ADB has played a major role in the power sector
restructuring since 1998 (post-Asian financial crisis) through policy-based
program lending, along with World Bank and the International Monetary
Fund.
In March 1999, ADB approved $380 million Power
Sector Restructuring Program (PSRP) loan to support the Power Sector
Restructuring Policy announced by government in August 1998. PSRP loan tranches
were tied to 30 “policy actions” that the Indonesian government needed to
comply before release; an additional $400 million was co-financed by the Japan
Bank for International Cooperation (JBIC). According to ADB’s own
assessment, the program loan was instrumental in (i) initiating important
measures e.g. tariff increases and resultant lessening of financial burden of
state-owned power utility PLN, (ii) unbundling PLN, (iii)
renegotiations of power purchase agreements (PPAs) with independent power
producers (IPPs) to help prevent further loss of investor confidence, (iv)
drafting of new 2002 Electricity Law; and (v) enabling creation of competitive
market in power generation in Java-Bali.
PLN union and NGOs took the 2002 Electricity Law
to the Indonesian Constitutional Court; PSI made a deposition to the
Constitutional Court demonstrating the systematic weakening of the electricity
systems around the world due to the policies of deregulation, unbundling and
privatisation, with many countries reversing or postponing these policies.
in a landmark decision in December 2004, the Court rejected the law that would
unbundle and privatize the country’s electricity system, saying the law
contravened Article 33 of the Indonesian Constitution which provides that
electricity is a public good and should be managed by the state.
Indonesia again passed a new electricity in
September 2009, Law No. 30 of 2009, which this time was upheld by the
Constitutional Court. Law No 30 marked the change of power industry
structure and end the special status of PLN – Further liberalize the power
sector; PLN will no longer have a monopoly in supply and distribution of
electricity to consumers; Shared responsibility and decentralized authority to
local government (district and provincial level); Regional electricity tariff
as alternative to the uniformed national electricity tariff; Electricity
trading with other countries.
ADB’s current and proposed lending operations in
the power sector include the following:
Java-Bali Electricity
Distribution Performance Improvement Project, a total $100 million loan
approved March 2010 ($50 million each from ADB & French agency AfD), will
mainstream energy efficiency: (i) improve overall efficiency of electricity
distribution in the Java Bali grid, and (ii) promote demand side management
practices (new technology and behaviors) to reduce waste by educating customers
and PLN staff and providing energy-efficient equipment. Carbon credits
will also be sought. PSI energy unions have raised these issues: (i) What
is relation between distribution sector and reducing carbon dioxide (CO2)
stated as one of the project objectives; (ii) Project is expected
to be completed by end-May 2012, has conducted an audit of progress, and what
is result? How was monitoring done by ADB? (iii) Why not build 50kV and
150kV transmission first?
Java-Bali 500 KV Power
Transmission Crossing, a $202 million loan project for
the construction of 220 km of extra high voltage transmission lines with
associated substations from Java to Bali Island, with capacity to transmit
1,500MW. Project will traverse 4km overhead across Bali Strait and
involve the building of two power pylons which will be the world’s tallest once
completed (at 376m high). Project is classified as Category ‘A’, i.e.,
due diligence is required as the 500kV transmission line will traverse densely
populated areas, two national parks, cultural sites (e.g. temples) and forest
areas. Draft EIA (Aug 2012) is already uploaded in ADB website for public
comments (at least 120 days before ADB Board consideration and/or
approval). The section on ‘Labor’ of Initial Poverty and Social Analysis
(IPSA, dated July 2012) identifies only two issues: ‘Employment opportunities’
and ‘CLS’; no labor retrenchment is anticipated: “The Project will
create wage employment opportunities during construction. It will be ensured
that the construction contracts will include provision of fair wages, equal
wages for men and women for equal work, and basic facilities in the
construction camps.” The concept paper (Dec 2011) and IPSA do not address
issues earlier raised by PSI energy unions – e.g. technical/safety/operational
risks (high pylon towers, Bali strait a busy navigation channel); cultural
factors (no structure in Bali should be above coconut tree); labor impacts – on
existing diesel generation workers in Bali. Moreover, local generation workers
were never consulted nor informed about the project during project preparation.
Strengthening West Kalimantan
Power Grid (BIMP-EAGA), a priority project for strengthening distribution network
in rural areas and for regional cooperation, is a $49.5 million loan to support
PLN plans to reduce its cost of power generation in West Kalimantan by
importing hydropower generated electricity from neighboring Sarawak (Malaysia)
by building 83 km 275 kV cross-border transmission line. On the other
side, PLN's counterpart in Sarawak (SESCO) will build 42 km 275 kV transmission
line to the border with West Kalimantan. Together, these transmission lines in
the two countries will form the first regional BIMP-EAGA flagship project and
the first leg of Trans Borneo Power Grid that aims to connect West Kalimantan
across Sarawak, and Brunei, to Sabah (Malaysia) enabling power trading between
BIMP-EAGA countries. PLN's planned import of cheaper power will also avoid
emissions of 400,000 tons of CO2 that would have been generated by old rental
oil fired that PLN currently uses in West Kalimantan. [Note that ‘avoiding CO2
emissions’ or ‘seeking carbon credits’ may also be code words for
decommissioning old ‘dirty’ power plants with resultant displacement of
workers.]
Sarulla Geothermal Power
Generation Project is a private sector loan (amount not yet
provided) to develop steam resources, and design, finance, construct, operate
and maintain geothermal power plants (total capacity 314.5 MW) for 30 years in
Sarulla, North Sumatra Province. The project will be the largest
single-contract geothermal power project upon completion. It is an Environment
Category ‘A’, i.e., needs comprehensive environmental and social due
diligence. Project sponsors are: Itochu Corp, Kyushu Electric Power Co,
Ormat International, PT. Medco Energi International Tbk.
Regards,
Bobet Corral
Bobet Corral
