Power Wheeling Scheme to End Electricity Monopoly

A NEW clause relating to network sharing between state electricity company PLN and private electricity producers, also known as power wheeling, in the New and Renewable Energy Bill (RUU EBET), could drive reforms to our national electrical power system. This endeavor could be a way to end PLN’s monopoly over transmission, which results in inefficiencies and slows down the energy transition.

Power wheeling is included in Article 29A and Article 47A of the New and Renewable Energy Bill currently being deliberated by the House of Representatives (DPR). The clause allows electricity suppliers with renewable energy sources to use PLN’s transmission network through a leasing mechanism. So far, private electricity generators have only been able to sell their electricity directly to PLN. They are banned from building their own transmission networks or using PLN’s network to supply electricity directly to end consumers.

This clause has slowed down the passing of the New and Renewable Energy Bill into law because members of the DPR and the government have been unable to reach agreement. Those opposed to power wheeling claim it will put an end to sovereignty over a vital energy source when the electricity distribution network is opened up to the private sector. Moreover, PLN is of course worried about losing its monopoly. PLN also needs to face the threat of competition from the private sector because the state electricity company has an excess capacity. Conversely, the government has an interest in allowing power wheeling because it will attract investors in renewable energy and accelerate the energy transition.

If we look at the larger interest, we should not oppose power wheeling, especially for electricity generated from new and renewable energy sources. After all, PLN has not been able to meet the demand for electricity from clean energy sources. On the other hand, a growing number of corporations and households would like electricity supplied from clean energy sources, in line with the global trend. Therefore, it would be more efficient if private electricity operators transmitted supplies to consumers by renting PLN’s network, rather than by selling electricity to PLN, which then distributes it to the consumers.

Admittedly, this will do some harm to PLN, which might in turn have an impact on the state budget. This would result from additional electricity supply costs as a consequence of the entry of privately owned generators that are intermittent, or that supply inconsistent amounts to the PLN system. Furthermore, PLN could see its electricity sales fall, which would have an impact on state income. If PLN loses money, the state will also feel the loss.

But this should not be used as justification or an excuse to oppose power wheeling, because this potential disarray is a result of policy mistakes in the past, when the government encouraged investment in coal-fired power stations and forced PLN to buy electricity from private companies using the take-or-pay scheme, under which it had to buy supplies at any price.

In line with the clean energy trend and to ensure a steady supply of electricity, PLN’s business model and government regulations are no longer relevant to consumer needs. Therefore, the New and Renewable Energy Bill should be used as an instrument to fix these complex problems, including using a power wheeling mechanism that could end monopoly practices in the electricity supply system.