Govt prepares new rules on investment in power sector
Fitri Wulandari, The Jakarta Post, Jakarta
The government is drafting a regulation for investment in the country's power sector to ensure that future power projects are in line with the national electricity plan.
"Power projects in the future should be in line with a supply- demand balance and financial capability," Director General of Electricity and Energy Utilization Yogo Pratomo said at a discussion on power investment on Friday.
Yogo explained that state-owned power firm PT Perusahaan Listrik Negara (PLN)) would draw up a list of power projects in its power supply plan, which would be based on the government's 2004 to 2013 National Electricity Plan.
"PLN will then choose which projects will be handled by them, based on their financing capability and which projects are to be offered to investors through competitive bidding," Yogo said.
The regulation on private power projects aims to prevent past failures with independent power producers (IPPs). Before the late 1990s regional economic crisis, the government allowed private investors to build their own power plants and to sell power to PLN. This was made without clear planning, in terms of both demand-supply aspects and financing capacity.
There were 27 IPPs that obtained licenses to build power plants. But the projects were allegedly marred by collusion, without a transparent bidding process, forcing PLN to pay a high price for the power.
Following the crisis, the government was forced to delay the projects, leaving it in lengthy disputes and negotiations with the IPPs.
Last year, the government managed to renegotiate the power price with 26 IPPs. However, it lost a legal battle with U.S.- based power firm Karaha Bodas Company (KBC) last February and has to pay US$290 million in compensation.
"These projects (the IPPs), were not in the government's plan. Thus it was not clear who established them," Yogo said.
Based on the National Electricity Plan, Indonesia needs an additional power capacity of 23,443 megawatts (MW) to boost the capacity of existing power plants to 54,528 MW by 2013. It needs an investment of US$23.4 billion, and another $7 billion to $8 billion for the construction of transmission and distribution facilities.
The plan is based on a number of assumptions, including average annual economic growth of 4 percent to 5 percent, and population growth of 0.9 percent.
Yogo added that in the future the government would not provide a government guarantee for the investors. Any commercial risks would be born by the investors.
"The government would not be involved in the business-to- business negotiation," Yogo said.
He said this was aimed at preventing the government from being involved in a commercial dispute and ending up paying huge claims.