Power industry watchdog expected in September: Official

Power industry watchdog expected in September: Official

A'an Suryana, The Jakarta Post, Anyer, Banten

The government hopes to set up a power industry watchdog, to be
called the Power Market Supervisory Agency, by September, a
senior government official said.

The director for electricity business supervision at the
directorate general of electricity and energy, J. Purwono, said
his office was currently finalizing a government decree on the
establishment of the agency, and expected the decree to be
approved in July.

"By September this year the supervisory agency is expected to
be established," he said during a gathering with journalists on
Wednesday.

The Power Market Supervisory Agency will act as the watchdog
for the power sector once the industry is liberalized, possibly
starting in 2007.

The agency, among other tasks, will determine which provinces
in the country are ready for market competition and which will
remain under government control. The watchdog also will be in
charge of ensuring fair market competition for mid-size and large
consumers and determining power prices for small users.

The state electricity company, PLN, will gradually lose its
decades-long monopoly in power generation, transmission and
distribution to mid-size and large users, with private investors
being allowed to enter the sector as part of the electricity law
approved by the House of Representatives last year.

However, to protect small electricity users, the government
will retain full control over the power industry in areas deemed
unready for open competition.

Java, Bali and the industrial island of Batam will likely be
the first areas to see open market competition, because many
electricity users in these areas are commercial customers.

Purwono said that according to a draft of the decree on the
supervisory agency, the body will be made up of at least five
members.

He said the Ministry of Energy and Mineral Resources would
select the members of the agency and would propose them to the
president and the House of Representatives for approval.

"The membership is open, but the members must not have any
affiliation with political parties or power companies to maintain
the agency's integrity," Purwono said.

Analysts have said the integrity of the agency is crucial to
ensure the drive to liberalize the power sector is successful.

Ending the monopoly of PLN is key to encouraging new
investment in the power sector.

However, a number of different parties have campaigned against
the liberalization drive, arguing that open market competition
would result in a sharp increase in power prices, as occurred in
other countries.

The government, however, has said the competition would
encourage more investment in the power sector, and power
producers would vie to provide the best service to customers.

There have been numerous blackouts around the country over the
past two years, and there are worries the situation will worsen
in the coming years unless the government is able to attract more
investment to the power sector.