Government drafts new regulation on private power

Government drafts new regulation on private power

JAKARTA (JP): The government is drafting a regulation on the
supply of private power to free state electricity company PT
Perusahaan Listrik Negara (PLN) from the obligation of buying
power from projects awarded to independent power producers (IPP)
without competitive bidding.

Minister of Mines and Energy Kuntoro Mangkusubroto said that
under the new presidential decree PLN would only buy power from
solicited power projects -- projects proposed by the government
and awarded to IPPs through a competitive bidding process.

IPPs will continue to be allowed to develop projects on an
unsolicited basis but the government and PLN will have no
obligation to buy power from them.

"The new regulations will not affect IPP power projects
already in possession of power purchase agreements (PPA) signed
by the government," Kuntoro said in a weekly press conference at
his office.

He said the government would issue the new presidential decree
later this year to replace 1992 presidential decree No. 37.

PLN has signed contracts to buy power from 26 projects, only
one of which was awarded through open bidding, namely the 1,320
Megawatt (MW) Tanjung Jati A coal-fired power plant in Jepara,
Central Java.

The plant belongs to PT Tanjung Jati Power Company, which is
30 percent owned by Japan's Tomen Power Corporation, 30 percent
owned by Britain's National Power, 20 percent owned by PT Bakrie
Power Corporation and 20 percent owned by Maharani Paramitra, a
company that belongs to Soeharto's daughter Siti Hediati Prabowo.

PT Tanjung Jati sells power to PLN for 5.75 U.S. cents per
kilowatt hour (kwh), the lowest price offered by any of the 26
IPPs. Other IPPs charge PLN between 6 cents and 8.4 cents per kwh
for power.

Tanjung Jati A was among 16 power projects put on hold by the
government in September 1997 as part of retrenchment efforts to
deal with the monetary crisis.

Analysts say that awarding power projects without competitive
tenders has resulted in PLN having to pay an excessively high
price for power supplied by IPPs.

International power companies are thought to have snapped up
power projects by carefully courting Soeharto's family and
cronies and former PLN officials.

Many IPPs, emboldened by the immunity bestowed upon them by
their weighty local backers, are alleged to have then violated
local regulations on a regular basis, according to analysts.

One such example is the fact that IPPs have obtained contracts
quoting power prices in dollars, in spite of the 1992
presidential decree stating that: "Power prices (from IPPs)...
must be quoted in rupiah and (the price must be) stipulated in
the contract."

The 1992 presidential decree also stipulates that:
"Investments made by private companies to produce power are not
guaranteed by the (Indonesian government)". However, some IPPs
claim the government has guaranteed their investments, opening
the door for them to receive compensation if PLN fails to buy
power from them.

PLN has refused to pay IPPs in full for months now in an
attempt to come to terms with severe financial difficulties it is
experiencing as a result of the rupiah's sharp depreciation in
value against the U.S. dollar.

PLN president Adhi Satriya said earlier that his company plans
to begin renegotiating contracts with IPPs in December and will
seek to lower the price of power supplied through these routes to
around 4 cents per Kwh.

Kuntoro also said the government is drafting a new
presidential decree to end the monopoly over geothermal resources
currently held by the state oil and gas company Pertamina.

Under the new regulation, no geothermal development projects
will be awarded to contractors without a competitive tender. (jsk)