House to complete debate on power bill Friday

House to complete debate on power bill Friday

Fitri Wulandari, The Jakarta Post, Jakarta

The House of Representatives is expected to complete the
deliberation on the power bill on Friday, despite strong protests
from non governmental organizations that say the new law will
make electricity prices unaffordable.

"There are only a few points left to be discussed at the
commission. After that, we will try to finish it at the end of
the session (Friday)," Julius Bobo, a member of the House
Commission VIII on environmental, science and technology affairs
said, as quoted by detik.com on Thursday.

He said that the House was expected to be able to pass it into
law following the Aug. 1-12 Annual Session of the People's
Consultative Assembly.

If the House does pass the bill, it will end the monopoly held
by state-owned electricity company PLN in the country's power
sector.

A crucial point in the bill, Julius said, is the division of
non competitive and competitive regions in power consumption.

Competitive regions are areas that have high level economic
activities such as Java and Bali.

He added the House was being very careful in coming up with
the duties of the special Power Market Agency to ensure the new
law will not hurt public interest.

Under the new system proposed in the power bill, all power
producers including PLN, will sell power to the public through a
bidding system. The cheapest power will be allowed to enter the
power grid first, which will be operated by the Power Market
Agency, to be set up by the government.

The plan has immediately spurred protests from several NGOs,
such as the Indonesian Corruption Watch (ICW) and the trade union
of state-owned power company PLN, saying the bill did not
guarantee lower power prices.

"When the law takes effect, you can bet the public will have
to face a continuing increase in power prices," said Batara
Lumbanradja, PLN trade union's head of advocacy.

Teten Masduki, coordinator of ICW shared a similar tone,
saying that liberalization of the power industry would not
guarantee better services to the public.

"A free market will turn power into a commodity, causing it to
raise its price and make it unaffordable for the public," he
remarked.

The debate has been mounting since the government submitted
the bill for deliberation to the House a year ago. The bill will
replace the current Power Law No. 15/1985.

The power bill was part of the government's plan to
restructure the power industry by lifting PLN's monopoly on the
sector.

The government has allowed private investment in the power
generation sector but maintains PLN's control over the country's
power distribution and transmission networks.

Private power producers cannot operate in the country unless
they have signed a power purchase agreement with PLN.

Based on one estimate, the country must raise its power
generation capacity to about 58,800 Megawatts (MW) by 2010, from
the current 22,732 MW to avoid power shortages.

To meet this, Indonesia needs about US$37.26 billion of new
investment in the sector.

Supporters of the bill say introducing a free market system
will allow cheaper prices for customers because power producers
will have to sell their electricity to the public through a
bidding system.

Opponents say vice versa, arguing that since the price of
power is decided by the market, the price will be higher.

Both Teten and Batara have criticized the Asian Development
Bank (ADB) and insist the bill supports private entities in order
to gain a greater share in the domestic power industry.

The government promised the ADB it would revise the current
power law when it signed a $380 million loan in 1999 for the
restructuring of the power sector. The passing of the bill into
law is a condition set by the bank for the disbursement of the
remaining part of the loan.

According to Batara, the first $200 million loan tranche had
been disbursed but it had not been clear whether the money was
being used to develop the power industry in Java and Bali.

ICW's and PLN's trade unions called on the House to establish
a special committee to investigate the ADB loan.

They also urged the government to drop the second tranche of
the loan to free the country from its obligation to change the
power law in order to serve the interests of foreign investors.