1. Dissemination and Training workshop, Jakarta March 22-23, 2005
Supported by the European Commission through the EC – ASEAN Energy Facility
Regulatory framework for hydropower development in Indonesia, Philippines & Vietnam
IFRERA
Dissemination and Training workshop, Jakarta
March 22-23, 2005

2. Task’s specific objectives
A part of the IFRERA project financed by EU under EAEF
Review and analyse the frameworks:
Legal
Regulatory
Fiscal
Formulate recommendations, innovative schemes to sustain the implementation of hydropower projects by the private sector
Ultimately contribute towards poverty alleviation and wider utilisation of RE

3. VIETNAM INDONESIA PHILIPPINES Presentation plan
Institutional framework in power sector
Power sector regulations
Natural resources and Envi. Regulations
Investment regulations
Conclusions
VIETNAM
INDONESIA
PHILIPPINES

4. Vietnam – Institutional stakeholders
Ministry of Industry : overall energy planning and policy
EVN : state-owned monopole power utility
MPI : licences for all business in power sector
MOSTE (MONRE) : RE R&D, EIA and appraising investment
MARD : water resources management & rural dev.
Provincial People Committee (PPC) and its departments at local level

5. Vietnam – Power sector regulations
Degree No.80 up to 2001 and No.45
Private only in Generation, with exception for isolated networks
Electricity tariff is set by the Government (MoI), except isolated network
For rural electrification, there is a clear distinction
grid extension : EVN is responsible, but LV will be funded from local sources
isolated network for rural electrification : Government supports and provides incentives and specifies tariff ceiling

6. Vietnam – Power sector regulations (2)
Electricity law adopted in mid 2005 to
Attract investors
Ensure the equality, fairness and antimonopoly
Protect legal rights & benefits of consumers
Main provisions of this Law :
Various forms of investment & ownership
Licence is required but can be granted for org., indiv. in all power sector activities
No monopoly (<25% the total load capacity of the country)
Tariff must include full costs, get return and benefits
Clear defined role for MoI and separate regulatory from MoI
The government set targets of RE for each period and incentive policies.

7. ERAV
The Electricity Regulatory Authority of Vietnam (ERAV) was established in October 2005.
Establishing the Master Plan for Power Sector development; advising the Minister of Industry on power market structure and industry restructuring policy,
Designing the power market & regulate the competition among the power market participants
issuing and enforcing licenses to power sector entities;
Tariff setting;
Elaborating PPA of the single buyer;
Ensuring the procurement of adequate new generation and transmission capacity ;
Monitoring functions

8. Roadmap for Power Market development in VN
2005
2009
2015
2016
2022
2024
Generation competitive market
Wholesale competitive
market
Retail market
Preparing for
Single Buyer
wholesale market
Preparing for retail
Internal generation
Generation
competitive
market _ Single
Buyer
Wholesale
Wholesale market and
Pilot retail market
Retail competitive
Single Buyer and
Pilot wholesale

9. Vietnam – Natural resources & envi regulations
Law on envi. protection 1993, on water resource 1998 and other decrees : protect the envi and compensate for damage to land & property
All hydropower projects are required to submit an EIA
Category 1 : MONRE and DONRE and/or PPC. A special council formed to advice the Minister.
Category 2 (off-grid) : DONRE after the advice from PPC
Natural resource tax (2%) applies to the use of water for generation of electricity, except the electricity not transmitted into the national grid (tax exception).

10. Vietnam – Investment regulations
General procedure :
Pre-investment study
Investment approval F/S
Acquire an investment licence
Acquire the approval to construct
Level of state intervention, length and complexity depend on :
Ownership of funding
Scale of project costs

11. Vietnam – Conclusions
Complexity of the process, but the growth in private investment in SHP is considerable
Existing legal framework was designed to accommodate large power projects but not small-scale projects like renewable energy schemes
Unlike before, private participation is now welcomed in energy sector
PPA with a single buyer (EVN) is the biggest issue (at least up to 2009).
A new ground foundation for RE is laying out, although the mechanism on how to implement and move forward are yet to be defined.

12. Indonesia – Institutional stakeholders
MEMR (DGEEU) : overall energy planning and policy, issuing permits, standards, regulation in non-competition areas
BAROKEN (National energy coordination body) : general energy policy setting and coordination
Ministry of Cooperative MOC : supporting PT.PLN to implement R.Elect.
MF : provide incentive package for investors
MTI : Permit for electrical products
BAPPENAS (national dev. planning body): involve in energy planning, monitor planned prog.
Provincial / District : regulations in non-competition areas that is off-grid, invest. & EIA approval
BAPPETAL (Market supervisory Board) : regulations in competition areas (under the law 20/2002)
PT.PLN (Persero) : National power utility. Only Authorized Electricity Business Institution

13. Relationship between key players in power industry

14. Indonesia – Power sector regulations
Old electricity law 15/1985 was replaced by the New electricity Law 20/2002  make power sector more competitive
The new elect. Law was annulled on 15 Dec  The government (PLN) should manage the power sector, not private (article 33 of the constitution 1945).
As the consequence, power sector is governed by the old electricity law, and the government regulation 3/2005 and other MD

15. Indonesia – Power sector regulations 2
Some particular points of power sector regulations
No competition is mentioned
Government is obliged to provide infrastructure for underprivileged community
Private involvement is possible and local government has the right to give permits to businesses license, not generation license
The government set the tariff. Local authority has right to set tariff for private electricity (under the law 20/2002). Tariff should reflect the economy of power generation & economic condition of the people
There is only one Electricity Authority and it is the representative of the government (PT.PLN)

16. Indonesia – Investment regulation
Regulated by decision No. 57/SK/2004 – Investment Coordination Board (BKPM)
The size of investment is determining the procedure with steps:
Set up company
Apply for tax registration code number
Apply for PPA
Apply for license to generate power for public service
Registering the investment to the Invest. Board
EIA
Construction phase
Operation phase
Base on these steps, the following institutions should be contacted : Lawyer office, tax office, EIA consultant and board, PLN office, DGEEU and/or Region head office, BKPM.

17. Indonesia – Envi. & water regulation
EIA is needed in two steps : PPA application and project implementation.
For small (<100MW), Impacts mitigation actions & Mitigation monitoring actions are required.
Scale of the project will determine the scale of surveys
For mini hydropower, EIA will be done by provincial level EIA board
The applicant of PPA must attach a license to use water, issued by local government, with water tax to pay (minimum 5 IDR/kWh electricity produced) depends on the local regulation.

18. Indonesia – Conclusions
Actually the guidelines are scattered in many regulations
Buying guarantee is for 1 year by PLN with possible to extended to at least 5 y. For medium size buying guarantee is 10 years ( from 1 MW up 10 MW)
Long term contract is possible for firm capacity generation plant.
Main actors : PLN and MEMR (DGEEU)

19. Philippines – institutional stakeholders
Rural Electrification
OTHER GOV’T. AGENCIES
Financing and project implementation, permission, LGU…
NEA
Project identification and monitoring
SPUG
Project implementation and Petition of Universal Charge for Missionary Electrification
PRIVATE SECTOR
Financing and Project Implementation and Operation
DUs
Project Implementation and Operation
ERC : Rate Design, Licensing and Determination of Univ.Charge-Missionary Electrification
DOE
Policy Direction-goal Setting and Program management and Coordination

20. Philippines – Power sector regulations
EPIRA (Electric Power Industry Reform Act, known as Republic Act 9136 was signed into law June
The Implementation rules & regulations (IRR) on Feb
DOE’s Circulars
ERC’s Issuances
Encourage competition in generation & supply
Trans & Dist remain regulated business
Distribution Utilities (DU) are classified into PIOUs (private Investor-Owned Utilities), EC (Elect. Cooperatives), LGUOUs ( Local Government Unit-Owned Utilities).
Protect public interest
Establish a strong independent regulatory body (ERC)

21. Philippines – Water & ECC regulations
Environmental Compliance Certificate (ECC) is issued by DENR – EMB (Envi. Management Bureau)
For mini hydro (<6 MW), only Initial Environmental Examination is required
Project description
Baseline environment conditions
Impact & risk assessment
Environmental management plan
For hydropower >6 MW & 20 m m^3 of water impoundment, an Envi. Impact Statement (EIS) is required, much more complex
Water right permit requires certain basic documentary, not too complex.

22. Philippines – Investment regulations
Each year investment priorities plan is issued which gives fiscal incentives, non-fiscal incentives.
For SHP:
Special tax rate 2% of revenue
Tax holiday 7 ys
Tax & duty free for machinery import
Tax credit on domestic capital equipment
VAT exemption (10% VAT from sale to nat. network)

23. Philippines – Conclusions
EPIRA provided the framework for Renewable Energy and participation of the private sector.
Innovative mechanism for RE (hydropower) :
can enter to Qualified Third Party to provide elec. service to remote area out of DU
Manage & operate EC through Investment man. Contracts
Collaborate with 14 ECs in the first wave of NPC-SPUG areas
Government’s thrust to attain “energy independence” utilizing indigenous resources (hydro, geothermal, wind…) : RE bill