The Energy Regulation and Markets Review - Stikeman Elliott

Indonesia
Control of the production and domestic market obligations, including a higher
percentage of divestment requirement, have affected the interest of investors wishing
to enter the lucrative Indonesian mining industry. The slow progress of the required
implementing regulations to enable implementation of the 2009 Mining Law creates
legal uncertainties for existing but also for prospective investors in the mining sector.
II
REGULATION
i The regulators
The energy sector, encompassing oil and gas, coal and renewable energy, is regulated
and supervised by the central government through the MEMR and its directorates
and agency bodies. Regional governments (the provinces and regents within each
province) are granted decentralised authority to issue certain licences and permits, and
deconcentration of authority from the MEMR for certain supervisory tasks. For the
electricity sector, the directorates of the MEMR regulating electricity activities are the
Directorate General of Electricity and Energy Utilisation and the Directorate General of
Renewable Energy and Energy Conservation.
While PT PLN is responsible for the majority of Indonesia’s electricity generation
and has exclusive powers in relation to transmission, distribution and supply of electricity
to the public, PT PLN is itself regulated and supervised by the MEMR and the Ministry
of State-Owned Enterprises (‘MSOE’).
The MEMR is responsible for developing the electricity master plan (‘the
RUKN’). The RUKN, inter alia, sets out estimates of power demand and supply for 10-
year periods. The RUKN also provides the approach of the government to the utilisation
of new and renewable energy resources. The current RUKN was issued in 2008 for the
period from 2008 to 2027. The RUKN is reviewed annually, and if need be, adjusted
accordingly.
Based on the RUKN, as mandated by the current law and regulation, PT PLN
prepares the national electrical generation plan (‘the RUPTL’), which is approved by the
MEMR. The RUPTL is an official 10-year power development plan containing demand
forecasts, future expansion plans, kWh production, fuel requirements and indications
on projects to be developed by PT PLN and IPP investors. The RUPTL is also reviewed
annually. The current approved RUPTL is for 2011–2020.
The 2009 Electricity Law also requires that regional governments prepare regional
general plans of electricity (‘RUKDs’) based on the RUKN for each region.
The oil and gas sector falls under the authority of the Directorate General of
Oil and Gas, a directorate general in the MEMR. The management of upstream oil
and gas production by contractors is managed and supervised by BPMigas. BPMigas is
the non-profit state-owned legal entity, which controls these activities on behalf of the
government through production-sharing contracts. The management and supervisory
roles of BPMigas are:
a advising the MEMR on the preparation and offering of work areas and joint
cooperation contracts;
b acting on behalf of the government as a party to the joint cooperation contracts;
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