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)