House endorses power bill after long delay

A'an Suryana, The Jakarta Post, Jakarta

After one-and-a-half years of deliberation, the House of Representatives finally endorsed the electricity bill on Wednesday.

The bill is expected to gradually liberalize the power sector and attract more investment.

All nine factions in the House endorsed the bill during a plenary session, despite strong resistance from several members, including outspoken legislator Hartono Mardjono who lodged a protest.

In their final submissions, the factions said that the liberalization drive would spur competition in the electricity industry, which in turn would allow the public to enjoy cheaper electricity.

"Competition will eventually lower the price of electricity, and the public at large will benefit from the lower prices," said Tunggul Sirait from the National Awakening Faction.

Meanwhile, Astrid Susanto from the Indonesian Nationhood Faction (FKKI) said that the newly endorsed bill would attract fresh investment to Indonesia.

A huge amount of investment in the power sector is needed to avoid power shortages in the future.

"This bill will create legal certainty in the country's electricity sector," Astrid told lawmakers.

Rustam Effendi Tamburaka from the Golkar Faction said that the bill was not excessively liberal as many have claimed, pointing out that the state-owned electricity utility PLN would still maintain its monopoly in less-developed areas.

The government submitted the power bill to the House in early 2001, but the House did not start its deliberations for another couple of months.

The initial version of the bill sparked protests from many members of the public, including the workers of public power utility PLN, given its goal of liberalizing the country's power industry and stripping PLN off its decades-long monopoly over the power sector. Critics fear liberalization would result in a sharp increase in power prices, thus hurting consumers.

They have demanded that the government maintain the current system unchanged, in which the power price is controlled by the government and only PLN is authorized to sell power to the public. Independent power producers can only sell power to PLN.

But the final version of the bill contains a number of changes from the original version.

In the final version, for instance, the government will maintain the current PLN-monopoly system in less-developed areas for years to come.

Meanwhile, legislators also warned the government of the possibility of a cartel being engineered by the private players in the market. Through a cartel, the producers of goods or services can jointly act to force up prices at the expense of customers.

Tunggul said that the yet-to-be established electricity regulatory commission must make sure that a cartel does not emerge.

Meanwhile, Muhamad Suhud, a coordinator for a grouping of non- governmental organizations concerned with the power sector, regretted the endorsement of the power bill.

"In a perfect competitive market, the new law would be of benefit.

However, the Indonesian market is not perfect yet as supply is not able to meet demand," Suhud told The Jakarta Post.

Suhud feared that liberalization would result in a sharp increase in power prices, thus hurting consumers.

Highlights of newly endorsed electricity bill

1. Within one year after the passage of the bill into law, the government will establish an electricity regulatory commission, which will have the task of setting power prices prior to the introduction of free competition, and ensure fair prices under free competition.

2. Within five years after the implementation of the law, the government will designate at least one area for free competition where licensed private companies will be free to develop power plants.

3. Under free competition, all licensed companies will be free to develop power plants and sell their power to the public by themselves or through agents.

4. The government, through a state agency, will continue to control the power transmission and distribution network, which power suppliers will be able to use for a fee.

5. Local governments have the right to issue licenses to private companies to set up power plants or sell power to the public in their respective jurisdictions.