Client Newsflash

Transnational Electricity Licensing

Indonesia has committed to a number of cross-border power projects with Singapore and Malaysia as part of the ASEAN Power Grid (“APG”), which was devised to support economic growth in Southeast Asia by facilitating intra-regional sale of electricity. A recent regulation from the Ministry of Energy and Mineral Resources (“MEMR”), No. 26 of 2012 on Application Procedures for Licenses for Transnational Sale and Purchase of Electricity and Interconnection of Power Grids (“MEMR 26/2012”), stipulates the licensing requirements for entities that will be involved in the APG and similar projects.

 BACKGROUND: Electricity Regulation in Indonesia

The first regulation on electricity was Law No. 15 of 1985, which granted monopoly power to the state-owned
electricity company, PLN. In 2009, Law No. 30 of 2009 (“Electricity Law”) allowed private sector participation
in electric power supply and supporting businesses. Subsequent regulations, including GR No. 14 of 2012 on
Electric Power Supply Business (“GR 14/2012”) and GR No. 42 of 2012 on Transnational Sale and Purchase of
Electric Power (“GR 42/2012”), elaborated the role of the private sector and paved the way for regional
interconnectedness.

At the regional level, Indonesia is involved in several programs under the ASEAN Interconnection Master Plan
Study, including the APG, which was ratified in GR No. 77 of 2008 on Ratification of Memorandum of
Understanding on the ASEAN Power Grid.

Based on the above, Indonesia has prepared the legal basis for PLN and/or Independent Power Plant
Companies (“IPPs”) to engage in transnational sale, purchase, and interconnection of electricity and electric
power grids.

 LICENSING OF TRANSNATIONAL ELECTRICITY PROVIDERS

Electricity providers desiring to engage in transnational sale or purchase of electric power must obtain the
general electric utility business license (Electric Power Supply Business License for Public Purpose – Izin Usaha
Penyedia Tenaga Listrik (“IUPTL”)) and a Transnational Sale of Electric Power License or Transnational
Purchase of Electric Power License from MEMR.

In order to sell electricity outside the country, the licensee must show that (i) the demand for electric power
in the local and surrounding area has been fulfilled; (ii) the sale price does not contain subsidies; and (iii) the
sale does not impair the quality or reliability of the local electric power supply.

To purchase electricity from abroad, the licensee must show that (i) the demand for electric power in the local
and surrounding area has not been fulfilled; (ii) the purchase will support the fulfillment of demand in the
local area; (iii) the purchase does not injure the national interest with respect to sovereignty, security, or
economic development; (iv) the purpose is to increase the quality and reliability of the local electric power
supply; (v) the purchase does not disregard the development of domestic electric power supply capacity; and(vi) the purchase does not cause dependency on overseas electric power procurement. The purchase price
should consider the economic value of the electricity bought, and the purchaser must obtain MEMR approval
of the price, as stated in GR 42/2012.

MEMR 26/2012 contains detailed application requirements for IUPTL holders to obtain licenses for
Transnational Sale, Transnational Purchase, or Transnational Interconnection from the Director General of
Electricity. Each type of license is subject to different application requirements. All of the licenses will be valid
for 5 years and can be extended. The license should be amended if there is any change in the amount of
electric power that will be bought or sold. Sale and Purchase license holders must submit implementation
reports to MEMR every 6 months.

Licenses for Transnational Sale and for Transnational Purchase also function as licenses for Transnational
Interconnection; therefore, power companies that already have a license to sell or to purchase need not also
obtain an Interconnection license.

July 24, 2013
ARFIDEA KADRI SAHETAPY-ENGEL TISNADISASTRA


Disclaimer:
The foregoing material is the property of AKSET Law and may not be used by any other party without prior written consent. The information herein is of general nature and should not be treated as legal advice, nor should it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.


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