Indonesia – MEMR Guidelines On Setting Electricity Tariffs For Consumers Outside PLN’s Business Area: More Certainty For Business Area Holders.

The electricity tariffs may be prepaid or postpaid and may be in either Rupiah or foreign currencies.

 

However, tariffs in a foreign currency will still need to be paid in Rupiah using Jakarta Interbank Spot Dollar Rate (JISDOR) exchange rate at an agreed time.

 

Initial electricity tariffs

 

Before selling electricity to consumers for the first time, Business Area Holders need to apply for initial electricity tariffs to the MEMR or the Governor (depending on who issued the license of the Business Area Holder) together with the following documents within three months after the Business Area Holders have got their own consumers:

 

1. the electricity supply business plan

2. the principal cost of electricity supply borne by the Business Area Holder (biaya pokok penyediaan tenaga listrik or Electricity BPP), such as fuel costs, maintenance fees, administration fees

3. the composition of the relevant structures or categories of the electricity tariff

 

Reg 47 does not provide any explanation for what would be the condition for a Business Area Holder to be deemed to have a consumer. However, based on discussion with the MEMR, a Business Area Holder will be deemed to have a consumer when it, at least, has a memorandum of understanding with a prospective consumer.

 

The MEMR or the relevant Governor will evaluate the application by no later than 14 days after the submission. A public hearing with the relevant stakeholders, such as the other Business Area Holders in the same province and PLN will then be held within 14 days after the evaluation.

 

No later than 21 days after the public hearing the MEMR or the relevant Governor must propose to the DPR or DPRD respectively for the electricity tariffs to be approved. 14 days after the DPR or DPRD approves the proposed tariff, the MEMR or the relevant Governor will issue the determination of the electricity tariff.

 

Determination of electricity tariff adjustment

 

Business Area Holders may apply for tariff adjustment if there is a significant change to the Electricity BPP to be determined by the MEMR or the Governor and approved by the DPR or DPRD. The adjustment can be applied for through the same procedures and mechanism as the determination of initial electricity tariffs.

 

Temporary electricity tariffs

 

To provide certainty to Business Area Holders, if the DPR or DPRD has not approved the tariffs within three months after the submission of a proposal from the MEMR or the relevant Governor, the Business Area Holder must set a temporary tariff by referring to the tariffs set by PLN or other Business Area Holders (which have been approved by the DPR or DPRD) in the same Province and with the same structure and category.

 

The temporary tariffs will be valid for six months. 

 

If the DPRD still has not issued its approval within six months, the relevant Governor must determine permanent electricity tariffs based on the electricity tariffs of PLN or other Business Area Holders. However, we understand from the MEMR that the Business Area Holders will still need to submit a request for determination of the permanent electricity tariffs to the Governor.

 

Reg 47, however, does not set a deadline for the approval of electricity tariffs by the DPR. Therefore, the timeframe for the DPR's approval of electricity tariffs remains unclear in this respect. We understand from our discussion with the MEMR that the MEMR believes that the DPR should be able to issue its approval within six months.

 

Reporting requirements

 

MEMR Reg 47 requires Business Area Holders to report their electricity tariff realization, sales of electricity and electricity BPP quarterly to the MEMR or the relevant Governor. The reports will be reviewed by the MEMR or the relevant Governor, by considering, among other things, inflation and foreign exchange rates. Following the review, the MEMR or the relevant Governor may determine new electricity tariffs that are subject to approval from the DPR or DPRD.

 

Conclusion

 

Reg 47 gives detailed procedures for the determination of the electricity tariff for consumers outside PLN's Business Areas that are more favorable for Business Area Holders, as they are now allowed to determine temporary tariffs while waiting for the approval from the DPR or DPRD. Therefore, Business Area Holders are now guaranteed to be able to sell electricity to consumers sooner using these temporary tariffs. However, there is still uncertainty with respect to the timeframe for the approval from DPR, as Reg 47 does not set a clear timeframe.