Govt urged to draw up power policy
Govt urged to draw up power policy
The Jakarta Post, Jakarta
The World Bank has asked the government to prepare itself with
adequate policies to lure foreign investment in the country's
power sector, in line with its plans to liberalize the sector in
2006.
The request was made during a closed-door meeting on Friday
between the government and the World Bank, Asian Development Bank
(ADB) and the Japan Bank for International Corporation (JBIC),
said Coordinating Minister for Economy Dorodjatun Kuntjoro-Jakti.
Dorodjatun did not go into details about the suggestions made
by the bank and the two other international financial
institutions.
But, he said some crucial points that were raised during the
meeting pertained to legal certainty and electricity tariffs.
"The meeting should be of high importance, given the fact that
the Bank has done some studies in other countries. They also
reminded us to improve our negotiation skills in dealing with
private power investors," Dorodjatun was quoted by Antara as
saying.
He added similar meetings would be held in the near future, as
the country was gearing up to fully open its power sectors to
private investors starting 2006, as mandated by the Electricity
Law enacted in 2002.
The law, which will end the long-standing monopoly of state
power company PT Perusahaan Listrik Negara (PLN), is seen as
crucial, not only to lure more investment in the sector, but also
to avoid the looming power shortages in the future.
Nevertheless, there are also fears that the implementation of
the law would lead to an uncontrollable increase in power rates,
creating more burden on the public.
Currently, the power price is controlled by the government and
only PLN is authorized to sell power to the public. Independent
power producers (IPP) can only sell power to PLN.
PLN has signed power purchase agreements (PPA) with 27 IPPs
but some of the projects have been stopped due to the economic
crisis and the dispute with PLN over price.
Recently, PLN announced that it had managed to settle the
disputes with all the IPPs.
Starting 2006, under the electricity law, private companies
will be allowed to generate power and sell their power directly
to the public.
They will also be allowed to set up their own distribution and
transmission networks in cooperation with the government or use
the state-owned network now operated by PLN to supply their
power.
Elsewhere, PLN's president director Eddie Widiono admitted
that beyond 2006, Indonesia needed huge investment in the power
sector to meet the rising demand.
The Java-Bali power grid alone will need an additional supply
of about 12,000 Megawatt until 2010.
"For that, we'll need about US$20 billion in investment,"
Eddie said.
He explained that the government would likely cover the
development of power plants to produce 5,000 MW in new supply,
while private investors were expected to develop their own plants
to cover the rest of the new demand.