House queries private role in electricity generation

House queries private role in electricity generation

JAKARTA (JP): The budgetary commission of the House of
Representatives yesterday questioned the viability of electricity
generation by private firms, saying the large number of new power
projects might cause an oversupply.

Tadjuddin Noer Said of Golkar said the electricity shortage
might have been exaggerated by the government as a pretext to
allow massive participation by private companies in power
generation.

"Despite Pak Djiteng's denials, we have calculated we will
face a large oversupply of electricity in the near future,"
Tadjuddin told a hearing with Djiteng Marsoedi, the president of
the state-owned electricity company PLN.

Indonesia has a generation capacity of 15,000 Megawatts (MW),
while electricity demand is only 10,000 MW.

In the next three years, PLN alone will increase its
generation capacity by 4,100 MW, and private companies will
generate close to 7,100 MW.

He said growth of electricity demand had only been around 17
percent a year. The increased capacity would exceed the demand by
7,000 MW even though an electricity reserve of about 30 percent
of the total demand had been taken into account.

"This has not included the additional capacity likely to be
built by private firms in the next five years," he said.

Djiteng acknowledged private companies had proposed to PLN to
build some 51,000 MW of electricity, of which some 7,000 MW had
been agreed to by PLN -- through power purchase agreements -- and
some 5,000 MW was under negotiation with the private firms.

Several other House members shared worries of possible
oversupply, saying what the problem PLN actually faced was not
related to supply but to lack of transmission and distribution
networks.

Tadjuddin said if the problem faced by PLN was related to
transmission the government should encourage private companies to
build transmissions, not power plants.

Electricity transmissions have been the responsibility of PLN
in the past.

Djiteng denied there would be an oversupply.

"The electricity development by the private companies will
proceed in stages according to electricity demand. The growth of
our electricity demand now ranges from 15 percent to 17 percent
per year. But we don't know exactly, because it may increase much
higher than that. After all, we should prepare a generation
capacity of up to 130 percent of the total demand, using the
other 30 percent as a reserve," Djiteng argued.

Speaking at a fast breaking function on Wednesday night, PLN's
Director of Planning, P. Sihombing, also strongly denied an
imminent oversupply, saying the fear of oversupply had been
caused by misunderstanding by the people of the electricity
system.

"We don't know for sure what will happen in the near future.
And we cannot predict the exact demand for electricity. We,
therefore, have to prepare for any possibility in the future," he
said.

Pressed by journalists on projections of electricity supply
and demand, Sihombing noted, "Technically speaking, I understand
more about electricity than you. But you, as a journalist,
understand more about journalism than me."

But Minister of Mines and Energy I.B. Sudjana admitted over
the weekend the possibility of oversupply. "We overestimated in
designing the electricity plan. Our prediction of the electricity
demand is not compatible with the industrial growth," he said.

During the hearing Tadjuddin also questioned industries'
reluctance to use PLN's electricity. "We noticed during our
visits to East and West Java many industries preferred to use
their own captive diesel units, which they said were cheaper than
PLN's electricity," he said.

"The master plan should be formulated by an inter-ministerial
team which includes the ministries of finance, trade and
industry. The master plan, therefore, should be issued by the
President himself by accommodating input from the ministries," he
said.

Djiteng said last year PLN posted a net profit of Rp 1
trillion (US$431.03 million) with a total sales of Rp 9.7
trillion, an increase of about 15 percent from 1995. (bnt)

Profit -- Page 10