1. General Energy Policy General Energy Policies in Indonesia –Intensification of current available energy resources –Diversification of available local energy resources –Rational use of energy or efficient energy use –Energy Pricing should reflect competitive price –Utilisation of environment friendly energy resources

2. Support to Energy Intensification The government supports investment in oil and gas sector Several incentives have been given to boost investment in exploration and exploitation of available or new reserves Oil production has been declining recently

3. Support to Renewable Energy The government supports RE development by enacting the following regulations: Geothermal Law No.27 of 2003 Green Energy Ministerial Decree No.002 of 2004 supports development of RE Small Distributed Renewable Power Plant Ministerial Decree No.1122 of 2002 gives incentive for RE development Pre-Electrification Ministerial Decree No.064 of 1998 is in favour of RE technologies

4. Support to Rational Use of Energy The government applies DSM and other energy conservation strategies Presidential Instruction No.8 of 1982 Energy Conservation Presidential Decree No.43 of 1991 Efficient Use of Energy and National Energy Efficiency Programme Green Energy Ministerial Decree No.002 of 2004 DSM programmes: –Terang Programme (domestic sector) –Peduli Programme (domestic sector) –Street Lighting Programme and –Partnership Programme (for industries)

5. Competitive Energy Pricing The government increased the energy price for both primary and secondary forms of energy The recent increase in fossil fuel price in February 2005 (+- 40% increase) Electricity tariff is gradually increased to reach economic price of US$ 7 cents/kWh

6. Evolution of Electricity Law Old Electricity Structure was regulated by Electricity Law No.15 of 1985 that supports the monopolistic practice of PLN Independent Power Producers were involved in the mid 90s Asian monetary crisis worsened the condition and electricity sector needs more private involvement

7. Evolution Part-2 August White Paper emphasised the need of competitive structure in electricity sector The House of Representatives passed new Electricity Law No.20 of 2002 that has the spirit of competitive market and decentralisation Constitutional Court annulled the law in December 2004 Government passed Government Regulation No.3 of 2005 as basis for the future electricity law

8. Support to Private Involvement There is no specific regulation regarding private involvement/investment in power sector Power sector investment is considered as normal industrial investment There is no specific incentives for power sector investment Incentives are given to small business entities based on Decree 1122 of 2002 to interconnect its RE power plant to PLN’s grid