Court annuls new electricity law

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.