The Indonesian government has passed a series of laws, namely respectively, Law Number 15 of 1985, Law Number 20 of 2002 and Law Number 30 of 2009 regarding Electricity. Law Number 20 of 2002, however, was annulled by the Constitutional Court (CC) on 21 December 2004 through Decision Number 001-021-022/PUU-I/2003 dated 21 December 2004 because the unbundling system arrangement in the Electricity Law Number 20 of 2002 regarding Electricity was in contradiction to Article 33 of the 1945 Constitution paragraphs (1), (2), (3) and (4) along with its elucidation stating that the state has the right to control land, water and any resources therein, including electricity, in order to meet the needs of the greater people.
On 14 December 2016, the Constitutional Court passed another Decision Number 111/ PUU-XIII/2015 dated 16 June 2016 which partially granted the petition of Workers’ Union (SP) of PT PLN (Persero) together with the Indonesian Association of Employees (PPI) in electricity, in relation to material review on the provisions of Article 10 paragraph (2) as well as Article 11 paragraph (1) of Law Number 30 of 2009 regarding Electricity which was filed by the Workers’ CONSTITUTIONAL COURT DECISION ON ELECTRICITY LAW: Union of State Electricity Company (PT PLN). The SP of PT PLN considered that the provisions in the Electricity Law have caused the need of the greater people to be controlled by national private companies, multinational companies and private individuals, and have deprived the state of any power over electricity control.
Considering the arguments of the petitioners, the Constitutional Court deemed that Article 10 paragraph (2) of the Electricity Law opens up a possibility that the electricity provision business be conducted separately (by way of unbundling). Article 10 paragraph (2) contains an explanation that PLN can have an integrated business ranging from electricity generation, transmission, distribution up to electricity sale. Moreover, other than PLN, other parties such as private companies, local state companies (BUMD) and cooperatives are allowed to do an integrated business ranging from electricity generation up to electricity sale, insofar as based on the principle of electricity being “controlled by the state”.
Meanwhile, Article 11 paragraph (1) was deemed by the Constitutional Court as being able to open up a potential loss of principle of state control in terms o providing electricity for the people. Based on the foregoing considerations, the Constitutional Court did not annul the two articles in full, and only limited their interpretation insofar as the principle of “controlled by the state” is not violated. This implies that the business areas which are allowed to be explored by private investors will be determined through the government, electricity permits will be given by the government, and the electricity rate charged on the people will also be controlled by the government.
Hence, the government remains in control of the business areas, licensing and rates. Basically, during the past 7 years since the Electricity Law’s enactment, the government actually has never fully given private investors the control to run the electricity business. Thus, the Constitutional Court’s decision actually affirmed the interpretation of Article 10 paragraph (2) and Article 11 paragraph (1) of the Electricity Law which should have been read together and not be separately interpreted.