Energy Newsletter no.11 – March 2022

HIGHLIGHTS        NEWS         PUBLIC CONSULTATIONS AND FORUMS         WHAT’S COMING UP…

Check out our Energy Newsletter, which gathers information on the main administrative, normative and legal texts related to the regulation of the electricity sector in Brazil, for the month of February.

We remain available to help you with any questions and listen to your ideas and suggestions on how we can improve even more.

Enjoy reading!
Demarest Energy and Natural Resources Team


HIGHLIGHTS

ANEEL publishes Normative Resolution regarding Water Scarcity Account

On March 15, 2022, Brazil’s National Electric Energy Agency (“ANEEL”) published Normative Resolution No. 1,008, establishing criteria and procedures for the management of the Water Scarcity Account and its financial operations, as well as its funding via the Energy Development Account (“CDE”).

 As set out in the Resolution, transfers from the Water Scarcity Account will entirely or partially cover:

  • costs of estimating the balance of the Centralizing Account of Tariff Flag Resources for the period of April 2022;
  • costs associated with the Incentive Program for the Voluntary Reduction of Electricity Consumption;
  • costs of energy imports;
  • deferred costs applied in the tariff process prior to the release of financial resources linked to measures to address the financial impacts on the electricity sector arising from the water scarcity situation;
  • fixed revenue for the period from May to December 2022, regarding the Simplified Competitive Procedure (PCS).

The Resolution also establishes that the transfer of resources from the Water Shortage Account to distributors will occur until February 28, 2023, to cover the above-mentioned items.

The background to this measure regards the financial mismatches that distributors had been bearing, due to the costs arising from the measures to address the water scarcity crisis and concerns about the possibility of defaults by consumers in 2022, as a consequence of the pandemic and economic crisis.

Read in full

Ordinance of the Federal Office of the Attorney General establishes National Team Specialized in Arbitration

On March 18,2022, Normative Ordinance No. 15/PGF/AGU/2022 was published, establishing the “National Team Specialized in Arbitration” of the Office of the Federal Attorney General (“AGU”), linked to the Advisory Office of the AGU.

The team’s objective is to (i) promote knowledge and good practices in out-of-court (extrajudicial) dispute resolution within the AGU’s competence; (ii) provide uniformity, legal certainty and efficiency to the extrajudicial representation of federal public authorities and foundations; and (iii) specialize and systematize the actions of federal prosecutors and defense arguments used by federal authorities and public foundations.

The Ordinance is of paramount importance for the electricity sector. This is because such Rule establishes that it will be the responsibility of the Team to provide extrajudicial representation of these entities in the context of the arbitration procedures carried out in the national territory, referred to in Law No. 9,307/1996, which is also applicable to federal prosecutors serving in regulatory agencies (i.e., ANEEL’s Prosecutor’s Office, for example).

Although Law No. 9,307/1996 also refers to arbitration procedures involving government bodies, this practice was only established at ANEEL in September 2021, when the Agency authorized the execution of an Arbitration Commitment Agreement with concessionaire Transnorte Energia S.A. (TNE) to find a solution for the economic-financial rebalancing of the 500kV transmission line concession for Lechuga – Ecuador – Boa Vista (RR).

Moreover, arbitrations in the energy sector are a common occurrence between agents as well as in disputes involving the Electric Energy Trading Chamber (“CCEE”), in accordance with the conditions set forth in CCEE Arbitral Convention (REH No. 531/2007).

Read in full

Decree establishes the Federal Incentive Strategy for Sustainable Use of Biogas and Biomethane

On March21,2022, Decree No. 11,003 was published, establishing the Federal Incentive Strategy for the Sustainable Use of Biogas and Biomethane. The Decree aims to promote the use of biogas and biomethane as renewable energy sources, in compliance with the global sustainability commitments assumed by the country.

Within the context of the Strategy, the Ministry of the Environment Ordinance No. 71/2022 was also published, which establishes the National Program for the Reduction of Methane Emissions (“Zero Methane”), whose directive is to stimulate the implementation of technologies that allow the use of biogas and biomethane as renewable energy and fuel sources. In addition, an amendment was also proposed in Normative Ordinance No. 19/MME/2021, to include investments in biomethane in the Special Incentive Regime for Infrastructure Development (‘’REIDI’’).

Read in full – Decree

Read in full – Ordinance

NEWS

ANEEL publishes Technical Note on Market Security

ANEEL’s Superintendence of Economic Regulation and Market Studies (“SRM”) published Technical Note No. 31/2022/SRM/ANEEL in early March, as a result of Public Consultation No. 51/2021, which was opened in order to collect contributions to improve the criteria for entry, maintenance and exit of agents in the energy market, and laying out the requirements for the security of the energy trading market.

The resulting Technical Note is based on the occurrence, in 2019, of several judicial and arbitral disputes involving commercial agents who had not registered their contracts in the Free Contracting Environment (ACL).

Thus, as listed by ANEEL, “in this scenario, it is considered pertinent to adopt more careful practices to evaluate new requests for energy trading under the National Interconnected System (SIN), as well as for the maintenance and exit of agents under the CCEE”.

We highlight some measures addressed by ANEEL in the Technical Note:

  • SRM deems it appropriate to classify as “Type 2” (small) traders those who are limited to recording monthly sales of amounts up to 30 average MW in the CCEE system. However, if such agent still wants to negotiate amounts greater than 30 average MW per month, the agent must also prove to the CCEE it has a minimum net worth of BRL 10 million;
  • inclusion of a provision establishing that failure to send information required by the CCEE Monitoring personnel may lead to the revocation of authorization for trading energy; and
  • the term for disconnection of an agent will be reduced by 20 days, thus reducing risks to the market.

The SRM submitted a draft resolution, which will still be analyzed by ANEEL’s Board of Directors.

Read in full

Technical Note No 31/2022

ANEEL publishes Ordinances establishing General Procedures on Management Programs of its Superintendencies

ANEEL published Ordinances authorizing the implementation of the Management Program of its internal bodies, which includes the on-site, working from home and partially working from home modalities, for a period of three months, applicable to: administrative assistants of the Board of Directors, Superintendency of Economic Regulation and Market Studies, Executive Secretariat of Auctions, Superintendency of Tariff Management, Superintendency of Research and Development and Energy Efficiency, Superintendency of Regulation of Distribution Services, and Superintendency of Regulation of Generation Services.

In addition, an Ordinance was published structuring the internal operations of the Superintendency of Human Resources, through several management categories, such as Coordination of Registration, Internship and Training, Health and Performance, Administration, among others.

Read in full Ordinance No. 6.735

Read in full Ordinance No. 6.736

Read in full Ordinance No. 6.737

Read in full Ordinance No. 6.738

Read in full Ordinance No. 6.741

Read in full Ordinance No. 6.742

Read in full Ordinance No. 6.743

Read in full Ordinance No. 6.744

EPE and MME release Booklet on Generation and Transmission Cost Parameters

On March 04, 2022, the MME and EPE published the findings of a study in a booklet covering Generation and Transmission Cost Parameters, within the scope of the 10-year Energy Expansion Plan 2031 (PDE 2031). The booklet details the prognosis of the costs of energy sources seen as possibilities for energy expansion, in addition to addressing the costs involved in the expansion of interconnections between subsystems.

Read in full

ANEEL approves revision of the Regulatory Agenda for 2022/2023

On March 18, 2022, ANEEL approved the first revision of the Regulatory Agenda for 2022/2023. The revision added three priority activities to the other 35 previously planned: the regulation of the Social Renewable Energy Program (PERS), a variation on the international Scaling-up Renewable Energy Program and aimed at low-income residential consumers; the revision of the estimated Operation and Maintenance costs (O&M), associated with photovoltaic technology used in isolated systems; and activities that were not completed in 2021.

Read in full

Regulatory Agenda 2022/2023

EPE and MME release new Booklet on PDE 2031: Energy Demand and Efficiency

On March 15, 2022, the MME and EPE published a report in the form of a booklet on Energy Demand and Efficiency for the 10-year Energy Expansion Plan 2031 (PDE 2031), created to communicate results regarding the findings of a study on energy demand and efficiency of the current energy planning cycle.

Read in full

ANEEL approves revision of the Commercialization Procedure for Agents to join CCEE

On March 15, 2022, REN No. 1,006/2021 was published, which approved version 7.0 of Submodule 1.1 of the Marketing Procedures, which establishes the rules for agents to join CCEE.

The amendments include: (i) increased flexibility regarding technical qualifications for a generator to join the CCEE; (ii) increased flexibility to enable a company’s subsidiary to represent its parent company and/or another subsidiary of the company within the scope of the CCEE; and (iii) inclusion of the minimum requirements for the CCEE’s acceptance of the declaration of performance to prove the consumer’s compliance to the captive market, when it migrated to the free market.

Read in full

ANEEL approves CCEE Rules for Power Trading

On March 15, 2022, Normative Resolution No. 1,007/2022 was published, which approved the Power Trading Rules applicable to the Accounting and Settlement System (SCL) and the Trading Procedures of the CCEE.

Such measure is in alignment with Decree No. 10,139/2019, which deals with the revision and consolidation of normative acts that are lower in hierarchy than a Decree. As decided by ANEEL, “we sought to maintain the organization of the original texts so that current users of the rules can locate the normative devices, and for any changes of form we sought to preserve the nature of the original device, since this process was not aimed at redefining the merits of the regulation”.

Read in full

Rules (Annex II)

 

IDEC publishes nine aspects that cannot be missing from the electricity sector reform

On March 17, 2022, the Brazilian Institute of Consumer Protection (IDEC) published a list of nine topics deemed indispensable in the drafting of Bill No. 414/2021, whose measures will provide for the reform of the electricity sector. The topics are:

  1. Separation of distribution activities from trading of electricity;
  2. Costs of long-term contracts;
  3. Risks of energy contracting;
  4. Encouragement of the provision of services;
  5. Guarantee of expansion of the sector;
  6. Allocation of risks according to the responsibility of each sector’s agent;
  7. Disallowance of the creation or increase of subsidies;
  8. Structural solutions to problems in the electricity sector;
  9. Protection of low-income consumers in the new framework of electricity contracting.

Read in full

Congress postpones consideration of vetoes of the Eletrobras Privatization Law and the Distributed Generation Legal Framework

Bill No. 14,182/2021, which provides for the privatization of Eletrobras, was published with 14 vetoes, including, for example, the provision regarding the possibility that, after privatization, the employees of the company and its subsidiaries acquire remaining shares owned by the government.

Bill No. 14,300/2022, which established the Legal Framework for Distributed Generation, was published with 2 vetoes. The first, regarding the division of power plants installed on the surface of water reservoirs, dams and lakes, both natural and artificial, for classification as distributed generation. The second, regarding the consideration of distributed generation projects for the purposes of qualifying under the REIDI.

The vetoes were scheduled for consideration on March 17, 2022. However, the National Congress postponed the consideration of the vetoes to a date yet to be determined.

Read in full – Processing of vetoes of the Bill No. 14,182/2021

Read in full – Processing of vetoes of the Bill No. 14,300/2022

Provisional Measure dealing with the financial impacts on the electricity sector due to the water scarcity crisis is extended by Congress

On March 18,2022, Act No. 10 of the President of the Board of the National Congress was published, which extended for another 60 days (that is, until May 22,2022), Provisional Measure No. 1,078/2021, regarding the measures to address the financial impacts on the electricity sector due to water scarcity. Consequently, Congress will have additional time to analyze the measure.

Read in full

ANEEL coordinates the establishment of the ABAR Technical Energy Chamber

On March 21, 2022, ANEEL announced the establishment of the Technical Energy Chamber (CT-Energia), whose function will be to regulate the relationship between the government, companies and society. It will aim to ensure the development and balance between all energy sectors, so that there is greater security and protection for all, in addition to functioning as a service channel for social demands with energy companies.

Read in full

MME establishes the Digital Governance Committee

On March 23,2022, Ordinance No. 630/GM/MME/2022 was published, which establishes the Digital Governance Committee. The Committee will take the form of a decision-making body and aims to discuss policies, guidelines and plans related to the digital government strategy and the governance of Information and Communication Technology.

Read in full

Federal Senate institutes the Mixed Parliamentary Front for Electromobility

On March 24,2022, Federal Senate Resolution No. 2 of 2022 was published, establishing the Parliamentary Front for Electromobility (FPEletromobilidade), which aims to promote discussions in order to encourage public policy initiatives and other measures to stimulate electromobility in Brazil.

The Resolution highlights the importance of electromobility and the development of technologies for its improvement.

Read in full

MME publishes changes in the rule on transfers to the Fuel Consumption Account

On March 22,2022, Normative Ordinance No. 38/GM/MME/2022 was published, amending Ordinance No. 15/GM/MME/2021, which deals with transfers to the Fuel Consumption Account.

The Ordinance also begins to address criteria for transfers of the financial effects of involuntary overcontracting of electricity distributors, covered by art. 4C of Bill No. 12.111/2009.

Read in full

Rio Grande do Sul and Enerfín sign memorandum for the implementation of a green hydrogen project

Following a commitment to lower the state’s carbon emission levels by 50% by the year 2030, the state of Rio Grande do Sul has sponsored studies to make decarbonization possible through the use of green hydrogen.

Accordingly, on March 24,2022, the state signed a memorandum of understanding with the company Enerfín do Brasil for the development of a green hydrogen project. This is the second memorandum of understanding signed, the first having been signed with the company White Martins.

Read in full

Senate Bill aims to include H2 as a national energy source

On March 28,2022, Senator Jean Paul Prates presented to the Federal Senate Bill No. 725/2022, which provides for the inclusion of hydrogen as an energy source in Brazil and establishes parameters to encourage the use of sustainable hydrogen.

The Bill proposes amendments to Bill No. 9,478/1997 (Petroleum Law), in order to provide, for example, for the inclusion of the concept of sustainable hydrogen, of the kind produced from solar, wind, biomass, biogas, and hydraulic sources.

Read in full

ABREN publishes study on energy recovery

On March 28,2022, the Brazilian Association for Energy Waste Recovery (ABREN) published on its website a survey on energy recovery presented during the GD Sudeste Forum, where it stated that urban waste in the Metropolitan Region of São Paulo has the potential to generate about 3.7 million MWh/year.

The study of the São Paulo region estimates that investments around BRL 16.6 billion are needed to reach the indicated potential. According to the survey, the region has the capacity to implement 23 energy recovery plants (URE) with 20MW of installed power each, whose potential would exceed BRL 20 billion in 40 years.

Read in full

ONS publishes Technical Note on Quantitative Remaining Capacity of the SIN

On March 28,2022, the National Electric System Operator (‘’ONS’’) published Technical Note NT-ONS DPL 0035/2022, which addresses the Remaining Capacity Quantities of the National Interconnected System for the flow of Generation through the Basic Network, Other Transmission Installations (DIT) and Transmission Installation of Exclusive Interest of Generation Centers for Shared Connection (ICG), prepared by the ONS and with information contributed by the EPE, containing quantitative information for the remaining capacity flow of select substation buses, subareas and areas of the National Interconnected System (‘’SIN’’).

This Technical Note will support the classification of bids in Auction No. A-4/2022, scheduled to take place in May, where Contracts for the Trading of Electricity in the Regulated Environment will be negotiated in the following modalities:

  • availability of electricity from thermoelectric biomass sources; and
  • quantity of electricity for projects of generation of hydroelectric, wind and solar photovoltaic sources.

Read in full

ANEEL consolidates rules on energy contracting

On March 30,2022, ANEEL published REN No. 1009/2022, which establishes the rules for the contracting of energy by agents in the regulated and free contracting environments. This measure is in alignment with Decree No. 10,139/2019, which deals with the review and consolidation of regulatory acts lower in legal hierarchy than a Decree and will consolidate 26 norms that deal with the subject.

Read in full

PUBLIC CONSULTATIONS AND HEARINGS

SUBMISSION OF CONTRIBUTIONS (ANEEL)

SUBJECT MATTER

CONTRIBUTION TERM

No 002/2022

Submodule Review 2.3. of PRORET, on the Regulatory Remuneration Basis of electric energy distributors.

Until June 17, 2022

No 004/2022

Review of Sub-modules 4.5 and 6.5 of the Grid Procedures due to the revision of Normative Resolution No. 614/2014 (REN 614/2014), according to Normative Resolution No. 947/2021, which consolidates the rules regarding the determination of unavailability of the generating unit or energy import project connected to the National Interconnected System (SIN) and establishes new criteria for calculation and verification of contractual physical energy hedge.

Until April 01, 2022

No. 005/2022

Relevance of ANEEL databases for citizens, with a view to preparing the Open Data Plan (PDA) 2022-2024.

Until April 07, 2022

 

PUBLIC CONSULTATIONS (ANEEL)

SUBJECT MATTER

SESSION

No 073/2021

Regulatory Impact Assessment (AIR) and the proposal for regulatory improvements related to infrastructure sharing between the electricity distribution and telecommunications sectors

Until April 18, 2022

No 006/2022

Improvement of the consolidation draft that deals with the process of defining the relation to the subject matter (thematic relevance) of “Procedure and grant requirements – wind, photovoltaic and thermoelectric sources”.

Until April 4, 2022

No 007/2022

Obtaining information to improve the draft that deals with the topic “ Infrastructure Sharing”.

Until May 5, 2022

 

PUBLIC CONSULTATIONS (MME)

SUBJECT MATTER

CONTRIBUTION TERM

No 123/2022

Proposal for the laying out of a reference for the assumptions, methodology and criteria detailed in the Report that defines the scope of the ordinary revision of physical energy guarantee to be carried out in 2022 and to become effective from January 1, 2023, prepared by the representatives of the Energy Research Company and the MME.

Until April 4, 2022

WHAT’S COMING UP…

 

 

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This material is for informational purposes only, and should not be used for decision-making purposes. Specific legal advice may be provided by one of our lawyers.