Court annuls new electricity law

Muninggar Sri Saraswati, The Jakarta Post, Jakarta

The Constitutional Court annulled on Wednesday Electricity Law No. 20/2002, ruling that it was against the nation's Constitution for opening the door to full competition in the electricity business.

It was the first law to be annulled by the powerful court since its establishment last year.

Court chief Jimly Asshidiqie, when announcing the court's ruling, said that since electricity was an important commodity pivotal to the lives of many people, electricity should remain under the government's control.

This, Jimly said, was in accordance with Article 33 of the 1945 Constitution which says "economic sectors which are important to the state and crucial for the welfare of the people are controlled by the state and must be developed to give the maximum benefit to the people."

The Court reinstated the defunct Electricity Law No. 15/1985 in a bid to maintain legal certainty following the annulment of the 2002 law.

However, it maintained that any contracts made by the government under Law No. 20/2002 prior to its annulment on Wednesday remained in effect.

Jimly said that the nation's Constitution did not prohibit the private sector from doing business in the power sector, but the government must keep control of the sector.

"The government must be the majority shareholder in state or regional companies, which manage the sector... so it holds power in decision making in the companies," Jimly said.

The Court said private companies, national or foreign, may cooperate with the state-owned enterprise to supply and generate power for the public, by providing loans or setting up joint ventures. In the case of joint ventures, the state owned enterprise must have majority shares of more than 50 percent or relative majority shares of less than 50 percent.

Under the 2002 law, the government would gradually liberalize the power sector, starting in Java, Madura and Bali in 2007. By then, private companies may produce and sell power to the public in those areas by themselves.

The panel of nine justices said private companies were in a better position than state electricity firm PLN to compete in the sector given their better management, technology and finances.

The court considered the law unfair toward PLN as it requires PLN to fulfill the power needs of less developed areas outside Java, Madura and Bali, while competing with private companies in the three developed islands.

The judicial review of the law was raised with the court by the Indonesian Legal Counsel and Human Rights Association (APHI), the Indonesian Legal Aid and Human Rights Association (PBHI), the PLN workers union, and the Association of PLN pensioners.