Early electricity arrangements in Indonesia were probably carried out pursuant to the 1890 Dutch Ordinance entitled the “Installation and Utilization of the Conductors for Electrical Lighting and Transferring Power via Electricity in Indonesia”.
This ordinance was annulled in 1985 with the introduction of Electricity Law No. 15/1985. The 1985 Electricity Law essentially commenced the modern era of electricity regulation in Indonesia. The 1985 Electricity Law provided for a centralized system with a state-owned electricity company, being PLN, holding exclusive powers over the transmission, distribution and sale of electricity. Private companies were however allowed to generate electricity.
In 2002, the Government enacted Electricity Law No. 20/2002 which was aimed at liberalizing the electricity sector by allowing private investors to produce and sell power directly to customers in those areas disignated as competitve areas. However, in December 2004, the Indonesian Constitutional Court annulled the 2002 Electricity Law and re-enacted the 1985 Electricity Law. This was on the basis that the 2002 Electricity Law contravened Article 33 of the Indonesian Constitution. According to the Constitutional Court, electricity is a strategic commodity and its generation and distribution should remain under the exlusive control of the Government.
The 1985 Electricity Law was implemented through Government Regulation (GR) No. 10/1989 on the provision and utilization of electricity as ammended by GR No. 3/2005 and GR No. 26/2006. Based on these regulations, IPPs were permitted to develop and supply power to Electric Power Business Licence holders which was essentially limited to PLN. This was also with the approval of the MoEMR, Governors and heads of the regions/districts. Electricity development by IPPs was also required to be in-line with the prevailing RUPTL and RUKN.
Other important legislation includes :
- President Regulation (PR) No. 67/2005 (since amended by PR No. 13/2010 and MoF Regulation No. 38/2006 which set rules and procedures for Public Private Participation (PPP) arrangements;
- PR No. 42/2005 with outlined the inter-ministerial Committee for the Acceleration Program (KKPPI) responsible for coordinating policy related to the private provision of infrastructure;
- MoEMR Reg No. 44/2006 which allowed direct tender for the first track programs (of coal-fired plants); PR No. 71/2006 which launched the first track program (FTP); PR No. 4/2010 which launched the second fast track program; and
- MoEMR Reg No. 1/2006 (and its revisions via MoEMR Reg. No 4/2007 on ‘electric power purchasing or rental transmission lines’ which covered the appointment of IPPs.
As indicated, the 2009 Electricity Law replaced the 1985 Electricity Law (with effect from 23 September 2009). However, the 2009 Electricity Law does not eliminate the main role of PLN in the electricity supply business (as PLN is given priority rights to conduct this business throughout Indonesia). The 2009 Electricity Law also provides a greated role to the regional authorities in terms of licensing and in determining electricity tariffs.
LAWS AND REGULATIONS