Players doubt free power market<\/p>\n
Fitri Wulandari, Jakarta<\/p>\n
A free market may be successful in providing customers with
\nsufficient and affordable goods and services, but can a free
\nmarket ensure an uninterrupted power supply at affordable prices
\nfor customers in Indonesia?<\/p>\n
Consumer protection activists concluded during a recent
\ndiscussion on the issue that free market competition in the
\ncountry's electricity sector would likely result in a sharp
\nincrease in power prices of up to 40 percent.<\/p>\n
The government is preparing to liberalize the power sector in
\na bid to lure badly needed investment. Law No. 20\/2002 on
\nelectricity allows private companies to produce power, build
\ntransmission and distribution networks, as well as sell power to
\nthe public in areas declared "competition zones".<\/p>\n
It is not yet clear, however, when full competition, where
\npower firms will be able to sell their power directly to
\nconsumers, will be realized. The government has said the
\nliberalization drive will be implemented gradually starting in
\n2007.<\/p>\n
"As private companies control different aspects of the power
\nbusiness, it (free market competition) will make the power supply
\nchain longer and in turn push prices higher for consumers," Fabby
\nTumiwa, coordinator of the Working Group for Power Sector
\nRestructuring (WGPSR), said during the discussion.<\/p>\n
According to the WGPSR, power prices could rise by between 30
\npercent and 40 percent the power sector implemented open
\ncompetition.<\/p>\n
Price rises could be expected because consumers would have to
\npay taxes to purchase power, as well as having to subsidize the
\ndevelopment of the power infrastructure in undeveloped areas,
\nFabby said.<\/p>\n
Currently, only state-owned electricity company PT PLN is
\nauthorized to sell power to the public. Private power producers
\nare allowed to produce power, but they are only be able to use
\nthe power themselves or sell it to PLN.<\/p>\n
Independent energy consultant Nengah Sudja said electricity
\nprices could rise under free market competition because the
\ncommodity would be traded in the spot market, where prices would
\nbe determined by supply and demand.<\/p>\n
"If supply is less than demand, prices will be high," Nengah
\nsaid. "To maintain a sufficient supply at reasonable prices, it
\nmust be secured via a long-term contract."<\/p>\n
Fabby said Indonesia was not ready for an open power market
\nbecause the high demand for electricity here would require
\ncapital-intensive investment, which eventually would cause power
\nprices to rise as investors sought to recoup their investments.<\/p>\n
"Free market competition can be applied in a country where
\n(power) demand is low and the infrastructure is mature. It will
\nbe difficult for Indonesia because it is too risky and costly for
\nconsumers," he said.<\/p>\n
Yogo Pratomo, the director general of electricity and energy
\nutilities at the Ministry of Energy and Mineral Resources, said
\nthe outlook for the sector was not that grim.<\/p>\n
"The government will be very careful in applying competition
\nin the power sector," Yogo told the Post. "Competition is not the
\nobjective, but a tool to provide a sufficient supply of
\nelectricity in an efficient manner."<\/p>\n
Yogo acknowledged there were conditions that had to be met
\nbefore entering full-fledged free market competition.<\/p>\n
The first condition is that transmission and distribution
\nnetworks should be ready to store massive loads of power to
\nguarantee an uninterrupted supply for consumers.<\/p>\n
Another condition is that power prices must achieve an
\neconomic level, which means power prices can cover the cost of
\nsupply and provide a margin for investors.<\/p>\n
These conditions, Yogo said, cannot be achieved in a short
\ntime.<\/p>\n
"Full market competition down to the end users is still a long
\nway away. It will take time until the power sector is ready," he
\nsaid.<\/p>",
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