Draft law on electricity may become boomerang to government

The draft law on electricity which is now being deliberated by the House of Representatives for approval may become a boomerang to the government if some important clause in the article is not revised, the chairman of the advocacy team of state electricity company PLN?s workers, Yunan Lubis.

The government may, for example, be forced to pay compensation of at least US$15.4 billion to independent power producers (IPPs) if the article in the proposed law, especially those related to the change in PLN organization such as through reorganization, mergers or privatization is not revised, Yunan said.

"The change in the PLN organization provides a loophole for IPPs to sue the state electricity company for defaulting the existing power purchase agreements," he was quoted as saying by Bisnis Indonesia daily. As the consequence of the default, the IPPs have the right to ask the government to buy out their power plants and pay compensation, he added.

If there is a default, the government, as sated in the appendix of the law, has to cover the investment that has been spent by IPPs, the interest of the investment, and spending of the sponsors of the project as well as compensation payment of about 22 percent per annum.

"If there is a dispute, the proposed law also allows the IPPs to take the case to international arbitrary. "If this happens, the government and PLN will have no chance to win the case,? he said. (*)