. The government has traditionally kept the retai l price below cost to support economic development objectives, and sub sidies have covered PLN's losses. Opponents of private power argue tha t without subsidies private suppliers would have to raise the retail p rice to unacceptable levels-according to PLN, almost 50% more per kilo watt-hour than its own price. The paper assesses PLN's claim by quanti fying hidden subsidies, and demonstrates that, if these were properly taken into account, the average retail price per kilowatt-hour for 198 0-93 should have been 46% higher than it was.