PLN workers threaten to strike

Fitri Wulandari , The Jakarta Post, Jakarta

Employees of state-owned electricity company PT PLN have threatened to strike if the government goes ahead with plans to sell the company's core business.

Ahmad Daryoko, chairman of PLN labor union, argued that the sale of the company's core business would burden the public with skyrocketing power rates.

Ahmad referred to a letter signed by Director General of Electricity and Energy Utilities Luluk Sumiarso which instructs PLN to unbundle its transmission, distribution and power plant units into separate entities.

The letter said the unbundling process should start on Nov. 27, 2003 as stipulated in Electricity Law No. 20/2002.

"This is an entry point for the government to spin off power plants and retailing operations in Java and Bali from PLN," Ahmad said in a statement.

The list of core businesses to be spun off from PLN are power plants, power transmission, power distribution, power sales, power sales agents, management of the power market, and power system.

Ahmad said once the units become separate entities, it would allow the government to sell them to private investors.

"If this happens, the process of selling power will be done by too many companies. Eventually it will raise power prices," Ahmad said.

Ahmad warned if the government did not cancel the plan by Nov. 27, PLN workers nationwide would go on strike. During the strike, the firm's workers would not provide services to the public including responding to calls if there were power disruptions.

"We apologize to the public for the strike," Ahmad said, adding that some 48,000 PLN workers nationwide will join the strike.

The strike, if it materializes, will predictably create chaos and anger as it will take place when the entire country is still celebrating the Muslim holiday Idul Fitri. The holiday will fall on Nov. 25 and Nov. 26.

Based on the power law, the country's power sector should be liberalized to allow the private sector to manage the business ranging from operating power plants to becoming power sales agents.

The law also says when liberalization starts in 2007, PLN is not allowed to dominate power generation in the "competition area", that is areas which are considered ready for liberalization.

Java and Bali are considered to be the first candidates to become competition areas in 2007 given their huge population, strong power demand and huge power generation. Both islands now consume about 80 percent of the country's total power generation capacity of 21,000 megawatts (MW).

Some fear that the liberalization would cause power rates to skyrocket since power will be sold by producers to end users through a chain of agents.

Media reports also said that the unbundling of PLN core businesses was part of the agreement for a US$242.6 million loan signed by the government and the World Bank in early October.

The loan was to help finance a number of projects, including power, gas distribution and health care.

Around half of the loan, or $141 million, would be used to help finance a number of power projects in Java and Bali.

PLN badly needs a capital injection as it has not made any investment in power infrastructure since the economic crisis in 1998. Inefficiency meant PLN could not make any further investments in infrastructure leading to a power crisis in Java and Bali.

However, in return, PLN must carry out a number of measures. Among other things, PLN must restructure two of its most lucrative business units -- PT Indonesia Power and PT Pembangkit Jawa Bali (PJB).

Both companies provide 80 percent of power supply for Java and Bali.

The bank asked PLN to group power plants run by both companies into four or more subsidiaries by the end of 2006.

PT Indonesia Power currently has 132 power plants with a total capacity of 9,040 MW or half of total installed capacity for the Java-Bali power system. PJB owns Muara Karang power plant, Cirata, Gresik, Brantas, Paiton with a total capacity of around 4,300 MW.

Analysts said with such a huge market, it is not surprising the company would attract investors.

Ahmad added unbundling PLN's core business would cause imbalance in investment between Java and outer islands.

"Investors would only look at Java and Bali and overlook other islands. Who wants to invest in places that do not promise profit?" Ahmad remarked.