Indonesian Power bill faces delay

24 April, 2002 – Indonesia’s electricity bill, due to be considered in April will now be delayed whilst technical issues are resolved in Parliament, according to a government official.

The bill, which aims to restructure the country’s power industry in order to avoid a looming energy crisis, will now have to wait until parliament returns from recess in May.

Members of the Parliament have “accepted the spirit of the new law and the creation of a competitive electricity market,” said Yogo Pratomo, an adviser to Minister of Energy and Mineral Resources Purnomo Yusgiantoro.

While the Parliament may have agreed on the main issues underlining the power sector revamp, technical ones need to be resolved before the bill is passed into a law by the end of the year, Pratomo said. “But we hope to get the bill passed by August,” he added.

Indonesia’s parliament has already agreed to the creation of a regulatory body and a development fund aimed at rural electrification and subsidizing low-income consumers.

But questions remain on the management of the funding agency, as well as determining if funding will come from the state budget.

The new electricity bill also calls for power sector restructuring to undergo four stages, and the time required for the industry to move from one stage to the next remains contentious, Pratomo said.

The restructuring process of the Indonesian power sector will start with the unbundling of the vertically integrated state-owned power company PT PLN over two years, said Pratomo.

During the first stage, a new regulating body and social development fund agency will also be set up.

Between the two stages, PLN will split its generating, transmission and distributing functions into separate business units, as the regulator and fund agency take over administrative and subsidy allocation duties.

In stage three, the country will promote “bulk competition,” with power generators competing for direct electricity sales to distribution companies, said Pratomo. He estimates it will take six-seven years for Indonesia to evolve to this level in the Java-Bali grid.

The restructuring process will first be implemented in “more mature areas” like the Java-Bali grid, and more prosperous islands like Batam, an industrial zone close to Singapore, and resource-rich Tarakan, off East Kalimantan, said Pratomo.

By 2009-2010, “full competition” will be in place in the Java-Bali grid, as well as the wealthier islands of Batam and Tarakan, Pratomo said.

For Indonesia to get from stage three to four of the restructuring process, the country will need to have a high power reserve margin for consumers to choose who they wish to purchase electricity from, he said.

Indonesia is looking at a reserve margin of 25 per cent to avoid the low 5 per cent reserve margin that caused the power crisis in California, he added.

Nevertheless, the notion of a fully competitive market in nine-10 years is poised to be the most difficult issue the Parliament will be addressing, a government official said.

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