Conducting an Electricity Supply Business in Indonesia

Electricity4

Overview

Indonesia current electricity regulations, generally stipulated in Law 30/2009 and one of its subordinate legislations namely GR 14/2012 which promotes the electricity development with the aim to guarantee the availability of power to improve public welfare and to achieve sustainable development, as well as to promote the role of private investors by allowing private participation in the electricity supply business.

The Subjects

Pursuant to the prevailing electricity regulations, the electricity supplies is controlled by the state and conducted by the central and regional governments through the electricity state-owned enterprise namely PT Perusahaan Listrik Negara (Persero) (PLN) whereas PLN is given the priority right to conduct electricity supply throughout Indonesia, and therefore it plays a major and important role in the development of power sector in Indonesia. Moreover, the central or regional governments (in accordance with their respective authority) may offer the right to conduct the public electricity supply business to regional-owned enterprises, private enterprises or cooperatives for the areas which have not been served with electricity.

The Implementation

Temporary Electric Power Supply Business License (Izin Usaha Penyediaan Tenaga Listrik/IUPTL)

Prior submitting IUPTL application for power generation, transmission, distribution, or integrated electricity supply business the applicant can apply for temporary IUPTL to the DGE by fulfilling the following administrative and technical requirements. MEMR Regulation 35/2013 has decreased the amount of technical requirements documents in which (a) type and capacity of the business to be conducted; and (b) construction schedule; have no longer required to be submitted.

IUPTL

Under the prevailing regulations, electricity supply business in Indonesia is divided into 2 (two) categories, namely (i) electricity supply business for public use and (ii) electricity supply business for own/private use. Both business categories required licenses. The electricity supply business for public use requires an Electric Power Supply Business License (Izin Usaha Penyediaan Tenaga Listrik/IUPTL), meanwhile, the electricity supply business for own/private use requires an Operational License (Izin Operasi) whereas both licenses are issued by the Minister of Energy and Mineral Resources (MEMR), governor, or regent/mayor pursuant to their respective authorities.

Electricity supply business shall commence the following lines of business: (i) electricity for power generation; (ii) transmission; (iii) distribution; and/or (iv) electricity purchase which can be conducted as an integrated electricity supply business whereas shall firstly obtain a business area.