The Indonesian government has prepared a draft of a new Government Regulation (“GR”) on Electricity Supply Business (“GR Draft“) as part of the efforts to accelerate the energy transition and optimisation of the electricity supply business in Indonesia. GR Draft is intended to replace GR No. 14 of 2012 on Electricity Supply Business, as amended by GR No. 23 of 2014 (“GR 14/2012”). GR Draft is still under governmental deliberation.

GR Draft seeks to modernize Indonesia’s electricity regulatory framework by accommodating developments in the electricity sector, encouraging greater private sector participation, and supporting the integration of renewable energy into Indonesia’s electricity system. It also introduces several notable changes to the current regulatory regime, particularly regarding business licensing, captive power arrangements, and the rights and obligations of the electricity business licence holders.

This article highlights several proposed changes introduced under the draft that businesses should know.

 

  1. Defined Scope of Electricity Supply Business

GR Draft refines the scope of the electricity supply business by providing greater clarity on the activities under each category. While GR 14/2012 has distinguished between businesses conducted for the public interest and electricity supply business for self-use, GR Draft further clarifies the purpose and scope of each category.

For businesses conducted for the public interest, GR Draft emphasises that their activities should be carried out to meet the electricity needs of consumers (e.g., individuals or business entities). Meanwhile, the scope for electricity supply businesses for self-use specifies the activities based on (i) one entity’s interest, (ii) energy exchange, and/or (iii) affiliates of the integrated business ecosystem and/or downstream area purposes (Article 2 (3) and (4) of GR Draft).

 

Electric Supply Business Actor

GR Draft generally maintains the existing categories of entities eligible to undertake electricity supply business activities for the public interest. However, the draft further broadens the range of eligible business actors to facilitate wider participation in the electricity infrastructure development.

Under Article 4 paragraphs (4) and (5) of GR Draft, the following entities may be granted the opportunity to carry out electricity supply business activities for the public interest:

  1. regional-owned enterprises;
  2. private enterprises;
  3. cooperatives;
  4. community-based organizations;
  5. public service agencies;
  6. village-owned enterprises; and
  7. regional public-service agencies.
  8. other state-owned business entities.

Although new types of entities will be granted the opportunity to carry out the electricity supply business, state-owned enterprises that specialise and solely operate in electricity power provision shall remain the first priority actors of the electricity supply businesses in the public interest (Article 4 (1) and (2) of GR Draft).

Additionally, these business actors could get the fiscal and non-fiscal incentives if they utilise renewable energy in respect of the electricity supply (Article 4 (6) of GR Draft).

 

Expansion of Electricity Supply Business

GR Draft formally recognizes electric vehicle (“EV”) charging business as part of the electric supply business activities. Article 13 (1) and (2) of GR Draft stipulates that the provision of electricity supply business for EVs shall be in the form of:

  1. recharge stations, private installations or public electric vehicle charging stations (Stasiun Pengisian Kendaraan Listrik Umum); or
  2. battery swap business in the form of public electric vehicle battery swap stations (Stasiun Penukaran Baterai Kendaraan Listrik Umum).

GR Draft provides a streamlined licensing framework for EV electric supply business activities, reflecting the efforts to accelerate the utilisation of renewable energy. Particularly, electricity supply business EV activities are exempted from the requirements that generally apply to other electricity supply businesses, including operating in a service territory or possessing an electric supply business plan (Rencana Usaha Penyediaan Tenaga Listrik) (Article 16 (1) to (3) of GR Draft). Instead, GR Draft permits an EV electric supply business activity to be operated by relying solely on the relevant business activity, or, where the facilities are located within an existing business operational area, on the operator’s applicable standard license (Article 16(4) of GR Draft).

 

Climate-Friendly Merit

GR Draft introduces a formal recognition mechanism for electricity supply businesses conducted both in the public interest and self-use that utilise renewable energy or other energy sources contributing to climate change mitigation.

Under Article 49 of GR Draft, the government would grant the following environmental attributes:

  1. carbon credit;
  2. renewable energy certificates;
  3. green label; and
  4. other tradeable rights,

to holders of IUPTLU (Electric Power Provision for Public Sector Business License) and IUPTLUS (Electric Power Provision for Self-Usage Business License), who have renewable energy sources or contribute to climate change mitigation action.

The recognition of these environmental attributes may provide additional commercial opportunities for electricity businesses, particularly through participation in Indonesia’s developing environmental markets, subject to the applicable regulatory framework.

 

Explicit Environmental Aspects

  1. While GR 14/2012 already generally requires electricity supply business activities to comply with the environmental compliance requirements, GR Draft further elaborates the key environmental obligations that must be observed by the licence holders. In particular, Article 56 (2) of GR Draft expressly requires compliance with the: environmental approval;
  2. water pollution management;
  3. air pollution management;
  4. hazardous and toxic waste management; and
  5. non-hazardous waste management,

To ensure that the implementation is fully complied with, GR Draft reinforces this obligation by introducing a new reporting requirement whereby the electric supply business license holder must submit greenhouse gas emission information to the Ministry of Energy and Mineral Resources information system (Article 56 (3) of GR Draft).

 

Strengthened Administrative Sanctions

GR Draft stipulates more structured administrative sanctions for non-compliance by introducing fines in addition to the existing measures. Administrative sanctions may take the form of a written warning, temporary suspension of business activities, administrative fines, and/or revocation of the electricity supply business license (Article 59 (1) of GR Draft). Depending on the nature of the violation, administrative fines may range from IDR 50 million to IDR 2.5 billion (Article 60 (1) of GR Draft).

 

Concluding Remarks

GR Draft signals the government’s continued efforts to create a more adaptive and investment-oriented regulatory framework for Indonesia’s electricity sector. Although many of the proposed provisions refine the existing regime rather than introduce entirely new concepts, GR Draft may still influence how electricity projects are structured, licensed, and operated, particularly regarding EV infrastructure, climate-related initiatives, and regulatory compliance.

As GR Draft has not been enacted, businesses should closely monitor its development and evaluate how the final regulation may affect their existing operations and future projects.

 

 

Disclaimer: The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their circumstances.