UGM Economist Calls Power Wheeling Scheme Potentially Hurts People And State Budget

JAKARTA - Gadjah Mada University Energy Economics observer Fahmy Radhi said the application of the concept of multi buyers-multi sellers through the power wheeling scheme is a form of electricity liberalization that has the potential to increase the burden on the people and the state budget.

"The Ministry of Energy and Mineral Resources should withdraw the proposal to include power wheeling in the New Renewable Energy Bill (RUU EBT)," said Fahmy as quoted by Antara, Tuesday, October 25.

According to him, the concept of multi buyers-multi sellers is an unbundling pattern regulated in Law Number 20 of 2002 concerning Electricity.

The unbundling pattern has been canceled by the decision of the Constitutional Court because it is contrary to Article 33 of the 1945 Constitution.

Then, the regulation was replaced with Law Number 30 of 2009 concerning electricity by eliminating unbundling.

Private power generation companies or Independent Power Producers (IPPs) of new and renewable energy are allowed to sell directly to consumers using PLN's transmission and distribution network.

"There is no doubt that power wheeling and open source are forms of electricity liberalization," said Fahmy.

He conveyed that the setting of liberal tariffs is based on market mechanisms that depend on demand and supply.

When demand is high and supply is constant, it is inevitable that electricity rates will increase.

According to him, the power wheeling scheme also has the potential to erode PLN's organic customer demand by up to 30 percent and non-organic customer demand from high-voltage consumers by up to 50 percent.

"The decrease in the number of PLN customers, in addition to increasing the excess supply of PLN, can also increase the burden on the state budget to pay compensation to PLN," concluded Fahmy.

Previously, Deputy Chairman of Commission VII DPR RI, Eddy Suparno, said that the New Renewable Energy (EBT) Bill would include the concept of multi buyers - multi sellers.

So far, private companies are allowed to build power plants, but sell all of the electricity they produce to PLN in accordance with the multi-buyer-single seller concept.

Eddy said that the application of the multi-buyer-single seller concept was regulated in Article 47A, point 3b of the New Renewable Energy Bill on power wheeling, which is a mechanism for jointly utilizing PLN's electricity network through open source.