EGI-INDONESIA

The Electricity Governance ForumBangkok, 29-31 March 2006

Day 2

Supported by:

2

Discussion Agenda

1. EGI-Indonesia Team Research Team Advisory Panels

2. The Context3. Research Methodology4. Research Findings5. Good Practices in Governance6. Governance Challenges7. Recommendation8. Plan for Action

3

EGI-Indonesia Team (1)

Research Team:1. Indonesian Institute for Energy Economics (IIEE)

2. Indonesian Center for Environmental Law (ICEL)

3. Pelangi

4. People Centered Economic and Business Institute (IBEKA)

5. Working Group on Power Sector Restructuring (WG-PSR)

6. WWF-Indonesia

4

EGI-Indonesia Team (2)

Advisory Panel:1. Dr. Bambang Adi Winarso, Coordinating Ministry of Economy

2. Dr. Bambang Brodjonegoro, Independent Commissioner of PT PLN (Persero), and Dean of Economic Dept. of the University of Indonesia

3. Dr. Irwan Prayitno, Member of Commission VII (Energy, Environment, Research and Technology) of the House of Representatives.

4. Dr. Umar Said, Former Secretary General of the Ministry of Energy and Mining, Commissioner of PT Pertamina (Persero), and Lecturer at the University of Indonesia

5. Mr. Endro Utomo Notodisuryo, Transparency International Indonesia, and Former Director General of Electricity & Energy Development

6. Mr. Faisal Basri, Commissioner of the Oversight Commission for Business Competition (KPPU), and Lecturer at University of Indonesia

7. Mr. Puguh Sugiharto, Former Chairman of the Working Group for Good Governance in the Electricity Sector, Vice Chairman of the Indonesian Renewable Energy Society, and Director of PEN Consulting

5

The Context 1990s: electricity reform had been initiated (IPP). 1998:

Reform direction adjusted: Distinction of policy maker/regulator and players (including SOE) Accommodate requirements for economic bailout (unbundling, divest major share of

SOE, multi buyer-multi seller, time line). Electricity Law 20/2002 reflected this structure.

2004: Constitutional Court annulled Law 20/2002 Electricity should be perceived as infrastructure for the national economic

development. The State should regulate, facilitate & operate electricity provision to be able to exercise control over the sector.

Private participation & competition shall be within the above context Legal base is reverted back to Law 15/1985

2005: Interim measures to overcome inconsistency: Government Decree 3/2005,

Ministerial Decree 9/2005 and 10/2005 (regional autonomy, rural electrification development & RE, corporatization of PLN)

Closed process of preparing the draft of new law

6

Research Methodology

Strategy of Implementation:a. Select indicators: priority, relevance, time

b. Select case study as the base for assessment: important, controversial PP & RP: Law No. 20/2002 on Electricity ESA: The Development of Gas Combined-Cycle on

Power Plant (PLTGU) in Pemaron-Bali

c. Data collection: questionnaire, literature, interview, discussions

d. Sub-group the Research Team to divide work

7

Research Findings (1)

POLICY PROCESS: Development process of Law 20/2002:

Steps of decision making are clearly defined, both at the legislative and executive body.

Information about the process of policy development and establishment inside both institutions is not available to the public

General description of roles, functions, obligations of government institutions Varying interpretation of jurisdictions & authority Grey and blank areas Undermines independency of decision maker.

8

REGULATORY PROCESS: Regulatory Body:

Within the executive No explicit statement on its function to balance various interests in the

electricity sector Grey and blank areas in institutional role, function and obligations

Government do not have guidelines on documents confidentiality and procedure on public access for information

Significant role of the official in chair position The legislative has public hearings to gather public opinions There is no strong legal base concerning:

Obligation to provide information for general public, Mechanism to assure public participation, Accommodation of public opinion in the policy materials produced by

the regulator

Research Findings (2)

9

Research Findings (3)

ENVIRONMENTAL & SOCIAL ASPECTS (ESA): DGEEU and State Ministry for the Environment handle environmental

issue in electricity sector; clear jurisdiction but lack of coordination between them.

The government has adequate capacity for accommodating ESA in their tasks

Commission VII has several knowledgeable staff, but there is no designated teams to handle ESA in electricity sector.

Limited attention on ESA in national electricity planning and during the sector reform process.

There is no minimum environmental performance standard in electricity sector

10

Good Practices in Governance (1)

Role of donor agencies during policy reform Available information and documents: position on

policies, binding conditions on loan disbursement, financial disbursement relating to loan condition, and technical assistance projects

Capacity of Legislative Committee Expert staff Access to documents Budgetary allowances for expert staff and research Authority to call in the appropriate representatives

11

Good Practices in Governance (2)

Capacity of CSO to address environmental and social aspects (case study) Documentation & filing system by CSO Include environmental and social analysis to support

their petitions

Executive capacity to evaluate environmental and social issues Special division with relevant background Availability of annual training Funding for research

12

Good Practices in Governance (3)

Mechanism for the establishment of Electricity Law No. 20/2002 in the Legislative Reasonable time: required six terms/sessions Quorum Involve parties in favor and against the establishment

13

Governance Challenges

Lack of awareness of good governance among stakeholders in electricity sector, lead to low capacity to implement the principles

There is no legal base and mechanism to ensure: Provision of information and documentation Public participation Decision compliance

Multidimensional crisis that lead to pragmatic approach and short term solution

14

Response & Follow Up An improvement in DPR website:

Agenda, work in progress, completed legislations Message board for public input, procedure for

public participation ”Develop The National Electricity Through

Implementation of Good Governance”, a seminar focusing on the awaited Electricity Law, 26 January 2006.

EGI-Indonesia findings have been published in the Indonesian Energy Economics Review, Volume I-2006.

EGI-Indonesia Team has formally requested to be in the DPR-RI public hearing agenda.

15

Recommendation to Improve Electricity Governance in Indonesia (1)

Develop a clear shared vision on national energy and electricity development policy

Publish a clear government direction pertaining to: Conflicting role and function in executive level Overlapping jurisdiction of authority in government Missing obligation Coordination among government bodies and cross

sectors Independent Regulatory Body Distinct planning body

16

Recommendation to Improve Electricity Governance in Indonesia (2)

Improve transparency Dissemination of information related to policy and

regulation making process to the public. A strong legal base and clear mechanism to ensure

public participation in key decision making process.

Establish a roadmap to promote governance in electricity sector Awareness program: governance concepts & its

operational elements Establish codes and standards including good

business conduct and ethics in electricity sector. Assess governance implementation on regular basis Publish result

17

Plan for Actions

Mainstreaming governance in operational terms: Awareness program & capacity building of a wider

audiences to create space & improve quality of participation

Toolkit & assessment result as a mean

Case: Process of developing the new electricity law to be

more open & transparent

18

Thank You