MEMR to Study the Establishment of an Independent System Operator in the Electricity Sector

The Ministry of Energy and Mineral Resources (“MEMR”) is currently studying the establishment of an Independent System Operator (“ISO”) in the electricity sector, particularly to ensure that such an arrangement would not be classified as a form of business unbundling that contravenes the prevailing laws and regulations.

“We are still examining how an Independent System Operator should be interpreted and classified, including whether it falls within the category of unbundling,” stated Luky, Sub-coordinator for Power Plant Operations Regulation at the MEMR.

According to Luky, the establishment of an ISO presents a particular challenge following the decision of the Constitutional Court (Mahkamah Konstitusi –“MK”) to invalidate the implementation of an unbundling scheme in the electricity sector through a ruling concerning Law No. 30 of 2009 on Electricity (“Law 30/2009”). Therefore, the government needs to develop a strong legal justification to demonstrate that the establishment of an ISO would not constitute a form of business unbundling that diminishes the state's role, but rather an effort to transform electricity sector governance to improve the efficiency and reliability of the electricity system.

Luky further stated that establishing an ISO would require amendments to the Electricity Law. Two institutional arrangements are currently under consideration: incorporating the ISO into the organizational structure of PT PLN (Persero) or establishing an independent entity under the government.