Liberalization of power industry will hurts consumers, expert says
Fitri Wulandari, The Jakarta Post, Jakarta
The power industry should be state controlled, says one leading expert on energy, who has warned that liberalizing the sector would make power prices very expensive to the public.
Kurtubi argued that because power is a special commodity that affects the public interest, it should not be treated like other commodities.
"Power should be controlled by the state to keep the price as low as possible for consumers," Kurtubi told The Jakarta Post over the weekend.
The House of Representatives is expected to pass the power bill into law next month. The power bill is aimed at ending the long-held monopoly of state-owned electricity company PLN and liberalizing the local power industry.
At present, PLN controls all aspects of the power sector in Indonesia. It owns a number of power plants as well as operating transmission and distribution infrastructures across the country.
The government is under pressure to liberalize the power sector in a bid to attract more private sector investment to avoid a power crisis in the future.
Under the new system proposed by the bill, all power producers including PLN would sell power to the public through a bidding system. Producers offering the cheapest power prices would be given priority to enter the power grid.
A special agency would be set up by the government to supervise this new system and also to establish the new rules of the game.
Deregulation of the power industry has been proceeding in countries such as the United States, the United Kingdom, Sweden and the Netherlands. But they are also facing higher power prices.
Power prices in Sweden have risen ten fold since before deregulation, while in California, they have risen five fold.
The Philippines has also deregulated its power sector. It has reached 100 percent electrification in 78 provinces.
But the public have to pay between 5 U.S. cents and 6 cents per kilowatt hour, compared to a previous subsidized rate of between 3 cents and 4 cents.
A legislator from House Commission VIII insisted, however, that the new system would still enable the state to retain control over the power industry.
"It is far from being liberalized because the state will still control the distribution of power to consumers," Emir Moeis told The Post over the weekend.
Commission VIII oversees science and technology affairs.
The state, through a special agency would control the transmission of power across the country, and the distribution and range of power prices," he added.
Emir added that under the new system, liberalization would only go ahead if consumers were able to buy power at the market price even when supply is higher than demand.
"It would take at least five to ten years to reach that situation," he said.
Elsewhere, Kurtubi said that a free market system would work well if foreign investments to the country and law enforcement were strictly supervised.
He further suggested that the bill should be suspended at least for another 2 or 3 years to study the experience of other countries that had liberalized their power sector.