Asian Development Bank - How Better Regulation Can Shape the Future of Indonesias Electricity Sector

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HOW BETTER REGULATION CAN SHAPE THE FUTURE OF INDONESIAS ELECTRICITY SECTOR

DECEMBER 2020

Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO)

2020 Asian Development Bank

6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines

Tel +63 2 8632 4444; Fax +63 2 8636 2444

www.adb.org

Some rights reserved. Published in 2020.

ISBN 978-92-9262-657-0 (print); 978-92-9262-658-7 (electronic); 978-92-9262-659-4 (ebook)

Publication Stock No. TCS200427

DOI: http://dx.doi.org/10.22617/TCS200427

The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent.

ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned.

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This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) https://creativecommons.org/licenses/by/3.0/igo/. By using the content of this publication, you agree to be bound by the terms of this license. For attribution, translations, adaptations, and permissions, please read the provisions and terms of use at https://www.adb.org/terms-use#openaccess.

This CC license does not apply to non-ADB copyright materials in this publication. If the material is attributed to another source, please contact the copyright owner or publisher of that source for permission to reproduce it. ADB cannot be held liable for any claims that arise as a result of your use of the material.

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Corrigenda to ADB publications may be found at http://www.adb.org/publications/corrigenda.

Note:

In this publication, $ refers to United States dollars.

Cover design by Jan Carlo dela Cruz.

This report was prepared by PT. Castlerock and Economic Consulting Associates for the Ministry of Finance of Indonesia.

Contents

Tables, Figures, and Boxes
Abbreviations
Acknowledgments
Summary and Recommendations
Introduction
Electricity Regulators: A General Overview
Why a Regulatory Body Matters
Ensuring High-Quality Regulatory Decisions
Regulatory Functions in the Electricity Sector
Legal Circumstances for an Electricity Regulatory Body in Indonesia
The Legal Conditions Surrounding the Regulatory Body
A Regulatory Body Does Not Reduce State Control
Key Tasks for an Indonesian Electricity Regulatory Body
Infrastructure Planning
Facilitating Off-Grid Electricity Supply
Infrastructure Procurement
Efficient Cost Recovery and Cost Allocation
Establishing the Indonesian Electricity Regulatory Body
Legal Aspects
Ensuring High-Quality Decision-Making and Efficient Task Management
Market Design
Appendixes
	How Other Sectors in Indonesia Have Implemented Regulators
	The Stakeholders
	Timeline of Regulatory Framework for Indonesia Electricity
	Relevant Regulations Regarding Electricity
References

Tables, Figures, and Boxes

Tables
1:	Possible Regulatory Functions Overview
2:	Comparison between Sources of Law
3:	Legal Options for the Establishment of the Regulatory Body
4:	Consideration Matrix in Choosing the Legal Basis
A1:	Comparison of Regulatory Body in Indonesia
A3.1:	Main Provisions of the 2002 Electricity Law
A3.2:	Summarizes Decision 001
A3.3:	Summarizes Decision 149
A3.4:	Summarizes Decision 111
Figures
1:	Current Institutional Structure of the Electricity Sector of Indonesia
2:	Milestone of Regulatory Framework on Electricity in Indonesia
3:	Sale and Purchase Mechanism under 2002 Electricity Law
4:	Sale and Purchase Mechanism under 2009 Electricity Law
5:	Subsidies Paid by the Government of Indonesia to the Electricity Sector
6:	Possible High-Level Governance Framework for the Indonesian Electricity Sector Regulator
Boxes
1:	Principles to Develop Accurate Investment Plans
2:	Lessons from the Formulation of Transmission Network Development Plan
3:	Investment Plan and Procurement Process in Brazil and South Africa
4:	Nigerian Electricity Regulatory Commission Performs Licensing Task
5:	Brazils Experiences in Electricity Procurement through Auctions
6:	Path to Cost-Reflective Tariffs by the Kosovo Energy Regulatory Office
7:	The Transparent Development of Electricity Plan in the State of Georgia

Abbreviations

ADB	Asian Development Bank

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