INDONESIA Law and Practice Contributed by: Emir Nurmansyah, Serafina Muryanti, Adya Sepasthika and Kenny Poltak, ABNR Counsellors at Law
1. Structure and Ownership of the Power Industry 1.1 Law Governing the Structure and Ownership of the Power Industry The power industry consists of (i) generation, (ii) trans- mission, (iii) distribution, (iv) sale and (v) integrated activities. The electricity regulations generally allow for bundled or unbundled activities, on the basis that Article 10, paragraph 2 of the Electricity Law provides that the four electricity business activities “may” ( dapat ) be conducted in an integrated manner. However, it is to be noted that the constitutionality of “unbundling” has been revisited by the Indonesian Constitutional Court ( Mahkamah Konstitusi ) on several occasions. • Constitutional Court Decision No 111/PUU- XIII/2015, dated 14 December 2016 (the “2016 Constitutional Court Decision”), ruled that the concept of “unbundling” under the Electricity Law is conditionally unconstitutional if: (a) it results in the loss of the government’s control over electricity supply and therefore contradicts the principle that electricity should be under the government’s control; or (b) it is interpreted as the government relinquish- ing control over the power sector, in violation of the principle under the Constitution whereby the government must control electricity or power supply in Indonesia. • Constitutional Court Decision No 39/PUU- XXI/2023, dated 29 November 2024 (“2024 Con- stitutional Court Decision”), goes further than the 2016 Constitutional Court Decision by declaring the word “may” ( dapat ) in Article 10, paragraph 2 of the Electricity Law is unconstitutional and has no binding legal force, without the conditional qualification used in the 2016 Constitutional Court Decision. In theory, this ruling suggests that the unbundling of electricity generation, transmission, distribution and sale is no longer permissible in Indonesia.
However, in practice, these Constitutional Court decisions have not affected the power industry since the government, through the Minister of Energy and Mineral Resources (MEMR), still controls the industry by way of issuing approvals, permits or licences to conduct power business activities, including control over the electricity purchase price and tariff to end- consumers. In current practice, the power industry in Indonesia consists of the following: • unbundled activities for generation, transmission, distribution and sale, with mostly private investor- owned companies engaging in power generation activities with PT Perusahaan Listrik Negara (PLN, or Persero ; a state-owned enterprise – SOE) as the offtaker; and • bundled activities to accomplish all of the afore- mentioned electricity supply operations (power generation, transmission, distribution and sale) by a single company. Although the regulations allow for bundled activities covering only two activities, such as distribution and sale, this has never been seen in Indonesia. The market players in the power industry are a com- bination of SOEs (including subsidiaries) and private, investor-owned companies. The power industry is mainly governed by Law No 30 of 2009 on Electricity (the “Electricity Law”), as last amended by Law No 1 of 2026 on Adjustment of Criminal Sanctions (Law 1 /2026). The Electricity Law does not regulate power storage. However, Govern- ment Regulation No 25 of 2021 on the Implementation of the Energy and Mineral Resources Sector sets out that battery energy storage system-related activities are classified under electricity-supporting services – namely consultancy services, installation, operation and maintenance services, and training services. Further, Presidential Regulation 112 of 2022 on the Acceleration of Renewable Energy Development for Power Supply (PR 112/2022) sets out the price of battery facilities and other electrical energy storage facilities for solar and wind power plants of all capaci- ties having such facilities, where the price shall be
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