Govt to totally liberalize power sector in 5 years<\/p>\n
JAKARTA (JP): The government plans to liberalize the power
\nsector over the next five years to allow independent power
\nproducers (IPPs) to directly sell power to the public in
\ncompetition with state electricity company PLN.<\/p>\n
Minister of Mines and Energy Kuntoro Mangkusubroto said
\nyesterday the government would soon start on all the necessary
\nrequirements, including restructuring PLN and changing the
\nexisting electricity law, to pave the way for a free power market
\nin Java and Bali by 2003.<\/p>\n
Outer regions will gradually adopt the free market mechanism
\nin later years, he said.<\/p>\n
\"The government believes that competition is the best means to
\nsecure efficiency and the lowest possible price for electricity,\"
\nKuntoro said at a gathering to mark the long-term restructuring
\nof the power sector.<\/p>\n
The ceremony drew hundreds of local and foreign power company
\nexecutives.<\/p>\n
Under the existing 1985 electricity law, IPPs are obliged to
\nsell their power to PLN at negotiated prices. PLN then sells the
\npower together with electricity generated by its own plants to
\nthe public. PLN is thus the single seller and the single buyer of
\npower.<\/p>\n
Under the free market mechanism, IPPs and PLN would both send
\npower to a state power distribution and transmission company
\nwhich would offer the pooled power for sale to power retailers
\nand corporate users through an open bidding system.<\/p>\n
The distribution and transmission company would be entitled to
\ncharge a fee for its services.<\/p>\n
The system would thus feature multiple sellers and multiple
\nbuyers with prices determined by market forces.<\/p>\n
\"The power market would evolve around a 'power purchase pool'
\ninto which (power) generators would bid and from which retailers
\nand large end-users could purchase.<\/p>\n
\"There would be free entry into both the generation and
\nretailing segments. Only transmission and distribution, as
\nnatural monopolies, would continue to be regulated,\" he said.<\/p>\n
The system is applied in countries like Singapore, Britain,
\nChile, Argentina and the U.S. state of California.<\/p>\n
Kuntoro said that after the free market scheme was fully
\nimplemented in Java and Bali, the government would no longer
\nprovide subsidies to consumers on both islands, except for the
\nvery poor.<\/p>\n
Consumers in other regions will still receive government
\nsubsidies until the free market system is fully implemented
\nnationwide.<\/p>\n
Under the plan, the government will take over PLN's current
\ntransmission and dispatch division for the Java-Bali grid and
\nturn the division into the Java-Bali Transmission Company (JBTC),
\nseparate from PLN.<\/p>\n
PLN's power generation division will be transformed into two
\nseparate companies: the Java-Bali Electricity Company (JBEC),
\nwhich will control all power plants built on both islands, and
\nthe Regional Electricity Company (REC), which will control all
\npower plants in other regions.<\/p>\n
JBEC will be an independent, profit-oriented company ready for
\nprivatization, while REC will be directly owned and subsidized by
\nthe government.<\/p>\n
Kuntoro said JBEC would be formed next year, while JBTC and
\nREC would be created the following year.<\/p>\n
PLN currently has two power generation subsidiaries: PT
\nPembangkitan Listrik Jawa Bali (PJB I), which controls power
\nplants in West and Central Java, and PT Pembangkitan Jawa Bali II
\n(PJB II), covering power plants in East Java and other regions.<\/p>\n
The multiple buyer\/multiple seller market system is in sharp
\ncontrast with the system outlined in the power purchase
\nagreements signed by the country's 27 IPPs.<\/p>\n
Under the agreements, PLN is required to buy power from IPPs
\nat an average fixed price of 7 U.S. cents per kilowatt hour (kwh)
\nand as much as 80 percent of their power generation capacity.<\/p>\n
Under the free market system, power prices and sales volumes
\nwould be determined by a supply-demand mechanism.<\/p>\n
The current agreements stipulate that IPPs have to transfer
\ntheir assets to PLN after 30 years of operation. The free market
\nsystem, however, would allow IPPs to own their properties
\nforever.<\/p>\n
Kuntoro, acknowledging the differences between the current
\npower purchasing agreements and the incoming free market system,
\nsaid all 27 IPPs would be directed to operate under the new
\nsystem.<\/p>\n
The government has postponed the development of several IPP
\npower plant projects to cope with the monetary crisis.<\/p>\n
PLN has also tried to renegotiate its contracts with IPPs to
\nalleviate its financial problems amid the crisis.<\/p>\n
Kuntoro said President B.J. Habibie would soon issue a decree
\nto set up a task force headed by Coordinating Minister for
\nDevelopment Supervision and Administrative Reforms Hartarto to
\nhelp end the dispute between PLN and the IPPs. (jsk)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-to-totally-liberalize-power-sector-in-5-years-1447893297",
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