House delays approval of power bill

The House of Representatives has to delay the approval of the long-awaited power bill as deliberation process could not yet be completed by the end of the current working period Friday.

The Bisnis Indonesia daily quoted Minister of Mineral Resources and Enery Purnomo Yusgiantoro as saying that the deliberation process would be resumed on August 18.

He added that the debate was longer than expected because legislators want to thoroughly and carefully discussed the content of the bill before approving it into law.

If the House does pass the bill, it will end the monopoly held by state-owned electricity company PLN in the country's power sector.

Under the new system proposed in the power bill, all power producers including PLN, will sell power to the public through a bidding system. The cheapest power will be allowed to enter the power grid first, which will be operated by the Power Market Agency, to be set up by the government.

The plan has immediately spurred protests from several NGOs, such as the Indonesian Corruption Watch (ICW) and the trade union of state-owned power company PLN, saying the bill did not guarantee lower power prices.

"When the law takes effect, you can bet the public will have to face a continuing increase in power prices," said Batara Lumbanradja, PLN trade union's head of advocacy.

Teten Masduki, coordinator of ICW shared a similar tone, saying that liberalization of the power industry would not guarantee better services to the public.

"A free market will turn power into a commodity, causing it to raise its price and make it unaffordable for the public," he remarked.

The debate has been mounting since the government submitted the bill for deliberation to the House a year ago. The bill will replace the current Power Law No. 15/1985.

The power bill was part of the government's plan to restructure the power industry by lifting PLN's monopoly on the sector.

The government has allowed private investment in the power generation sector but maintains PLN's control over the country's power distribution and transmission networks.

Private power producers cannot operate in the country unless they have signed a power purchase agreement with PLN.

Based on one estimate, the country must raise its power generation capacity to about 58,800 Megawatts (MW) by 2010, from the current 22,732 MW to avoid power shortages.

To meet this, Indonesia needs about US$37.26 billion of new investment in the sector.

Supporters of the bill say introducing a free market system will allow cheaper prices for customers because power producers will have to sell their electricity to the public through a bidding system.

Opponents say vice versa, arguing that since the price of power is decided by the market, the price will be higher.

Both Teten and Batara have criticized the Asian Development Bank (ADB) and insist the bill supports private entities in order to gain a greater share in the domestic power industry.

The government promised the ADB it would revise the current power law when it signed a $380 million loan in 1999 for the restructuring of the power sector. The passing of the bill into law is a condition set by the bank for the disbursement of the remaining part of the loan.

According to Batara, the first $200 million loan tranche had been disbursed but it had not been clear whether the money was being used to develop the power industry in Java and Bali.

ICW's and PLN's trade unions called on the House to establish a special committee to investigate the ADB loan.

They also urged the government to drop the second tranche of the loan to free the country from its obligation to change the power law in order to serve the interests of foreign investors.(*)