An electricity bill which aims to lift the monopoly of the state electricity company PT PLN is facing stiff opposition from legislators who are questioning the benefits of lifting the monopoly and introducing a free-market system. One critic claimed that Indonesia had to learn from the failure in California when a free market system was introduced. The French system, which is based on a state monopoly, was offered up as a better model for Indonesia.

Under the terms of the proposed new law private sector power companies would be permitted to produce power and sell it directly to distributors. Today private sector companies can produce power but they must sell it to PLN. There are 27 private power producers with power contracts to supply the state company.

The new legislation was introduced into the country’s parliament early in 2001 but debate was delayed for several months. It was expected to be completed by March of this year but that deadline has not been achieved.

The new arrangements would mean that PLN and private sector companies would compete in an open market to sell power to distributors. There would be a seven year transition period and the government would establish a regulatory authority to ensure fair competition.

Critics, however, believe that modifying the present system would best serve Indonesia in the immediate future. Under the terms of one such scheme PLN would retain its monopoly but supervision would be strengthened to ensure it could not abuse its position. Investors could be attracted by improving overall security and offering competitive prices for the purchase of power, the critics claim. However many investors will be wary following the problems encountered in Indonesia during the Asian crisis of the late 1990s.