“Indonesia’s policy of managing the supply of electricity ensures the availability of electricity in sufficient quantities, of good quality, and at reasonable prices in the context of increasing the welfare and prosperity of the people in a fair and equitable manner and realizing sustainable development, and how the private sector can participate in this matter.”
A. Definition and Overview of Power Plant Permit
Generally, Article 1 Law No. 30 of 2009 on Electricity as amended by Law No. 11 of 2020 on Job Creation (“Electricity Law”) an electricity supply business is an electricity procurement through electricity power plant, transmission, distribution, and sale to consumers. Further, the electricity power plant is defined as the activity of producing electricity. Licensing for electricity business is a license to carry out business activities for supplying electricity for public purposes, supplying electricity for own purposes, and/or supporting services for electricity.
Electricity supply companies can be carried out by state-owned companies and regional-owned companies, private companies, cooperatives, and non-governmental organizations, but based on Presidential Regulation Number 49 Year 2021 (“PR 49/2021”) the provision of electricity below 1 (one) megawatt is for cooperatives and micro, small and medium enterprises (UMKM). Foreign investors can also carry out electricity supply businesses and there are no investment limits with the requirement to provide electricity above 1 (one) megawatt and carry out large-scale electricity supply businesses with a minimum capital requirement of IDR 10,000,000,000.
Electric power plants are listed in KBLI 35111 regarding Electric Power Plants. This classification includes businesses producing electric power through generating electricity using various types of energy sources. Fossil energy sources such as coal, gas, fuel oil, and diesel. Renewable energy sources such as geothermal heat, wind, bioenergy, sunlight, water flows and waterfalls, movement and temperature differences in ocean layers. Hybrid energy sources combine fossil energy sources with renewable energy, and energy originating from energy storage technology. In order to run a business, a permit is required in the form of a Business Permit for Providing Electricity for Public Use (“IUPTLU”).
B. Types of Business License and Requirements
Requirements for Application and Determination of Business Licenses for the Supply of Electricity for Public Interest (IUPTLU) based on Regulation of Minister of Energy and Mineral Resources Number 5 Year 2021 (“MEMR Reg. 5/2021”)and our confirmation with the Directorate General of Electricity, as follows:
- NIB (Business Identification Number);
- List of Beneficial Ownership.
With the business licensing requirements, as follows:
- Feasibility study of electricity supply business (in Indonesian), with the following documents:
- Financial Feasibility Study;
- Operational Feasibility Study;
- Network Interconnection Studies;
- Installation Location;
- One Line Charts;
- Type and capacity of business to be carried out;
- Development schedule;
- Operation schedule, prepared by a certified Business Entity.
- The power purchase agreement between the applicant and the prospective electricity purchaser (PJBL and its amendments) is in accordance with the provisions on the sale price of electricity or has obtained approval for the sale price of electricity from the minister or governor with the authority.
Procedures for Application and Determination of Business Permits for the Supply of Electricity for Public Interest (IUPTLU) based on MEMR Reg. 5/2021 and our confirmation with the Directorate General of Electricity is as follows:
- The applicant has an NIB (Business Identification Number)
- Business entities apply for permits and complete the basic requirements at OSS (oss.go.id)
- The business entity completes the required documents in the ESDM Licensing Application (perizinan.esdm.go.id)
- The Directorate General of Energy and Mineral Resources verifies the technical requirements (business license commitment)
- Attachment to IUPTLU Information (perizinan.esdm.go.id) and Commitment Fulfillment
- Issuance of IUPTLU (oss.go.id)
Furthermore based on MEMR Reg. 5/2021, selling electricity across countries requires transnational sales of electricity permits. Based on Article 36 MEMR Reg. 11/2021, it is explained that transnational sales of electricity permits can only be implemented by integrated IUPTLU holders. Transnational sales of electricity can be implemented with the following conditions:
- the demand for local electricity and the surrounding area has been fulfilled;
- the selling price of electricity does not subsidized
- does not interfere with the quality and provides assistance with electricity in its business area
The requirements for obtaining a license to sell electricity across countries are regulated in MEMR Reg. 5/2021, as follows:
- copy of IUPTLU
- agreement on the initial sale of electricity
- balance sheet of energy in its business area
- business plan for supplying electricity for the next 5 (five) years
- Data on the ratio of electrified households to the local electric power system and the surrounding area.
Based on the regulations above, it can be concluded that in principle a license for transnational sales of electricity can be implemented by fulfilling the above requirements, then this is also supported by the confirmation that we made with the Directorate General of Electricity. However, in practice, the Directorate General of Electricity told us that until now there has been no company that has implemented transnational sales of electricity.
Author: Adam Kausar
Gaffar & Co. is an Indonesian Boutique Law Firm specializing and focusing in Investment Regulatory, including a Corporate Secretarial Services.
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