FOCUS: PLN facing gloomy future after new power law
Thursday, September 12 2002 - 08:53 AM WIB
Last week, the House of Representatives (DPR) endorsed government-sponsored power bill which stripped PLN of its four-decades long monopoly over the country's power industry.
The new law was approved by the House after one-and-a-half years of deliberation, aims to gradually liberalize the country's power sector and attract more investment. The law allows independent power producers (IPP) to compete in selling electricity directly to the public at large, which differs from the current system under which the government controls the power price and only PLN is authorized to sell electricity to the public.
As a matter of fact, dozens of IPPs have been licensed to develop power plants, but they are only allowed to sell their power to PLN, which then resells it to the public. Thus, under the new law, there will be many power producers and power sellers.
The law stipulates that the control of the power transmission and distribution network will remain in the government's hand but it is not clear if it will allow PLN to continue operating the network or transfer it to another government's agency. As a matter of fact, the law does not mention at all about PLN.
"This is the beginning of PLN's end. PLN will change into several small companies," energy analyst Kurtubi said.
President Megawati Soekarnoputri is expected to ratify the new law within a month after the endorsement of the law by the House. The power law entails the formation of a regulatory commission and a state agency respectively tasked with setting power prices prior to the introduction of free competition and controlling power transmission and distribution networks.
The new organizations will take over from PLN the roles it has played for decades. PLN has in fact played a leading role through the years in supplying electricity to the public at large by developing and running power generating projects and electricity transmission and distribution systems up to remote areas throughout the country.
It was only in 1993 that the government allowed private investors into the country's power generation sector in order to boost power supply and fulfill the drastic demand for power, mainly in the rapidly growing industrial sector.
PLN came into being in 1961 as a business division of then Ministry of Public Works and Energy. It got a legal status as a business enterprise in 1965, some four years after it started commercial operation. It became a limited liability company, PT PLN, in 1994.
Headquartered in Jakarta, PLN presently has regional and business unit offices throughout the country, with 50,000 full-time workers.
Under the new law, PLN will have to compete with other power companies in developed areas like Java and Bali five years after the law becomes effective.
Liberalization in the power sector will be gradually carried out in such areas five years after the enactment of the law. But one year after the enactment of the law, the government will set up a special body to supervise competition in the power sector. The body however will not have to bother about less developed areas as PLN is expected to maintain its monopoly in such areas for years to come -- continue selling electricity at subsidized prices.
Analysts believe PLN's power generation subsidiaries PT Indonesia Power and PT Pembangkitan Jawa Bali, will remain major players in the country's power industry for many years after the implementation of the law given the large power generation capacity they have. Both firms now have the combined power generation capacity of 21,000 Megawatt.
With its numerous marketing and distributing offices throughout the country, PLN is also believed to remain the major player in the power retail sector in many years after the implementation of the law. But, all the PLN subsidiaries have to operate more efficiently to survive the future competition.
"What matters is not only the revocation of PLN's decades long monopoly, but also that people like to see PLN operating as a competitive enterprise," legislator Emir Moeis of the House's Commission VIII for mines and energy, environment and science and technology said.
PLN's workers are now worrying that PLN will cut a lot of jobs to improve its efficiency ahead of the competition era.
"In any part of the globe, economic liberalization has always caused layoffs," Udibowo Ciptomulyono, PLN's labor union chief, told Petromindo.Com. He noted however layoffs would not do much to improve PLN's efficiency.
"The payment for the 50,000 people accounts for only 6.5 percent of the total costs. Accordingly, layoff would be meaningless for PLN to survive," he said.
(Leo, Godang, Robert)