Regulation of electricity utilities – sales of power

Approval to sell power

What authorisations are required for the sale of power to customers and which authorities grant such approvals?

Indonesia recognises two types of power sales: from one IUPTL to another IUPTL, and from an IUPTL holder to end users.

An IUPTL is required for all entities engaging in the power sales business. However, for sales from one IUPTL to another IUPTL, the purchaser must conduct a public tender, and the proposed purchase of power must conform to the electricity supply business plan approved by the MEMR. The public tender requirement does not apply, and the purchaser may directly appoint its desired party, under the following circumstances:

  • where the power originates from a generator using renewable energy, marginal-gas, mine-mouth coal or other local energy;
  • in connection with the purchase of excess electricity;
  • in a power supply crisis or emergency; and
  • expansion of power plant capacity in the same operating power station in the same area.

If power sales are in the framework of diversification of energy for non-fuel power generation, then the purchaser may compare and choose from at least two bidders that have submitted proposals.

Power sales tariffs

Is there any tariff or other regulation regarding power sales?

Yes. As mentioned in question 18, there are two types of power sales and, therefore, there are two types of tariff. Basically, for on-grid power sales (from one IUPTL to another IUPTL), the tariff is developed through a public tender process with the agreed price approved by the relevant authority (MEMR or the governor). The government has provided several feed-in tariffs for purchase of electricity from IPPs for certain power generators (eg, MEMR Regulation No. 50 of 2017 on the Utilisation of Renewables for Power Generation and MEMR Regulation No. 19 of 2017 on the Utilisation of Coal for Power Generation and Purchase of Excess Power).

In Indonesia, the term ‘tariff’ is used in connection with the price of electricity to end users. Pursuant to GR 14/2012, tariffs for electricity sold to consumers are determined by the MEMR or governor, subject to approval by the provincial or national house of representatives. For PLN, as a state-owned enterprise whose licence is granted by the central government, the tariffs are determined by the MEMR. The prevailing tariff for PLN is stipulated from time to time and lastly under MEMR Regulation No. 28 of 2016 on the Tariff of Electricity Supplied by PLN (MEMR 28/2016), as last amended by MEMR Regulation No. 41 of 2017. In such regulation, tariffs vary depending on the use of the electricity (for example, for household, business, or industrial purposes, or for wholesale) and the power of electricity (for example, 450VA).

In Indonesia, the electricity supply sector is monopolised by PLN, and the electricity tariff provided by PLN is divided into two categories: a regular post-paid tariff and a prepaid tariff.

Electricity is considered a good with a strategic purpose and is therefore exempted from VAT, except for in housing with capacity of more than 6,600W.

Rates for wholesale of power

Who determines the rates for sales of wholesale power and what standard does that entity apply?

Like power sale tariffs mentioned in question 19, wholesale power tariffs are determined by the MEMR or governor, subject to approval from the provincial or national house of representatives, depending on where the wholesale power is generated and sold. For wholesale electricity provided by PLN pursuant to MEMR 9/2015, the threshold for wholesale electricity is electricity above 200kVA.

Public service obligations

To what extent are electricity utilities that sell power subject to public service obligations?

The underlying constitutional principle of the Electricity Law is article 33 of the 1945 Constitution of the Republic of Indonesia, which stipulates that sectors of production that are vital to the state and affect the greater livelihood of the people shall be under the power of the state. That article also provides that the land, waters and natural resources of the country shall be under the powers of the state and used for the greatest benefit of the people. The core of the Electricity Law and electricity supply, therefore, is to achieve social welfare.

In accordance with the Electricity Law, electricity should be:

  • supplied in sufficient amount;
  • reliable in quality;
  • reasonable in price and tariff;
  • for the welfare of the people; and
  • able to achieve sustainable development.

Further, the Energy Law provides that the purpose of energy development is to increase energy access for unfortunate and isolated citizens and to reduce regional disparity with respect to availability of enough power and related infrastructures.

Other than the general policy objectives, there are no specific public service obligations.