TEMPO.CO, Minahasa - President Joko "Jokowi" Widodo has instructed Energy and Mineral Resources (ESDM) Minister and state-owned electricity company PT PLN (Persero) president director to scrap brokers' role in power generation projects. Brokers' involvement has resulted in high electricity prices.
"I have instructed ESDM Minister [to do so], there are too many brokers or middlemen." Jokowi said on Tuesday, December 27, 2016, after the inauguration of the Lahendong geothermal power plant (PLTP) in Minahasa, North Sulawesi.
Jokowi said that involvement of third parties or brokers has made PLN's operational activity inefficient. "One middleman would not be a problem. But there are four or six [brokers], it is not right. Even one would not be right if it takes too many," Jokowi said.
Jokowi noted that high electricity prices undermine Indonesia's competitiveness. For instance, the President said, electricity price in Serawak, Malaysia, is US$0.02 per kWh, whereas that of Indonesia is US$0.06 per kWh.
Therefore, the President has instructed the PLN to streamline licensing process for investors wishing to join power generation projects. "I have instructed ESDM Minister and PLN president director to streamline [licensing process], to simplify it."
PLN procurement director Iwan Santoso said that there are companies seeking to take advantage of power generation projects. The practice has become commonplace in independent power producer (IPP) scheme. "I call them squatters. Yes, the partners used to join the OPP," Iwan told Tempo on Tuesday, December 27, 2016.
Iwan explained that in power generation projects, local firms often collaborate with foreign ones who provide the technology. Such local companies, Iwan said, have no technical capabilities. PLN has repeatedly found foreign companies who face the same problem. He, however, declined to name the projects being targeted by the squatters.
Iwan went on to say that a company had won multiple power station tenders. But it failed to meet the performance set in the agreement with PLN since the machinery models produced by the company were poor.
Iwan revealed that 20 percent of private developers across Java and Sumatra have substandard power generation performance.
To stop the recurring theme, the PLN has adopted stricter regulations through bidders’ financial statement audits. The company also examines their technical feasibility.
The winning bidder will have to submit a commitment fee of 10 percent. If the company fails to develop power plants according to the agreement, the fee will be taken by the PLN. The PLN will also fine power plant operators for failing to meet agreed upon generation capacity.
Earlier, Energy Minister Ignasius Jonan has expressed his support for the PLN’s effort to push down power generation costs. The aim is to maintain system reliability and achieve operational cost efficiency. "If the power plant breaks down, [private developers] shall be fined," Jonan said last week.
ADITYA BUDIMAN | ROBBY IRFANY
