8fabbytumiwa indonesia eng
TRANSCRIPT
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Switch On/Switch Off:Lesson Learn from the Reform Indonesia Power Sector
Fabby Tumiwa
Institute for Essential Services Reform
Presented atInternational Conference on Establishing Dialogue on Fuel and EnergySector Transparency InitiativeBishkek, 26-27 September 2011
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INDONESIA
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Indonesia Electricity Sector at Glance (1)
13,466 islands, 1.9 mil sqmeter
Population: 237.6 million(2010)
GNI/capita: $ 2500 (2010)
Poverty headcount ratio:13.3% (2010)
CO2
emission/capita: 1.7(2007)
Electrification ratio: 65% (est,2010)
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Indonesia Electricity Sector at Glance (2)
Electric Power Law in 2009 markedthe change of power industrystructure, end the special status ofthe state-owned company - PLN. Further liberalize the power sector.
New industrial structure, mix of verticalintegrated and unbundled monopolymodel.
Shared responsibility and decentralizedauthority to local government (district
and provincial level). Regional electricity tariff as alternative
to the uniformed national electricitytariff.
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Indonesia Electricity Sector at Glance (3)
PLN dominates electricitysector National-wide coverage
Vertically integratedcompany: generation,
transmission & distribution 40,000 employee
27,000 MW Installed capacity(as 2010) + Purchasing energyfrom IPP (~ 3000 MW)
40 million customers
170 GWh total energyproduction, and 147 GWhenergy sold
Annual expenditure: ~US$ 18billion
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Governance Challenges
Electricity Industry is politicalsubject. Indonesia constitution regard
electricity as vital and strategic tothe state
Regulated and controlled by thestate.
Regulated Model prone tocorruption, and utility becometarget of political interest. Political, social, economic interest
vs. Commercial interest;
Governance of the management isseriously compromised.
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Historical Development of Power Sector in
Indonesia
1882 1942: Dutch electricity companies set-up and provide electricity
services to consumers in some major cities
1945: Dutch LWBs was taking over and establishment of Ministry of
Public Work and Power of Republic of Indonesia
1945 1956: Nationalization of foreign gas and power utilities 1965: gas and power utilities were separated, creation electric power
utility company (Perum PLN) and natural gas company.
1972: PLN has given task to electrify the entire country, with
monopolist status.
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Historical Development of Power Sector in
Indonesia
1985: New Electricity Law, starting deregulation andliberalization of Indonesia power sector, open-up forIPPs (first reform)
1990-1997: the emerging of IPPs, PLN act as singlebuyer.
1995: Corporatization of PLN, separating asset and unitunder a vertical-integrated structure: generation,transmission, distribution (second reform);
1998 2002: Power Sector Reform, intend to do fullliberalization, privatization develop competitive marketfor electricity, enactment of new law on electricity (No.20/2002) (third reform)
2004: the annulment of the Electricity Law No. 20/2002by the Constitutional Court.
2006 2009: development of new electricity law,enacted in 2009 (Law No. 30/2009).
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Electricity Sector Reform (ESR) in Indonesia (1)
ESR evolves since 1980s.
A major structural ESR designed since early 1990s by WorldBank and development donor agencies (such USAID). Driving by larger industrial deregulation attempt in 1980s
Main objective to end the monopoly of state-owned electric utility,
introducing market-oriented industrial structure, creation ofelectricity market, facilitation for private investment.
ESR getting more momentum after the economic crisis in 1997 economic stabilization loans from WB and IMF string attached to
the conditionality to do reform (deregulation and privatization) ofelectricity and oil and gas sector.
Asian Development Bank (ADB) and USAID assisted the policyformulation for the Power Sector Reform (PSR) and drafted the draftof the law.
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Electricity Sector Reform (ESR) in Indonesia (2)
Element of Proposed Reform (1998 White Paper and Electricity LawNo. 20/2002): Separation ofPLNs asset in Java-Bali and non-Java Bali.
Java & Bali system accounted of 75% of energy sold by PLN and more matureinfrastructure.
Unbundling of the PLN into generation, transmission and distributioncompanies; Later, privatization of unbundled companies.
Separation of Government policy-making and regulatory function forelectricity sector.
Establishment of electricity market regulatory body.
Establishment of electricity market (power pool) in Java-Bali system. Rationalization of Independent Power Producers (IPP).
Estimated cost to complete the overall reform program wasestimated around US$ 4-5 billion.
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Electricity Sector Reform (ESR) in Indonesia (3)
Civil Society Organization and Labor Union
took the 2002 Electricity Law to the
Constitutional Court in 2003.
The Electricity Law were revoked by the
Constitutional Court in 2004, practically ending
the Electricity Sector Restructuring Program.
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Why Civil Society opposing the 2002 Power
Sector Reform (PSR)?
Externally driven by IFIs and Western Donor Institutions that
is seen as the instrument to serve capitalist interests.
The Reform package perceived as a program that only
promote and facilitate private interest and very narrow to
the financial issue of the sector, instead of taking into
account a wider public interest.
The reform package missed to address the need to secure
the electricity service provision for the people that is
affordable and reliable.
State responsibility vs.Private profit
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Why Civil Society opposing the 2002 Power
Sector Reform (PSR)?
The design of PSR and the formulation of 2002 Law were lack with civil
society and consumer participation in the first place.
Process did not well communicate, information and document were
hard to obtain;
Impact of reform did not well assessed and properly addressed in theproposed electricity law.
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Failing Reform
Government failed to define and implement PSR theelectricity law revoked by the Constitutional Court: The Electricity Law is passed without sufficient public
consultation or taking into account public concern.
Doubt over the implementation of the electricity law to addressconcern over electricity supply.
Failed to establish independent regulatory body to oversightPLN and private utilities.
Electricity subsidy remaining high in the last 5 years ( averageabout $ 6 to 8 billion/year).
Despite the Electricity Law intends to stripped PLNs monopolypower, in practice PLN has given more role (i.e. purchaserenewable electricity from small-hydro and geothermal).
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Lesson Learn of Designing and Implementing the
Electricity Sector Reform (1)
Electricity sector reform is a complex matter. Require wider institutional reform before overall electricity
reform take place.
Defining the definition and scope of Electricity Sector
Reform Citizen-oriented electricity sector reform
Reform should not always ended up in privatization andincreasing in electricity tariff.
Reform shall be contextualized in the situation of countries
(political, economic development, state of electricityindustry, etc).
Assessing impact, cost, and unintended consequences
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Lesson Learn of Designing and Implementing the
Electricity Sector Reform (2)
Address civil society and consumer
concerns/issues since the beginning while
developing the reform agenda.
Creating platform and process for public
participation and mechanism for consultation.
Require strong and knowledgeable civil society
organizations to be participated effectively.
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Conclusion
Power sector is critical and important indeveloping countries context and subject topolitical struggle.
Indonesia PSR failure caused by many factors, inaddition to the complexity of the reform itself.
Power Sector Reform requires wide-range reformin energy sector and public sector.
Creating a platform for dialogue, clear andtransparent mechanism for public consultation isa prerequisite condition toward a citizen-oriented power sector reform.
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THANK YOU
[email protected] website: www.iesr-indonesia.org
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