18 Oct 2018

THE URGENCY OF POWER PURCHASE AGREEMENT

Electricity is an inevitably important resource supporting various activities in almost all sectors of human life. Based on the data Ministry of Energy and Mineral Resources, the use of electricity in Indonesia in 2017 was 1,012 Killowatts Per Hours (KwH)/Capita. This shows that the use of electricity is very much a necessity for the community and this is a great business opportunity and investment in the field of electricity.

The objective of the stipulation of Law No. 30 of 2009 concerning Electricity in conjunction with Government Regulation No. 14 of 2012 concerning Business Activities of Electricity Providers is for the sake of fulfilling the Public Interest. In this field, there are 3 important roles, namely: Electricity Supply Business Entity, Consumers, Policy Holders. The said business entity can be from the State, Regional Government, Cooperatives or Private Parties with the priority given to State-Owned Company. What is meant by priority here is that business entities other than the State-Owned Company may conduct electricity supply business activities when the State-Owned Company is unable to meet the needs of electricity for the public interest.

Even though a state-owned company is prioritized, it still becomes a lucrative business opportunity, where the private sector can be given the opportunity by the government to participate in conducting business activities of Electric Power Supply. Electricity Supply Business is a unique business, where the goods offered do not have a form (intangible) and the same as other businesses that have the risk of loss both from the business entity and the consumer, it is crucial that electricity supply business entity have a so-called Electricity Purchase Agreement (Power Purchase Agreement).

Power purchase agreement is very important for the business entities as well as for the consumers in order to avoid this business activity from possible disputes considering that electricity is an intangible item. This agreement is also important to protect the rights and to maintain liabilities in the event of a mistake whether it occurs intentionally or by force majeure , so that the provision of electricity for the public use runs normally and smoothly. Making a Power Purchase Agreement is not like making a sale and purchase agreement on other kind of goods, instead a Power Purchase Agreement is more complicated because the business sector is closesly related to the public interest so the provisions in the agreement are very complex in which further learning is needed to obtain the required knowledge to make a power Purchase Agreement.

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