New bill hoped to energize power sector competition

Ika Krismantari, The Jakarta Post, Jakarta

After liberalizing the oil and gas sector, the government now plans to do the same in the power sector, with a bill allowing new players to compete with state utility PT PLN in electricity generation, distribution and transmission.

Under article 10(2) of the latest version of the electrical power bill, local government-owned and private-sector firms will be allowed to enter the sector so as to help ensure sustainable electricity supplies throughout the country for the first time.

The bill, if approved by the House of Representatives, will effectively end the monopoly held by PLN for decades over the country's electricity sector.

The bill will replace the 1985 Electrical Power Law, which gives PLN a monopoly over the country's electricity system, and obliges other players to work under PLN based on so-called Independent Power Producer (IPP) agreements.

"We have high hopes for this new bill as it should accelerate electrification in remote areas," J. Purwono, the Energy and Mineral Resources Ministry's director general of electricity utilization, told The Jakarta Post on Tuesday.

Purwono said the government was hopeful that the bill would be approved and enacted by the end of the year.

While on one hand the bill will end PLN's monopoly, Purwono said that the arrival of new players would indirectly assist the state firm fulfill its mandate of providing and distributing electricity to the entire country.

The company hopes to achieve 100 percent electrification by 2025. Currently, the country's electrification rate stands at an abysmal 56 percent, which PLN claims is the result of a lack of money.

Regarding concerns in some circles that the liberalization of the sector could damage the public interest -- such as giving rise to unpredictable price fluctuations -- Purwono said that this would be very unlikely as the bill also contained a mechanism by which the different levels of the governmental hierarchy (central and local) would continue to have a say over pricing having regard to best commercial practice.

"If it is at the regency level, then pricing levels will be discussed with the regent, while if it is at the provincial level, the question will be discussed with the governor," Purwono explained.

The bill also stipulates that a private-sector firm interested in investing in the electricity sector will first have to secure a license from the relevant administration before it can commence operations, he added

If the company's envisaged operations were at the regency level, it would have to secure a license from the regent, while an operation involving more than one regency would require a license from the provincial governor and, finally, operations involving more than one province would require a license from the ministry at the center.
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