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.