?Introduction

On February 5 2018 the Ministry of Energy and Mineral Resources (MEMR) announced the revocation of 32 regulations in the energy and mineral resources sector. However, a subsequent examination revealed that most if not all of the regulations have yet to be revoked. Although this should happen in the future, there is no timeline in place at present. In the meantime, the MEMR has unofficially stated that the regulations in question will no longer be enforced. Therefore, the regulations remain legally binding until they are legally revoked by another legal instrument of equal or higher status. This could have consequences should a dispute involving the relevant regulations come before the courts.

Power sector

The ministry has announced that 11 regulations will be revoked in the power sector, the following of which are of particular importance to independent power producers (IPPs) in the new and renewable power sub-sector:

  • the MEMR Regulation on the Purchase of Electricity by PT PLN from Hydropower Plants with a Capacity of up to 10 MW (19/2015);
  • the MEMR Regulation on the Purchase of Electricity by PT PLN from Photovoltaic Solar Power Plants (19/2016); and
  • the MEMR Regulation on the Purchase of Electricity by PT PLN from Biomass and Biogas Power Plants (21/2016).

The revocation of the above regulations will simplify the licensing process and eliminate certain obligations placed on IPPs operating in the new and renewable energy sub-sector.

Under MEMR Regulation 19/2015, IPPs will no longer be required to:

  • register with the MEMR to obtain the designation of water manager for power plant purposes;
  • post a performance bond amounting to 5% of the total investment value; or
  • pay a late performance penalty in the form of a reduction in the price payable for the electricity supplied by the IPP in the event that the physical construction of the plant has not commenced within three months from the issuance of the electricity supply business licence.

Under MEMR Regulation 19/2016, IPPs will no longer be required to:

  • register with the MEMR as the developer of a photovoltaic solar power plant; or
  • pay a late performance penalty in the form of a reduction in the price payable for the electricity supplied by the IPP in the event that the commercial operation date is not achieved within 12 months (for plants with a capacity of up to 10 megawatts (MW)) or 24 months (for plants with a capacity of more than 10 MW) from the issuance of the electricity supply business licence.

Under MEMR Regulation 21/2016, IPPs will no longer be required to:

  • register with the MEMR as the developer of a biogas or biomass power plant;
  • achieve financial close within 12 months of signing the power purchase agreement; or
  • pay a late performance penalty in the form of a reduction in the price payable for the electricity supplied by the IPP in the event that the commercial operation date is not achieved within 36 months of signing the power purchase agreement.

Comment

According to the MEMR's press release, the revocation of regulations is being undertaken as part of the government's economic reform programme, which – among other things – aims to enhance transparency. While any reduction in the regulatory burden on investors is to be welcomed, the lack of clarity over which regulations have been revoked and which will be revoked in the future has called the ministry's commitment to transparency into question.

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