Advantage of power liberalization questioned<\/p>\n
Moch. N. Kurniawan, The Jakarta Post, Jakarta<\/p>\n
Debates on the electricity bill, which aims to lift the monopoly
\nof the state electricity company PT PLN in the country's power
\nsector, could heat up considerably, as many legislators now have
\nbegun to challenge the benefits of lifting the monopoly and
\nimposing a free market system in the sector.<\/p>\n
Husni Thamrin of the Golkar faction questioned the benefits of
\nliberalizing the country's power sector, while Tunggul Sirait of
\nthe Love the Nation Democratic faction strongly rejected the
\nidea.<\/p>\n
Husni added that Indonesia had to learn from the failure of
\nCalifornia in implementing a free market system in its power
\nsector and, on the other hand, the success of France to keep in
\nplace the monopoly system in its power sector.<\/p>\n
"This electricity liberalization spirit is going too far...,"
\nHusni told the Jakarta Post.<\/p>\n
Husni said he could not predict when the power bill
\ndeliberation would be completed.<\/p>\n
The government submitted the power bill to the House in early
\n2001, but they did not start deliberating upon it for several
\nmonths thereafter.<\/p>\n
Many expected that the debate would wind up in March, but the
\nHouse failed to do so.<\/p>\n
The planned power law, which will replace Law No. 15\/1985, is
\naimed at revoking PLN's decades-long monopoly in the power sector
\nto allow private firms to produce, as well as directly distribute
\npower to the public.<\/p>\n
With the bill, the government seeks to encourage investment in
\nthe power sector, create free-market competition, and to obtain
\ncompetitive prices for power. New investment is needed in the
\npower sector to help avoid a predicted power crisis in the
\nfuture.<\/p>\n
The government has often faced obstacles in dismantling
\nmonopolies in the economy. For example, the government needed
\nnearly three years to obtain the approval of the House for the
\nnew oil and gas law, which ends the decades-old lucrative
\nmonopoly of state-owned oil and gas firm Pertamina.<\/p>\n
Under the existing power law, only PLN is allowed to produce
\nand sell power to the public. Private firms have been allowed to
\nproduce power but they could only sell the power to the public
\nthrough PLN. PLN has signed power purchase agreements (PPA) with
\n27 independent power producers (IPP).<\/p>\n
Under the proposed power bill, all producers, including PLN,
\nwill have to sell to distribution companies through a bidding
\nsystem. The lowest bidder will be allowed to enter the power
\ngrid, which will be operated by a special agency to be
\nestablished by the government.<\/p>\n
The power distribution companies then would sell to the end
\nusers: households, industries and others.<\/p>\n
The bill stipulates that there will be a seven-year transition
\nperiod before a fully liberalized power system will be
\nimplemented in particular areas.<\/p>\n
The government will also form a regulatory authority to ensure
\nfair competition in the industry. This regulator would also be
\nresponsible for determining the transmission fee.<\/p>\n
Many analysts say through the bill, the government seeks to
\napply a system resembling the one being applied in California,
\nwhich was blamed for raising power prices to an unaffordable
\nlevel which caused a crisis in the state for several months last
\nyear.<\/p>\n
Learning from the power crisis in California, they called on
\nthe House to reject the bill proposed by the government and
\nmaintain PLN's monopoly.<\/p>\n
They said, however, supervision should be boosted to prevent
\nthe monopoly holder from abusing its privilege or wantonly
\nraising its rates.<\/p>\n
Tunggul said he was against the idea of imposing full
\ncompetition in the sector because "the public was not yet ready
\nto implement it and accept its consequences."<\/p>\n
"So what is full competition for? Just to lure investors?," he
\nasked.<\/p>\n
He said to lure investors the government should better focus
\non improving the security situation, introducing attractive
\nprices for power and providing incentives to attract investors
\nrather than seeking to implement a free market system.<\/p>\n
"Those are the important factors that can lure investors to
\nbuild more power plants to provide electricity for all people
\nacross the country," he said.<\/p>\n
According to Tunggul, the best system for the country for
\nabout the next 15 years was the current multi sellers-single
\nbuyer system, in which private firms are allowed to produce power
\nbut could only sell them to the public through PLN.<\/p>\n
"We have experience in handling it. What we need to do is to
\neliminate corrupt practices, such as marking up power prices, to
\navoid public and government's losses" he said.<\/p>\n
He said once the current system was considered obsolete in the
\nfuture and the full competition was needed for the country's
\npower sector, the government and the House could revise the law.<\/p>",
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