Perspective on Power Sector Reforms in Indonesia - un.org · 1/1/2004 · Perspective on Power...

Perspective on Power Sector Perspective on Power Sector Reforms in IndonesiaReforms in Indonesia

Presentation to the Parliamentarian Forum on Energy Legislation and Sustainable Development, Cape Town, 5-7 October 2005

By

Puguh Sugiharto

Indonesian Electrical Power Society (MKI)Indonesian Geothermal Association (API)

Indonesian Renewable Energy Society (METI)PENConsulting, Energy Development Consultant

Perspective on Power Sector Perspective on Power Sector Reforms in Indonesia Reforms in Indonesia

PRESENTATION OUTLINE:

1. Country Profile2. Energy Resources Potentials3. Overview and Outlook of Indonesia Power Industry4. Impact of 1997 Asian Financial Crisis to the Condition of State Electricity

Company (PLN)5. Update on Indonesia Power Sector Reforms

1. Power Reforms through the Implementation of Law 20/2002 on Electricity2. Judicial Review by Constitutional Court Brought Us Back to Law 15/1985.3. Government Regulation 3/2005 as a Remedy .

6. What We Learned and How Can We Do Better.7. Take-Away Messages.

1. COUNTRY PROFILE 1. COUNTRY PROFILE

Background

The Dutch began to colonize Indonesia in the early 17th century; the islands were occupied by Japan from 1942 to 1945. Indonesia declared its independence after Japan's surrender, but it required four years of intermittent negotiations, recurring hostilities, and UN mediation before the Netherlands agreed to relinquish its colony. Indonesia is the world's largest archipelagic state. Current issues include: alleviating widespread poverty, preventing terrorism, continuing the transition to popularly-elected governments after four decades of authoritarianism, implementing reforms of the banking sector, addressing charges of cronyism and corruption, holding the military and police accountable for human rights violations, and resolving armed separatist movements in Aceh and Papua.

total: 1,919,440 sq km, land: 1,826,440 sq km, water: 93,000 sq km

54,716 km

petroleum, tin, natural gas, nickel, timber, bauxite, copper, fertile soils, coal, gold, silver

archipelago of 17,508 islands (6,000 inhabited); straddles equator; strategic location astride or along major sea lanes from Indian Ocean to Pacific Ocean

241,973,879 (July 2005 est.)

1.45% (2005 est.)

Muslim 88%, Protestant 5%, Roman Catholic 3%, Hindu 2%, Buddhist1%, other 1% (1998)

August 1945, abrogated by Federal Constitution of 1949 and Provisional

Constitution of 1950, restored 5 July 1959

Area

Coastline

Natural Resources

Geography Notes

Population

Growth Rate

Religions

Constitution

INDONESIA COUNTRY PROFILEINDONESIA COUNTRY PROFILE


based on Roman-Dutch law, substantially modified by indigenous concepts and by new criminal procedures and election codes; has not accepted compulsory ICJ jurisdiction

unicameral House of Representatives or Dewan Perwakilan Rakyat (DPR) (550 seats; members elected to serve five-year terms); House of Regional Representatives (Dewan Perwakilan Daerah or DPD), constitutionally man-dated role includes providing legislative input to DPR on issues affecting regions; People's Consultative Assembly (Majelis Permusyawaratan Rakyator MPR) has role in inaugurating and impeaching President and inamending constitution; consists of popularly-elected members in DPR and

DPD; MPR does not formulate national policy

Supreme Court or Mahkamah Agung (justices appointed by the president from a list of candidates approved by the legislature); a separate Constitu-tional Court or Mahkamah Konstitusi was appointed by the president on 16 August 2003; in March 2004 the Supreme Court assumed administrative and financial responsibility for the lower court system from the Ministry of Justice and Human Rights

Legal System

Legislative Branch

Judicial Branch

Indonesia, a vast polyglot nation, has restored financial stability and pursued sober fiscal policies since the Asian financial crisis, but many economic development problems remain, including high unemployment, a fragile banking sector, endemic corruption, inadequate infrastructure, a poor investment climate, and unequal resource distribution amongregions. Indonesia became a net oil importer in 2004 due to declining production and lack of new exploration investment. As a result, Jakarta is not reaping the benefits of high world oil prices, and the cost of subsidizing domestic fuel prices has placed an increasing strain on the budget. Keys to future growth remain internal reform, building up the confidence of international and domestic investors, and strong global economic growth. In late December 2004, a major tsunami took over 237,000 lives in Indonesia and caused massive destruction of property.

purchasing power parity - $827.4 billion (2004 est.)

4.9% (2004 est.)

27% (1999)

Economy – Overview

GDP

GDP Real Growth Rate

Population below poverty line


2. ENERGY RESOURCE POTENTIALS2. ENERGY RESOURCE POTENTIALS

5 MW4,80 kWh/m2/daySOLAR CELL

302 MW49 GWBIOMASS

4,200 MW6,851 GWh75 GW845 MMBOEHYDRO

800 MW2,593 GWh27 GW219 MMBOEGEOTHERMAL

54 MW458 MW458 MWMINI/MACRO HYDRO

INSTALLEDCAPACITY

UTILIZATIONEQUIVALENT RESOURCENON FOSSIL

ENERGY

0.5 MW9 GWWIND

460.136 50 COAL (Billion Ton)

333.0 97 384.7 GAS (TSCF)

90.54.3 86.9 OIL (Billion Barrel)

REMAINING LIFE (YEARS)

PRODUCTION PER YEAR

PROVED RESERVESRESOURCEFOSSIL ENERGY

ENERGY RESOURCE POTENTIALSENERGY RESOURCE POTENTIALS

118

4.535

887

738

581

408

920

109Central Sumatera

South Sumatera

Papua

Oil Reserves (Billion STB)

Natuna

East Java

East Kalimantan

North Sumatera

West Java

Maluku

PROVE = 4.3 Billion STBPROBABLE = 4.3 Billion STBTOTAL = 8.6 Billion STB

100

South Sulawesi

81

RESERVES RESERVES -- OILOIL(Status 1 January 2004)

135

NAD

0.85

8.52

24.49

5.80

10.30

54.11

47.39

4.1524.13

Papua

GAS RESERVES (TCF)

Natuna

PROVE = 97 TCFPROBABLE = 90 TCFTOTAL = 188 TCF

RESERVES RESERVES -- GASGAS(Status 1 JanuarI 2004)

8.60

NAD

Central Sumetera

South Sumatera

North Sumatera

East Java

East Kalimantan

West Java

Central Sulawesi

RESERVES RESERVES -- COALCOAL

1,6 %

4,6 %

43,5 %

28,5 %

1,1 %

20,2 %

0,0 %

0,2 %

0,3 %

Total Coal Resource in Indonesia : 50 Billion Ton

Source: Directorate of Mineral and Coal, 2003

1. Daerah Aceh : 17 2. Sumatra Utara : 16 3. Sumatra Barat : 16 4. Riau : 1 5. Jambi : 8 6. Sumatra Selatan : 8 7. Bengkulu : 6 8. Lampung : 13

16. Sulawesi Utara : 5 17. Gorontalo ; 2 17. Sulawesi Tengah : 14 18. Sulawesi Selatan : 16 19. Sulawesi Tenggara : 13 20. Maluku : 15 21. Irian Jaya : 2 22. Kalimantan ; 3

8. Banten : 5 9. Jawa Barat : 40 10. Jawa Tengah : 14 11. DI. Yogyakarta : 112. Jawa Timur : 11 13. Bali : 5 14 NTB : 3 15. NTT : 18

Total : 251 Lokasi

GEOTHERMAL RESOURCESGEOTHERMAL RESOURCESTotal Geothermal Resource Potential : 27 GWe (from 70 hi-enthalpy locations)

3.3.OVERVIEW AND OUTLOOK OF OVERVIEW AND OUTLOOK OF INDONESIA POWER INDUSTRY INDONESIA POWER INDUSTRY

CURRENT NATIONAL ENERGY SITUATIONCURRENT NATIONAL ENERGY SITUATION

ECONOMIC GROWTH RATE 2004 ECONOMIC GROWTH RATE 2004 ± ± 5%5%ENERGY GROWTH RATE ENERGY GROWTH RATE ± ± 7% PER ANNUM7% PER ANNUMELECTRICITY GROWTH RATE ELECTRICITY GROWTH RATE ± ± 9% PER ANNUM9% PER ANNUMELECTRIFICATION RATIO < 60%ELECTRIFICATION RATIO < 60%OIL ON ENERGY MIX OIL ON ENERGY MIX ± 66± 66%%REGIONAL DISPARITY IN ENERGY RESERVES AVAILABILITY, REGIONAL DISPARITY IN ENERGY RESERVES AVAILABILITY, CONSUMPTION AND INFRASTRUCTURESCONSUMPTION AND INFRASTRUCTURES

Critical Jawa-Bali 2004 2010

Sales (TWh) 79.7 125.9

No.of Cust. (M) 22.6 27.3

Capacity (GW) 18.6 28.3

Electrif Ratio 59.42 69.4

IPP 9,6

Sumatera 2004 2010

Sales (TWh) 11.6 16.3

No.of Cust. (M) 5.9 7.1

Capacity (GW) 3,0 6.0

Electrif Ratio (%) 53.1 61.9

IPP 0,9

Kalimantan 2004 2010

Sales (TWh) 3.2 4.5

No.of Cust. (M) 1.7 2



Sulawesi 2004 2010

Sales (TWh) 3.1 4.4

No.of Cust. (M) 2.0 2.6



IPP 0,4

Others 2004 2010

Sales (TWh) 1.3 5.3

No.of Cust. (M) 0.9 2.1


Electrif Ratio 33 37.9

Indonesia 2004 2010

Sales (TWh) 99 145

No.of Cust. (M) 33,0 44



IPP 10,8

POWER GENERATION SYSTEMPOWER GENERATION SYSTEM

PROJECTED PEAK DEMAND AND GENERATING PROJECTED PEAK DEMAND AND GENERATING CAPACITY 2004 CAPACITY 2004 -- 20132013

INDONESIA … annual growth rate 7.2 – 6.3%

**) Reserves Margin 40% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

NEW PROJECTS ? – MW 3.159 4.325 5.451 6.584 8.017 10.639 13.456 16.512 19.999 23.470

TOTAL INST. CAPACITY – MW 27.503 28.356 29.356 30.529 31.578 31.601 31.608 31.566 31.380 31.058

TOTAL DEMAND – MW 2 ) 30.662 32.681 34.817 37.113 39.595 42.240 45.064 48.078 51,299 54,528

PEAK LOAD – MW 21.902 23.343 24.869 26.509 28.282 30.171 32.188 34.342 36.642 38.949

LOAD FACTOR – % 60 60 60 60 60 60 60 60 60 60

INSTALLED CAPACITY – MW 24.006 23.811 23.811 23.546 23.409 23.149 23.149 23.149 22.963 22.708

COMMITTED PROJECT – MW*) 3.497 4.545 5.545 6.983 8.168 8.452 8.459 8.417 8.417 8.350

Based on RUKN 2003-2020

*) Commulative figures

PROJECTED PRIMARY ENERGY REQ’T - JAMALI POWER PLANTSTYPE OF PRIMARY ENERGY 2004 2005 2006 2007 2008 2009 2010 2011 2012DIESEL (TON-LTR) 3.300 3.540 900 880 880 880 880 880 880 880

MFO (TON-LTR) 680 950 30 30 30 40 40 40 40 50

NATURAL GAS (BCF) 150 175 270 280 320 340 390 440 490 470

COAL (1000-TON) 20500 21000 23200 24700 24900 26600 26800 27500 28000 33500

2013

PROJECTED PRIMARY ENERGY MIX (% TOTAL ELECTRICAL ENERGY GENERATED)

TYPE OF PRIMARY ENERGY 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013DIESEL 13 13 3 2 2 2 2 2 2 2MFO 2 3 0 0 0 0 0 0 0 0NATURAL GAS 22 23 34 33 36 36 40 42 45 40COAL 50 48 50 51 48 48 46 44 43 48GEOTHERMAL 6 6 6 7 8 7 7 6 6 6HYDRO-POWER 8 7 7 6 6 6 5 5 5 5TOTAL TWh 91.6 97.0 102.7 108.3 115.0 122.0 130.0 137.5 146.0 155.0

PROJECTED PRIMARY ENERGY REQUIREMENTS AND PROJECTED PRIMARY ENERGY REQUIREMENTS AND COMPOSITION FOR THE JAVA COMPOSITION FOR THE JAVA –– MADURA MADURA –– BALI SYSTEMBALI SYSTEM

Electricity Facilities JAMALI Outside JAMALI IndonesiaGeneration (MW)(Additional Capacity)

12,155 5,002 17,154

Transmission Line (kmc)(Additional Transmision Line)

5,493 11,577 17,070

Sub Station (MVA)(Additional Sub Station

39,379 10,870 50,249

Distribution Network(Additional Distribution

network)A. 20 kV B. Low Voltage (kmc)C. Travo Distribution (MVA)D. Customer (Million)

38,13039,6387,04911.3

63,32542,8664,325

8.5

101,45582,50411,374

19.8

Rural Electrification (villages) 472 8,375 8,847

ELECTRIC POWER FACILITY REQUIREMENTSELECTRIC POWER FACILITY REQUIREMENTS2003 2003 -- 20102010

INVESTMENT REQUIREMENT 2003INVESTMENT REQUIREMENT 2003--2010 2010 (BILLION USD)(BILLION USD)

Electricity Facilities JAMALI Outside JAMALI Indonesia

Generation 8.94 5.20 14.14

Transmission 0.57 0.87 1.44

Power Station 1.23 0.84 2.07

Distribution 2.72 2.49 5.21

Rural Electrification 2.03 4.20 6.23

Total 15.29 13.60 29.09

4.4.IMPACT OF 1997 ASIAN FINANCIAL IMPACT OF 1997 ASIAN FINANCIAL CRISIS TO THE CONDITION OF THE CRISIS TO THE CONDITION OF THE

STATE ELECTRICITY COMPANY STATE ELECTRICITY COMPANY (PLN)(PLN)

US $ Billions % of Total Costs

% Foreign Exchange Cost/ Total Costs

Foreign Exchange Cost

IMPACT TO PLN COST STRUCTUREIMPACT TO PLN COST STRUCTUREIN 1999, APPROX. 80% OF TOTAL COSTS WAS

ALLOCATED FOR PAYMENTS IN FOREIGN

CURRENCY.

Production Cost

Avg. Selling Price

US

CEN

TS P

ER K

WH 4.00

2.00

6.00

PLN SELLS ELECTRICITY BELOW ITS PLN SELLS ELECTRICITY BELOW ITS PRODUCTION COSTPRODUCTION COST

THE HIGHER THE PRODUCTION ,

THE HIGHER THE LOSS

RESULT OF PLN CONTRACT RESULT OF PLN CONTRACT RENEGOTIATION WITH RENEGOTIATION WITH IPPsIPPs (1)(1)

NAME OF PROJECT ORIGINAL PRICE RENEGOTIATED PRICE

Sengkang 6.700 4.286Palembang Timur 6.400 4.200Cikarang 5.040 4.470Paiton I 8.477 4.900Paiton II 6.950 4.680Sibolga A 6.550 4.680Pare-pare 5.440 5.710Asahan 8.460 4.450

IN US$ CENTS/KWH

(X-change rate Rp 2,450/US$) (now approx. Rp 10,000/US$)

NAME OF PROJECT ORIGINAL PRICE RENEGOTIATED PRICE

Darajat 6.95 4.20Dieng 7.65 NASalak 8.46 4.45Sibayak 7.10 4.70Sarulla 6.47 NAPatuha NA NAKamojang 6.95 TerminatedBedugul 7.15 70% Avg. Bali TariffWayang Windu 8.40 (Negotiation in progress)

RESULT OF PLN CONTRACT RESULT OF PLN CONTRACT RENEGOTIATION WITH RENEGOTIATION WITH IPPsIPPs (2)(2)

IN US$ CENTS/KWH

(X-change rate Rp 2,450/US$) (now approx. Rp 10,000/US$)

PLN PROFIT AND LOSSPLN PROFIT AND LOSSUS $ Billions

Profit/(Loss)

Government Subsidy

Notes: Year 2002 includes PLN Asset Revaluation

Tran

smis

sion

Lin

e (in

Km

)

Year

TRANSMISSION LINE 500 KV STAGNANTTRANSMISSION LINE 500 KV STAGNANT

SUBSTATION DEVELOPMENT STAGNANTSUBSTATION DEVELOPMENT STAGNANTD

istr

ibut

ion

Line

in k

m/ T

rans

f. C

apac

ity in

MVA

PLN QUALITY OF SUPPLY: SAIFI & SAIDIPLN QUALITY OF SUPPLY: SAIFI & SAIDIIn

terr

uptio

n Fr

eque

ncy/

cust

omer

/yea

r

Inte

rrup

tion

Dur

atio

n (h

rs)/c

usto

mer

/yea

r

PLANNED (SAIFI)

REALIZED (SAIFI)

REALIZED (SAIDI)

PLANNED (SAIDI)

Up to 3RD Qtr.

AVERAGE PERFORMANCE REMAINS

UNCHANGED

PLANNEDREALIZED

TRANSMISSION LOSS (%)TRANSMISSION LOSS (%)

Up to 3RD Qtr.

INCREASING TREND, HIGHER LOADING THROUGH THE SAME

TRANSMISSION LINE

TARIFF (%) VS CORPORATE ROR (%)ASSUMING ELECTRICITY PRICE OF US $ 7 CENTS/KWH AS REFERENCE (100%)

TAR

IFF

(%)

PLN PLN –– TARIFF VS CORPORATE RORTARIFF VS CORPORATE ROR

IN ORDER TO OBTAIN FINANCING, PLN’S ROR MUST BE AT LEAST 8 % WITH CORRESPONDING TARIFF AT 125 %

PLN……WAY FORWARDPLN……WAY FORWARDCONTINUE TO IMPROVE FINANCIAL POSITION

– LOAN RESTRUCTURING ….COMPLETED– INCREASE TARIFF TO ITS ECONOMIC VALUE ….. ON GOING– ASSET REEVALUATION ….COMPLETED– IMPROVE QUALITY OF SERVICE …ON GOING– IMPROVE ACCESS TO SOFT LOAN ….ON GOING– PARTNERSHIP WITH IPP AND LOCAL GOVT. ….ON GOING

RESTORE SUPPLY CONDITION ….ON GOING

CONTINUE CORPORATE RESTRUCTURING EFFORT …. ON GOING

GOVERNMENT LAUNCHED POWER GOVERNMENT LAUNCHED POWER RESTRUCTURING POLICY IN AUGUST 1998RESTRUCTURING POLICY IN AUGUST 1998

5.5.HAS REFORM BEEN HAS REFORM BEEN

SUCCCESSFUL?SUCCCESSFUL?

MARKET STRUCTURE OF ELECTRICITY SUPPLY MARKET STRUCTURE OF ELECTRICITY SUPPLY INDUSTRY (“TO BE OBJECTIVE”)INDUSTRY (“TO BE OBJECTIVE”)

G*) T

MO

SO

SA

D

SB

LVC

MVC

HVC

Legend:

P : Generation SB : Electricity Sales Business : Electricity Flow*) Including IPP Trader SA : Sales Agent : Flow of Payment

T : Transmission LVC : Low Voltage ConsumersMO : Market Operator MVC : Medium Voltage ConsumersSO : System Operator HVC : High Voltage ConsumersD : Distribution

5.1.5.1.POWER REFORMS THROUGH THE POWER REFORMS THROUGH THE

IMPLEMENTATION OF IMPLEMENTATION OF LAW 20/2002 ON ELECTRICITY LAW 20/2002 ON ELECTRICITY

Law No. 20/2002(Electricity Industry

Restructuring)

Good GovernanceConducive Investment

Climate

Growing SupportingServices and

Industries

Independent and Efficient National

Electricity Industry

Regional Autonomy(Law No. 22/1999)

Macro-EconomicCondition

Electricity Business Restructuring

(especially PT. PLN (Persero))

Growing, Competitive, and CredibleElectricity Business Enterprises

FLOW OF THINKING FOR FLOW OF THINKING FOR THE DEVELOPMENT OF NATIONAL ELECTRICITY INDUSTRYTHE DEVELOPMENT OF NATIONAL ELECTRICITY INDUSTRY

IN EARLY 2005 WRI DESIGNATED

INDONESIA AS PILOT FOR EGI

MINISTRY OF ENERGY AND MINERAL RESOURCES

BLUEPRINT FORBLUEPRINT FORTHE DEVELOPMENT OF NATIONAL ELECTRICITY INDUSTRYTHE DEVELOPMENT OF NATIONAL ELECTRICITY INDUSTRY

2003 2003 -- 20202020

AN IMPLEMENTATION OF THE ELECTRICITY LAW NO. 20/2002

JAKARTA, APRIL 21, 2003

www.djlpe.go.id

REPUBLIC OF INDONESIA

MINISTER OF ENERGY AND MINERAL RESOURCES

FOREWORD

The Government has promulgated the Law No. 20 Year 2002 concerning Electricity Affairs, that serves as the legal basis for the development of national electricity industry toward a more efficient, transparent, and competitive industry. In order to implement this Law with the same perspectives, a Blueprint for the Development of National Electricity Industry needs to be prepared, with the expectation that it could serve as the guidance in implementing the Electricity Law. Without socialization programs, guidance, facilitations, and legal enforcement efforts, it would be difficult to achieve the goals stipulated in the Electricity Law.

This Blueprint is jointly prepared with the Indonesian electricity sector stakeholders, so it is expected that the stakeholders will have a commitment in implementing the Electricity Law No. 20 Year 2002 with this Blueprint as the guidance, which in due course will be supplemented with more detailed provisions.

Hopefully this Blueprint will be beneficial for all of us.

Jakarta, April 21, 2003Minister of Energy and Mineral Resources

Purnomo Yusgiantoro

I. Introduction …………………………………………………………………………………………. 1II. Flow of Thinking for the Development of National Electricity Industry ………………….. 2III. Pattern of Thinking for the Development of National Electricity Industry ..…………………… 3IV. Principles and Objectives …………………………………………………………………………. 4V. Vision and Mission ………………………………………………………………………………….5VI. Policy For the Development of National Electricity Industry …………………………………… 6

6.1. Objectives of the Policy .……………………………………………………………………… 66.2. Focus of the Policy …………………………………………………………………………… 6

VII. Target and Challenges …………………………………………………………………………….. 7VIII. Strategy for the Development of Electricity Industry ………………………………………. 10IX. Policy Instruments ……………………………………………………………………………….. 12X. Electricity Industry Development Program ………………………………………………………. 14

10.1. Designation of National Grids ………………………………………………………………. 1410.2. Meeting Electricity Demand ………………………………………………………………… 1510.3. Supply of Primary Energy for Electricity Generation ……………………………………... 1610.4. Resolution of Independent Power Producer Issues …..………………………………….. 1610.5. Institutional Development …………………………………………………………………… 17

10.5.1. Establishment of Electricity Market Supervisory Board (EMSB) ………………. 1710.5.2. Developing Certification Institution ………………………………………………... 1810.5.3. Empowerment of Stakeholders’ Role………………………………………………. 20

10.6. Preparation of Areas Implementing Competition .……………………………………….. 2110.6.1. Requirements for the Designation of Areas Implementing Competition ……… 2110.6.2. “Batam First” Project ……………………………………………………………….. 2110.6.3. Jawa-Madura-Bali Next …………………………………………………………….. 22

BLUEPRINT FORBLUEPRINT FORTHE DEVELOPMENT OF NATIONAL ELECTRICITY INDUSTRY 2003 THE DEVELOPMENT OF NATIONAL ELECTRICITY INDUSTRY 2003 -- 20202020

10.7. Development of Areas Not Implementing Competition ……………………………………… 2310.8. Community Development (ComDev) ………………………………………………………….. 2410.9. The Use of Domestic Goods and Services Products ….……………………………………. 2510.10. Development of Electricity Supply Ventures (Primary Electricity Ventures) …………….. 2610.11. Development of Electricity Supporting Business (Non-Core Business) ……….………… 28

10.11.1. Development of Electricity Supporting Service ………………………………….... 2810.11.2. Development of Electricity Supporting Industries…………………………………… 28

11. Legislation Programs for the Electricity Sector: Business and Technical Matters ……….…. 2911.1. Draft Government Regulation ……….……………………………………………………….….. 2911.2. Draft Presidential Decree …………..……………………………………………………….…… 3011.3. Decrees of the Minister of Energy and Mineral Resources ……………………....….……… 3111.4. Circular Letter of the Ministry of Energy and Mineral Resources …………………………… 3411.5. Codes for Competitive Electricity Market…………………………………………….……….…. 36

Appendix:A. Structure of Electricity Supply Industry …………………..…………………………………………………… 37B. Businesses Related to Electricity Industry ……………………………….……………………………………... 38C. Functional Relationship of Government, Non-Government and Business Players in National Electricity

Industry ……………………………………………………………………………………………………………… 39D. Matrix of Policy Instrument ..……..……………………………………………………………………………….. 40E. Nusantara Network 2020 ….………………………………………………………………………………………. 42F. ASEAN Power Grid .....…………………………………………………………………………………………….. 43G. Organizational Structure of Electricity Market Supervisory Board …..………………………………………… 44H. Product Safety Certification Scheme for Electricity Equipment and Appliances ..…………………………… 45I. Electricity Sector Organizational Networks ……………………….…..…………..….………………………….. 46J. Electricity Supply Business Scheme in Areas Implementing Competition ……..……………………………. 47K. Electricity Supply Business Scheme in Areas Not Implementing Competition ………………………………. 48L. Electricity Sector Legislation Program …………………………………………..………………………………… 49M. List of Institutions that Involved in the Development of the “Blue Print” …..……………………………….… 50

VISION AND MISSIONVISION AND MISSION

VISION:

Realization of a sustainable and environmentally-oriented electricity industry through an optimal utilization of energy resources, high quality and reliable universal services, and therefore greatly benefiting the prosperity of the people.

MISSION:

To conduct the development of supply facilities and electricity distribution to meet regional and national electricity demand.To conduct the regulation of electricity supply and electricity support business.To conduct the regulation of electricity safety and environmental protection.To optimally utilize primary and renewable energy resources by observing its economic feasibility. To prioritize the utilization of Local Energy Resources (SES) and renewable energy for electricity

generation.

STRATEGY FOR THE DEVELOPMENT OFSTRATEGY FOR THE DEVELOPMENT OFTHE NATIONAL ELECTRICITY INDUSTRY (1)THE NATIONAL ELECTRICITY INDUSTRY (1)

Strategy for target achievement:

A. TO PREPARE INVESTMENT SCHEMES IN ELETRICITY SUPPLY BUSINESSApplication of competitive market structure and market rules for eligible regions.Giving priority to environmentally friendly power generation investment and giving maximum contribution to the state revenues. Making investment attractive through economic tariffs and incentives.Funds provided by the Government and Regional Governments for the development of remote areas, under-developed and rural areas electrification.

B. TARIFF RATIONALIZATION AND LOCAL CONTENT IMPROVEMENT:Rationalization of Electricity Basic Rate (TDL) up to its economic valueRationalization of IPP’s electricity selling price to PLN.Improvement of national capacity in Electricity Supporting Business.

C. TO OPTIMIZE THE ROLE OF ALL ELECTRICITY SUPPLY BUSINESS PLAYERSPT. PLN (Persero), as an electric utility company with a long-time history and experience, needs to optimized its role by concentrating on the core business, that is electricity supply. Other PLN’selectricity support ventures can be conducted as long as they do not violate Electricity Law No. 20/2002.

D. TO APPLY GOOD GOVERNANCE PRINCIPLES

Reducing the Government’s role and empower the roles of independent institutions and electricity business players so that the Government could focus more on policy making and regulation.

Conducting transparent and accountable decision-making process.

Improving transparency in license issuance processes.

E. TO ESTABLISH FACILITATION TEAM TO HELP REGIONAL GOVERNMENTS

Conducting capacity building.

Gradually improving deconcentration tasks (Central Government’s authority performed by Regional Governments).

C. TO OPTIMIZE THE ROLE OF ALL ELECTRICITY SUPPLY BUSINESS PLAYERS (CONTINUE….)To improve operational performance and efficiency of all electricity supply business players through benchmarking process.

To improve public transparency in the determination of investment cost, and periodically publish electric cost of service in various regions or consumption points.

STRATEGY FOR THE DEVELOPMENT OFSTRATEGY FOR THE DEVELOPMENT OFTHE NATIONAL ELECTRICITY INDUSTRY (2)THE NATIONAL ELECTRICITY INDUSTRY (2)

POLICY INSTRUMENTS USED TO DEVELOP THE NATIONAL ELECTRICITY INDUSTRY, AMONG OTHER THINGS ARE:

A. LEGISLATIONElectricity Law No. 20/2002 used as the legal basis for the development of the national electricity industry includes policy development, business regulation, and technical regulation as well as sector governance and supervision.The government shall have the authority to stipulate emergency state in a region and determine its remedial actions (such as supply problems).

B. REGULATIONObligation for electricity companies to meet licensing requirement provisions, such as safety and service standards.Obligation for electricity companies to utilize local energy and renewable energy.Designation of “Energy Utilization Efficiency Commitment” for energy users.Obligation to use “SNI Mark” on electric equipment and safety mark on electric appliances.Obligation to use technical experts holding competency certificate.Application of “Quality Standard for Electricity Environment”.Obligation for electricity power installations to possess certification of proper operation.

C. TAXATIONApplication of transmission and electricity distribution facility levy .Tax incentives for renewable energy development

POLICY INSTRUMENTS (1)POLICY INSTRUMENTS (1)

D. PARTNERSHIPCooperation among business players in improving the capacity of national electricity supply.Cooperation among Government, Regional Government and electricity stakeholders.Cooperation between business players and local communities (community development).

E. GOVERNMENT/REGIONAL GOVERNMENT FUNDINGTo promote renewable energy research and development in electricity companies.Funds for the development of electricity supply facilities to help underprivileged community groups, underdeveloped areas, remote areas and rural electric development.

F. FUNDING FROM OFFSHORE LOANS AND PRIVATE INVESTMENTSelectively employ foreign funding.Promote private investment.

G. IMPLEMENTATION OF COMPETITION (MARKET MECHANISM)Customers shall have choices. Electricity companies shall have aspiration to improve services to customers.Electricity companies shall have initiative to help underprivileged customers.Electrical Supply Business shall have initiatives in improving Energy Utilization Efficiency (EUE) and using alternative renewable energy.Application of Emission Trading (ET).

POLICY INSTRUMENTS (2)POLICY INSTRUMENTS (2)

Banda Aceh Brastagi

Ombilin Tembilahan

Batam & SingaporeKucing

B.Gemuruh

P.Raya

Cempaka

Kledang

K.DalamAtap Palasa Manado

posoLuwuk

Kendari

MakasarKalianda

Cilegon

CibinongPaiton

B.Wangi

Kapal

MandoniAtsy

Jayapura

Ayamaru

Philippine

B.Asam

ExistingPlanned

Malaysia

P.Sidem.

Kelapa

NUSANTARA NETWORK 2020NUSANTARA NETWORK 2020

ASEAN POWER GRIDASEAN POWER GRID

Notes:

Power GridNatural Gas Field

Bandar Sri Begawan

Jakarta

Singapura

Kuala Lumpur

Phnom Penh

Bangkok

Yangon Hanoi

Ventiane

Manila

11 identified project of Asean Power Grid:

1. People’s Republic of Laos – Thailand;2. Myanmar – Thailand; 3. Thailand – Cambodia; 4. Cambodia– Vietnam;5. Sumatra (Indonesia) – Penisular (Malaysia);6. Peninsular (Malaysia) – Singapore7. Sumatera (Indonesia) - Singapore8. Batam (Indonesia) – Singapore9. Sabah/Serawak (Malaysia ) – Brunei10.Sabah/Serawak (Malaysia) – West Kalimantan (Indonesia)11. Philippine – Sabah/Serawak (Malaysia)

ASEAN ENERGY RESOURCE DISTRIBUTION ASEAN ENERGY RESOURCE DISTRIBUTION

BruneiIndonesiaMalaysiaPhillipinesSingaporeThailandVietnam



OIL COAL

HYDRO GEOTHERMAL


69%

8%

89%

52%20%

26%

78%

22%

5.25.2JUDICIAL REVIEW BY JUDICIAL REVIEW BY

CONSTITUTIONAL COURT CONSTITUTIONAL COURT BROUGHT US BACK TO BROUGHT US BACK TO

LAW 15/1985. LAW 15/1985.

1. Electricity is important for the wealth of people in which according to the Constitution UUD 45 Article 33.2 , it should be under the full control of State.

2. Electricity should be viewed as an integrated business and not be unbundled by separating generation, transmission, distribution and retail business.

3. As the owner of electricity business, the Government should rather enhance the position of the state owned company to gradually meet the increasing demand through partnership with private company, bothdomestic or international.

4. Article 16 (unbundling), article 17 (competition, market domination prohibition), and article 68 (transfer of Authorized Holder of Electricity (PKUK) are in conflict with the spirit of State Constitution.

5. As these 3 articles are the heart of the UU No. 20/2002, therefore the whole Law 20/2002 is to be revoked.

THE CONSIDERATION…….THE CONSIDERATION…….

1. New Law No. 20/2002 on electricity is no longer binding

2. Old Law No. 15/1985 is re-enacted.

3. All contracts or licenses which have been issued based on Law No. 20/2002 is still valid until the contracts or the licenses are expired.

4. The Government should prepare a new draft law in line with the spirit of the Constitution (UUD 45), article 33.

THE DECISION....THE DECISION....

1. THE POWER SECTOR RESTRUCTURING PROCESS BACK TO SQUARE ONE AFTER INVESTING A LOT OF TIME AND EFFORTS.

2. THE PROCESS FOR THE FORMULATION OF GOVERNMENT REGULATIONS TO IMPLEMENT LAW 20/2002 HAS TO BE STOPPED.

3. CAPACITY BUILDING ON IMPLEMENTING POWER RESTRUCTURING SUCH AS ROLE OF INDEPENDENT REGULATOR, MARKET OPERATOR, SYSTEM OPERATOR, WHOLESALE AGENT, ETC HAVE BEEN DISCONTINUED.

4. THE PARTICIPATION OF LOCAL GOVERNMENT IN POWER RESTRUCTURING BECOME UNCLEAR IN TERM OF PLANNING, LICENSING AND PRICING POLICYTOWARD THE IMPLEMENTATION OF REGIONAL TARIFF

5. PRIORITIZATION TO UTILIZE SITE SPECIFIC ENERGY RESOURCES, RENEWABLE AND ENVIRONMENTAL FRIENDLY ENERGY RESOURCES NO LONGER HAVE STRONG BASIS.

6. SIMILAR CONCERNS ON SPECIFIC REGULATION ON PUBLIC INTEREST IN SAFETY, CERTIFICATION OF PERSONEL COMPETENCY, EQUIPMENT SAFETY AND QUALITY COMPLIANCE AS LAW 15/1985 WAS SILENT ABOUT THIS

THE IMPLICATIONS….THE IMPLICATIONS….

LAW 20/2002

• Consider implicitly electricity as “commodity”

• Regional Driven Planning - RUKD• Each Regional has its own economic • Open the possibility for enhancing

efficiency through competition • As a consequence, area declared as

competitive must be segmented to unbundling businesses.

• There specific conditions for implementing unbundling/competition.

LAW 15/1985

• Explicitly determine that State to provide electricity through SOE as PKUK

• In addition of PKUK , there is PIUKU and PIUKS

• National Driven Planning – RUKN • Tariff universally decides by President

There is precedent for Batam as exception. • No competition. Private participation is to

assist State. • Does not recognize ‘unbundling’.

PRINCIPLE DIFFERENCES OF PRINCIPLE DIFFERENCES OF LAW 20/2002 VS LAW 15/1985LAW 20/2002 VS LAW 15/1985

5.35.3GOVERNMENT REGULATION GOVERNMENT REGULATION

3/2005 AS REMEDY 3/2005 AS REMEDY

REMEDIAL ACTIONS BY THE REMEDIAL ACTIONS BY THE GOVERNMENTGOVERNMENT

• In order to provide certainty to Electricity Business, Government issued Government Regulations No. 3/2005 to replace Government Regulation No. 10/1989 regarding electrical power supply and utilization by addressing the following points:

General Planning on National Power Requirement (RUKN) Roles of Private in Supplying Electrical Power Roles of Government and/or Regional Government in Providing Funds for the Development of Electrical Power Infrastructure First Priority Given to the Utilization of Renewable Energy Pricing Policy Supervision and Standardization

LAW 15/1985

• Explicitly determine State providing electricity through SOE as PKUK

• In addition of PKUK , there is PIUKU and PIUKS

• National Driven Planning – RUKN • Tariff universally decides by President

There is precedent for Batam as exception.

• No competition. Private participation is to assist State.

• Does not recognize ‘unbundling’.

GOVT. REG. 3/2005

• Centrally Decentralized Planning -RUKN based on RUKD

• National Transmission Lines must be on “open access” basis to all

• Govt. declares National Grid • License for Private by Minister ESDM,

Governor and Bupati in line with their respective authority.

• PKUK and PIUKU have ‘obligation to supply’

• PIUKS may be given license by Regional if holder of PKUK/PIUKU:

• unable to supply• PIUKS is more economical

COMPLIMENTING COMPLIMENTING LAW 15/1985 WITH GOVT. REG. 3/2005LAW 15/1985 WITH GOVT. REG. 3/2005

SCHEME FOR POWER BUSINESSSCHEME FOR POWER BUSINESS

Through Direct AppointmentThrough Tender

Purchase Electricity and/Or Rent Transmission Lines

Own Development by PLN

RUPTL

RUKN National Electricity General Plan

Electricity Supply General Plan (Yearly)

GUIDELINE FOR PRIVATE GUIDELINE FOR PRIVATE PARTICIPATIONPARTICIPATION

Private development undertakings will be carried out along the following procedure:

– GOI establishes the National Electricity General Plan (RUKN)– PLN carries out RUKN in the form of Electrical Power Supply Plan (RPTL),

approved by Minister of Energy & Mineral Resources– Announcement of Power Supply Projects that will be connected to National

Grid is made by the Government– PLN conducts the tendering and negotiation process. – Minister approves electricity price– Permit for conducting electricity business for public use is issued by the

Government – PLN may conduct Strategic Partnership with private sector by first conducting

pre-qualification selection then bidding for price– PP No. 3/2005 stipulates procurements of mine-mouth steam turbine and

renewable energy power projects, as well as project using marginal gas or required for emergency supply may be obtained through direct appointment

6.6.WHAT WE LEARNED AND HOW CAN WHAT WE LEARNED AND HOW CAN

WE DO BETTER.WE DO BETTER.

WHAT WE LEARNED AND HOW CAN WE DO BETTER?WHAT WE LEARNED AND HOW CAN WE DO BETTER?

Indonesia could be an exciting opportunity new power industry growth• Current inefficiencies offer commercial opportunities• Privatization should present some investment opportunities

But many concerns / obstacles to work through Power Reforms• Fundamentals are still weak• System does not encourage new initiatives

Most power business opportunities will not meet hurdle rates in the current environment so creativity will be necessary

• Need for integrated approach by and to Government • Strategic Partnerships and JV’s will be necessary • Transparent pricing and level playing field• Share the process and benefits of using WRI Electricity Governance Toolkit

…………THE NEW IMPLEMENTING REGULATIONS MUST BE WRITTEN VERY CAREFULLY AND MUST BE WORKABLE, IN ORDER TO ATTRACT NEW INVESTMENT

THE ELECTRICITY GOVERNANCE TOOLKITTHE ELECTRICITY GOVERNANCE TOOLKITBenchmarking Best Practice and Promoting Accountability in the Electricity Sector

Smita Nakhooda Navroz K. Dubash Shantanu Dixit Coordinator Senior Fellow Member–Energy Group Institutions and Governance Governance and Public Policy Prayas- Pune Program National Institute of Public Amrita Clinic World Resources Institute Finance and Policy Athawale Corner 10 G Street NE (Suite 800) 18/2 Satsang Vihar Marg Deccan Gymkhana Washington, DC 20002 New Delhi 110 067 Pune 411-004 USA India India Tel: +1-202-729-7756 Tel: +91-11-2656-9303, Ext.142 Tel: +91(20) 25420720 [email protected] [email protected] [email protected]

Contacts:

A TEAM FACILITATED BY IIEE (INDONESIAN INSTITUTE FOR ENERGY ECONOMICS) WORKING ON PILOT PROJECT TO DETERMINE BASELINE INDICATORS FOR

INDONESIA IS FINALIZING THE REPORT. THE SPONSORING ORGANIZATIONS IS AS FOLLOW:

World Resources Institute

National Institute of Public Finance and

Policy

Prayas-Pune: Initiatives in Health, Energy,

Learning and Parenthood

BASELINE INDICATORS: MAPPING THE ELECTRICITY SECTOR

POLICY PROCESSES

Institutional / ProceduralLegislative CommitteeExecutiveIndependence and Reporting of Electricity

Ministry / DepartmentReform and policy change processes Planning AgenciesDonor AgenciesRole of ConsultantsCapacity of Civil SocietyAvailability of relevant background

InformationQuality of participation, debate, and clarity of

policy processesMedia coverage

Key Substantive IssuesAsset EvaluationPrivatization SubsidiesIndependent Power ProductionExtent of Competition

REGULATORY PROCESS

Institutional / ProceduralAuthority and AutonomySelection and RemovalFinancial + Human ResourcesFunction and JurisdictionConflict of InterestTransparency AppealsTrainingUse of ConsultantsProcedural clarityPro-activenessDisclosure of and access to documentationRepresentation of weak stakeholdersSpace for public participation and civil

society capacityBasis for orders and decisionsDissemination of decisions

Key Substantive IssuesPerformance ReportingTariff PhilosophyLicensingConsumer Service and Quality of Supply

ENVIRONMENTAL AND SOCIAL ASPECTS

Institutional / Procedural Clarity about Jurisdiction for environmental

clearanceExecutive, regulatory and legislative mandates and

capacitySetting minimum environmental standardsInclusion of environment in sector planning and

reformEnvironmental Impact AssessmentRedress mechanisms Regulatory responsiveness to social or

environmental claimsEngagement of service provider with the publicCapacity of civil society to address social and

environmental aspectsJudicial or administrative forums

Key Substantive IssuesImpact on LabourAccess to electricity AffordabilityProject-affected peopleLow Environmental Impact Technologies and

RenewablesReporting of Environmental and Social

PerformanceReporting on Greenhouse Gases

SCHEMATIC OF INDICATORSSCHEMATIC OF INDICATORS

7.7.TAKETAKE--AWAY MESSAGEAWAY MESSAGE

Significant reform…. more debate and public participation neededSignificant reform…. more debate and public participation needed

1. Last 3 – 7 years the industry has seen significant efforts by Government on Power Reforms

2. Unbundling, competition, market domination prohibition, and transition of PLN as the only electricity business license holder need further justifying reasons.

3. With recent crude price hike, Government is accelerating the implementing regulations for the development of Green and Efficient Energy while ensuring Sustainable Development

4. Current debate on effective regulatory and fiscal incentive needed to stimulate a workable, accountable and transparent National Energy Policy

5. Overarching issue – how to provide conditions more attractive for investment, while not compromising overall objectives

Last but not least, Indonesia presents a unique opportunity for Last but not least, Indonesia presents a unique opportunity for electricity growth but there are also many challenges to be electricity growth but there are also many challenges to be overcomeovercome

1. Fourth most populous country with total population of 240mm and growing middle class

2. PLN currently still have a monopoly but this will change over the next few years

3. There is potential in all areas of the market

4. The country is going through economic and structural reform which should eventually lead to product growth and investment opportunities

5. But fundamental power reforms are weak and there are negative perceptions towards Indonesia which need to be overcome

Irian Jaya

SumatraKalimantan

Java

Sulawesi

PhilippinesPhilippinesPhilippines

SerawakSerawakSerawakMalaysiaMalaysiaMalaysia

VietnamVietnamVietnam

Perspective on Power Sector Reforms in Indonesia - un.org · 1/1/2004 · Perspective on Power...

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