Indonesia sets out to bring in line ailing power sector
Indonesia sets out to bring in line ailing power sector
TOKYO (Dow Jones): Indonesia's Ministry of Mines and Energy
aims to restore the domestic power sector's financial viability
through a restructuring program running through 2003, a senior
ministry official said on Tuesday.
Financial problems in the power sector ranked among the most
serious difficulties Indonesia has faced since the economic
crisis first hit in mid-1997, said Endro Utomo Notodisuryo,
director general for Electricity and Energy Development at the
ministry.
In August last year, the Indonesian government promulgated a
power sector restructuring program, which seeks to introduce
competition by more efficient participation of independent power
producers.
IPP projects in Indonesia haven't been based on open tender
mechanisms but on direct assignment, and the economic turmoil has
brought mounting IPP concerns about the return on their
investment, Endro said.
"Given the current excess of generation capacity in the Java-
Bali system, it is extremely difficult for PT Perusahaan Listrik
Negara (PLN) to meet the take-or-pay power purchase agreements
with the IPPs," he added.
Currently, the government allows IPPs to generate electricity,
but they are only allowed to supply the power to PLN, a state-run
power monopoly.
Endro said that within Indonesia's energy sector, power sector
demand has been hardest hit, with oversupply likely to be a
problem in the near future.
If no action is taken, the Java-Bali system will suffer an
excess of generation capacity "until the year 2006", Endro
predicted.
"IPPs' participation here has so far yielded a series of
complications," such as a flow of costly project offers and
developments regardless of the government plans, Endro said. "PLN
gets losses and more risks," he added.
In a bid to tackle the hefty losses the domestic power sector
is currently facing, the government has been working on
fundamental changes to existing laws and codes in conformity with
international practice, Endro said.
Under the proposed restructuring program, the government will
establish the Java Bali Power Company in the middle of 1999, to
start allowing direct electricity purchases, initially in the
Java-Bali area.
The Ministry aims to revise the current Electricity Law by the
end of 1999, set up an independent regulator in 2000, and
establish a "multiple buyer, multiple seller" power market in the
Java-Bali area by 2003, Endro noted.
The restructuring will see PLN unbundled into independent
business entities in generation, transmission and distribution,
Endro said.
The government also is in the process of rationalizing
electricity tariffs and establishing a new mechanism for delivery
subsidies to underdeveloped regions, he said.
Endro was speaking at an annual symposium on Pacific Energy
Cooperation being held in Tokyo Feb. 16-17.