Power plant projects face uncertainty following court ruling

The government?s five-year program to develop a combined 19,767 MW of power plants until 2019 (a revision from an earlier ambitious target of 35,000 MW) is facing the risk of total failure after the Constitutional Court (MK) on Wednesday annulled two chapters in the Electricity Law that is seen to cancel regulation that allows the role of private investors in the electricity sector, Kontan reported on Thursday.

The paper said that the MK made the ruling following a move by the labor union of state-owned electricity firm PT PLN to file judicial review. The two annulled chapters include one that allows single entity to operate an integrated power plant operation from generating units to transmission and distribution. The MK said that each components must be run by separate entities.

The MK also annulled a chapter in the law that allows the participation of private investors in electricity generation business in the country.

A source at PLN said that the MK ruling means that PLN will have to acquire all power plant projects run by private companies. The source said that according to the contract, in case of force majeure, PLN is obliged to acquire the power plants.

This raised the questions whether PLN has the necessary funding capacity to develop required power plants in the country on its own.

MK Judge I Dewa Gede Palguna, however, said in a statement that the private investors can still be involved in the provision of electricity for the general public as long as the state has full control. ?It (the ruling) doesn?t mean eliminating the role or involvement of the private sector both domestic and foreign?? he said.

Chairman of the Indonesian Private Power Producers Association (APLSI) Ali Herman Ibrahim lamented the MK ruling, saying that the state actually has been in control over the electricity supply in the country through the power tariff mechanism. (*)