Operational Performance of Regional Electricity Distribution in Indonesia <Article>

After three decades of sustained growth, the Indonesian electricity industry has been enduring a difficult phase, as an adverse impact of the country's economic crisis. Since 1999, the industry has endeavored to improve efficiency. To present the overall picture of the state of electricity distribution and the effects of the efficiency drive program, this study evaluates the changes in operational performance of regional electricity distribution in Indonesia. The target companies are 22 regional electricity distributors, and the period of observation is from 2002 to 2005. Most companies targeted in this study tended to improve their efficiency from 2002 to 2004. However, their efficiency improvement speed slowed in 2005 due to low revenues in real prices as compared to 2004. This decrease in revenue may have been caused by high inflation and high oil prices while the tariff on electricity remained constant in 2005. We determined that the main variables that improve electricity distribution efficiency are system loss and company location. Based on this result, we suggest that business specialization be pursued by undertaking corporate restructuring to separate the electric systems by generation, transmission and distribution outside of Java.