Utilities see the light on power

PUBLISHED : Friday, 17 March, 2000, 12:00am
UPDATED : Friday, 17 March, 2000, 12:00am

Moves are under way across much of Southeast Asia to bring more power to the people.

In the past week, Malaysia and Singapore have unveiled plans to radically reshape their power industries to foster greater competition and allow in foreign players.

In the Philippines, an Omnibus Electricity Bill is expected to become law next month, opening up the power sector to more foreign participation, particularly in generation and distribution.

Bankrupt Indonesian utility Perusahaan Listrik Negara (PLN) has, meanwhile, taken a long-awaited first step towards resolving its dispute with independent power producers.

Singapore's retail power market is to be opened up in two phases on April 1 next year. First to be liberalised is the corporate users market to be followed by the household market in 2002.

At present, national power utility Singapore Power has a virtual monopoly in generation, distribution and retailing.

Tuas Power, a wholly owned unit of state investment arm Temasek Holdings, is the only other permitted power generator.

Singapore Power is to transfer ownership of various generation companies and retail business to Temasek by April 1 next year.

Temasek will then divest the generation companies to private and foreign owners.

There are no limits on foreign ownership, although a cap will be placed on cross-holding by generation companies to prevent dominance by a single player.

The move follows complaints about the rising costs of power tariffs in Singapore.

Competition is expected to make tariffs more competitive.

Malaysian Energy Minister Leo Moggie said last weekend that his country's power industry would be restructured by the end of this year to enable users to buy electricity direct from one of 15 licensed producers.

However, Ahmad Tajuddin, executive chairman of utility Tenaga Nasional has since been quoted saying this deadline is unrealistic.

'Certainly not by the end of the year,' Mr Tajuddin said. 'Our system is not ready.' Mr Moggie said an 'exchange' would be set up where consumers would be able to buy electricity at the cheapest available price directly from the power generators.

'In the long-term, it is not advisable to have one producer which has complete dominance in the industry,' said Mr Moggie.

Malaysia has learned from bitter experience the dangers of placing all its eggs in one basket.

The country suffered an embarrassing peninsula-wide blackout in 1996 after allowing Tenaga to connect the mainland on a single grid with no breakers.

In the wake of its blunder, the government is restructuring Tenaga whereby it will become mainly a transmitter and distributor of power.

At present, Tenaga produces most of the country's power.

It also buys electricity from independent producers, which is passes on to consumers through its retail monopoly.

In future, these producers will be counted on to generate the bulk of the country's electricity, with Tenaga scaling back.

Mr Tajuddin was quoted as saying that initially only industrial consumers would be able to buy power directly from the producers.

There are nine producers in peninsula Malaysia, five in Sabah and one in Sarawak.

In Indonesia, the authorities are still trying to clear the mess from past liberalisation before taking more substantive steps forward.

Repercussions from the crash of the Indonesian rupiah in 1997 are still being resolved.

Before the currency crisis, state utility PLN, which operates the country's distribution network, struck deals with independent producers to buy power in US dollars despite collecting consumer revenue in rupiah.

Not surprisingly, when the currency plunged more than 50 per cent against the dollar, PLN quickly found itself unable to pay its bills.

Indonesia moved one step closer to resolving its long-running price dispute with producers this month by reaching an interim agreement with the biggest of them, Paiton Energy, controlled by United States and Japanese investors.

However, the compromise means Paiton will probably have to operate at a loss until Indonesia's economy recovers.

It is yet to be seen whether other producers will be as obliging.