(3 November 2020) The Indonesian House of Representatives (DPR) recently passed the Omnibus Bill on Job Creation (the "Omnibus Bill"). The stated aim of the Omnibus Bill is to bolster investment and create jobs by streamlining regulations and simplifying the licensing process to improve the ease of doing business in Indonesia.
The Omnibus Bill, among other things, amends various provisions in Law No. 30 of 2009 regarding Electricity (the "Electricity Law"). In general, there are no major changes to the Electricity Law under the Omnibus Bill, but we highlight below several changes that are worth noting.
Streamlining of Electricity Business Licenses and Issuing Authorities
Previously, there were two business licenses issued to companies supplying electricity, as follows:
- Electricity supply business license (Izin Usaha Penyediaan Tenaga Listrik or "IUPTL") for companies supplying electricity for public use; and
- Operational license (Izin Operasi or "IO") for companies supplying electricity for their own use (captive power plants).
Business entities that provided electricity supporting services, such as operation and maintenance and certification of electricity installations, obtained a different license, called an electricity supporting services business license (Izin Usaha Jasa Penunjang Tenaga Listrik or "IUJPTL").
Prior to the Omnibus Bill, the IUPTL, IO and IUJPTL could be issued by the Central or Regional Government based on their respective authorities, with the location of the project and existence of foreign investment in general determining which government issued the license.
Under the Omnibus Bill, the specific nomenclature IO, IUPTL and IUJPTL are revoked and replaced by a general Business Licensing (Perizinan Berusaha), which can be issued by the Central or Regional Government based on their respective authorities. The details of the issuance process for this Business Licensing are to be stipulated in implementing regulations(s). We expect that the clear delineation between the authorities of the Central and Regional Governments in issuing Business Licensing for electricity businesses will be provided in the implementing regulations.
However, the Omnibus Bill makes clear that it is the Central Government that will formulate the norms, standards, procedures and criteria related to the Business Licensing, and Regional Governments shall follow the same. This language was probably included on the consideration that the Business Licensing process will be integrated into the Online Single Submission (OSS) licensing system and the Indonesian government may want to ensure there is clarity and consistency in processing the applications of users.
In some parts, though, the Omnibus Bill revokes certain authorities of Regional Governments such as the authority to approve regional general electricity plans and to determine electricity rates for consumers.
General Electricity Plan
The Omnibus Bill revokes the obligation of the government to consult with the House of Representatives regarding the determination of the national general electricity plan. It also revokes the concept of regional general electricity plans.
Captive Power Plants
The Omnibus Bill retains the rule that companies that operate captive power plants may sell excess power to the public after obtaining prior approval from the Central or Regional Government. It provides that the Central Government will further stipulate the norms, standards, procedures and criteria regarding this approval, which is a recurring theme in the Omnibus Bill.
A company may sell excess electricity for the public interest if the area in question is not yet reached by the holder of Business Licensing for electricity supply. Selling excess power to the public without prior government approval may result in administrative sanctions. If such sale without prior government approval results in casualties or damage to health, safety and/or the environment, the party responsible may also be subject to criminal sanctions.
The Omnibus Bill does not expressly mention the sale of electricity by a power plant company to an affiliated company, but we understand that this is not prohibited in practice if it is implemented using certain schemes and meets certain requirements.
Similar to the old rule, if the supply of electricity is for the public interest, even if the generation, transmission, distribution and/or sale of electricity is done in an integrated manner, only one business entity is allowed to supply electricity in one Work Area. But the Omnibus Bill clarifies that if the electricity supply is not for the public interest, the business entities that conduct the electricity generation, transmission, distribution and/or sale in an integrated manner can generate and/or transmit the electricity outside of their Work Area.
Criminal Sanctions for Certain Building Construction
Article 51A of the Omnibus Bill stipulates criminal sanctions in the form of up to three years imprisonment and a maximum fine of IDR 1 billion maximum for any person who constructs a building and/or plants something that:
- has been indemnified and/or compensated by the holders of an electricity supply business license as referred to in Article 30 paragraph (2) and/or compensated as referred to in Article 30 paragraph (3);
- is in the minimum free space and distance around electricity lines; or
- endangers the safety or disrupts the provision of electricity.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.