In 2006, the industrial sector became the largest electricity consumer in Indonesia, followed by the household sector. The industrial sector consumes around 43% of total electricity followed by the household sector with 35%. By using Longrange's Alternative Energy Planning System Model (LEAP) for electricity projections from 2006 to 2025 for the island of Java-Madura-Bali (Jamali), it was found that the household sector would be the largest consumer by 2025, consuming around 42%. This study applies demand side management options (DSM) to reduce electricity demand in the household sector by implementing improved lighting efficiency, namely: 1) replacing 40W incandescent lamps with 8W compact fluorescent lamps (CFL), (2) replacing 60W incandescent lamps with 12W CFL and (3) replacing 100W incandescent lamps with 20W CFLs. With lighting increasing efficiency, electricity demand will be reduced by 5.2% by 2025. For electricity generation capacity, it will reduce power generation capacity by 3.2 GW or 5% of the total generation capacity of the Business as Usual (BAU) scenario in Indonesia 2025 and also reduce emissions by around 15.4 million tons of CO2 equivalent, which is a 5.8% reduction compared to the BAU Scenario. DSM costs are analyzed to achieve the electricity demand reduction target. In addition, the externality costs avoided by the DSM application were also calculated to find reasonable incentives for that.