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.