More competition in power projects likely

More competition in power projects likely

JAKARTA (JP): To stimulate competition in the electricity
business the government says it will increase the number of
projects that require investors to secure their contracts through
tenders, a senior government official said yesterday.

"Competition should be the first priority to encourage the
participation of private investors in developing our electricity
projects," said Zuhal, the Ministry of Mines and Energy's
Director General of Electricity and New Energy Development.

Speaking after a seminar on "The Role of the Private Sector in
Developing Energy and Electricity Infrastructure through
Partnerships", Zuhal noted that most electricity projects are
unsolicited.

An unsolicited project is one in which a private investor
submits a proposal to the government, in this case to state-owned
electricity company PLN, and wins approval without going through
a tender process.

With solicited projects, PLN offers an electricity project to
the private sector and awards a contract to an investor after a
tender process.

"We'll reduce the number of unsolicited projects and increase
the number of solicited ones to encourage competition, which is
good for efficiency," Zuhal said.

He stressed that the government will include the competition
principle into an electricity masterplan, which is currently
being formulated by the government. "We hope to issue the
electricity masterplan later this year," he said.

The plan will contain an electricity pricing system and act as
a legal reference for electricity businesses in the country, he
said.

Market risk

According to Zuhal, the government will include a market risk
calculation in the masterplan. "PLN, as the single buyer of
electricity from private power generators, has to bear the market
risks of selling energy. With market risk regulation, the
government and the private sector will share the risk," he said.

Take for example, he said, a private power station with a
generation capacity of 600 megawatt (MW). PLN may buy only 300 MW
if it feels that it is only able to sell 300 MW, and sell the
rest to other parties, he said.

To compensate for this, he said the company will be allowed to
establish transmission and distribution networks to support its
sales to the other parties.

"The government is also preparing a regulation about the
transmission and distribution businesses," he said.

The one-day seminar, which was organized by Mitra Teknology
Indonesia Foundation, was also addressed by PLN president Djiteng
Marsoedi, Jakarta Stock Exchange president Cyril Noerhadi and a
number of local and foreign business figures, including tycoon
Sudwikatmono, the chief commissioner of electricity generator PT
Cikarang Listrindo. (13)