Energy Newsletter No. 12 – April 2022

HIGHLIGHTS     NEWS     PUBLIC CONSULTATIONS AND HEARINGS     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.

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 opens Public Consultation on exemption from the Access Information requirement for issuing authorization grants

On March 30, 2022, the Brazilian National Electricity Agency (“ANEEL”) opened Public Consultation No. 008/2022, regarding the proposed regulation of Art. 1 of Decree No. 10,893/2021, which addresses the exemption from the Access Information requirement for issuing authorization grants.

Decree 10,893/2021 waived the requirement of submitting the Access Information exclusively for authorization grant requests filed with ANEEL by March 2, 2022. Such requests will be eligible for the discount on the Tariff for the Usage of the Distribution/Transition Systems (TUSD/TUST). Given that the matter is pending further regulation by ANEEL, grant request processes that fall under the terms of the Decree are on hold.

It is ANEEL’s understanding that the exemption of the requirement for Access Information is justified for two reasons: “the first refers to the increase in time that ANEEL has taken to analyze grant requests, given the significant volume of requests aimed at qualifying for the tariff discount” and the “second is to ensure equal treatment among energy sources, given that the three-year restriction established by Normative Resolution No. 876, of 2020, to wind farms, limits the classification of these ventures in the requirements established by Law No. 14,120, of 2021”.

Read in full – Technical Note No. 224/2022

 

Federal Government brings forward the end of the water scarcity flag

On April 6, 2022, the Ministry of Mines and Energy (“MME”) announced the bringing forward of the expiration of the water scarcity flag to April 15, 2022. Due to an increase in precipitation and, consequently, the increase in hydroelectric production and generation of energy through other sources (solar and wind), it was possible to reduce the usage of thermoelectric plants. It is estimated that the green flag tariff will be maintained until the end of the year.

Read in full

 

ANEEL opens Public Consultations on improving the monitoring of the Electricity Market and financial safeguards for the liquidation of the MCP

On April 7, 2022, Public Consultations No. 10/2022 and 11/2022 were opened, which aim, respectively, to obtain contributions for the improvement of (i) the financial safeguard processes in the electricity market and (ii) the electricity market monitoring process.

The Electric Energy Trading Chamber (“CCEE”) proposed “a structure of financial safeguards to mitigate losses arising from defaults in the Short Term Market (“MCP”), through mechanisms triggered sequentially, in a cascade framework, which progresses through six tiers, as follows: (i) Tier 1 – individual pre-established financial guarantee; (ii) Tier 2 – shares of the Settlement Fund from the defaulting agent; (iii) Tier 3 – termination of contracts of defaulting agents counterparties; (iv) Tier 4 – CCEE share of the Settlement Fund; (v) Tier 5 – shares of other Settlement Fund agents; and (vi) Tier 6 – Loss Sharing”.

In addition to the safeguards framework, ANEEL emphasizes the need for:

  • mechanisms that induce the bringing forward of the registration of contracts within the scope of the CCEE;
  • mechanisms for mitigating bilateral and systemic risks as a consequence ofthe non-execution of contracts in the CCEE due to the absence of financial guarantees provided by the parties involved;
  • improvement of the monitoring proposal in order to provide for different obligations/deadlines depending on the size of the agent, as a way of adequately complying with the principle of isonomy (to not make distinctions between agents whose circumstances are the same);
  • gradation and publicizing of sanctions, in addition to classification of anomalous conduct; and
  • single period of 12 months for agents to adapt to the entire regulation.

Interested parties can submit contributions on the Public Consultations until May 23, 2022.

Read in full – CP 10/2022  |  Read in full – CP 11/2022

 

Decree regulates conditions for contracting electricity from natural gas thermoelectric plants and hydroelectric plants up to 50 MW

On April 13, 2022, Decree No. 11,042/2022 was published, which establishes the conditions for contracting electricity from thermoelectric projects using natural gas and from hydroelectric projects up to 50 MW, regulating art. 20 and 21 of Law No. 14,182/2021 (Eletrobras Privatization Law).

As provided for in the regulation, the contracting of electricity from thermoelectric projects using natural gas – reserve capacity auction modality – will be carried out in the form of reserve energy, through auctions held by ANEEL.

The contracting of electricity from hydroelectric projects of up to 50 MW will take place in the A-5 and A-6 new energy auction modalities.

Read in full

NEWS

ANEEL consolidates rules on the trading of electricity in the National Interconnected Systemional

On April 1, 2022, Normative Resolution No. 1011/2022 was published, consolidating the normative acts concerning the subject matter relevance pertaining to “authorization for energy traders” of the 2021-2022 Regulatory Agenda.

The Resolution establishes the requirements and procedures concerning the obtainment and maintenance of authorization to trade electricity in the National Interconnected System (“SIN”) and sets out the procedures for (i) authorization request; (ii) maintenance of authorization; (iii) rules on retail marketing; (iv) contract model for retail sales.

The consolidation was carried out with the goal of ensuring clarity, precision and order regarding the topic and is in alignment with Decree No. 10,139/2019, which addresses the review and consolidation of normative acts lower in hierarchy than a decree.

Read in full

 

ANEEL publishes Resolution that approves the Submodules of the CCEE Trading Procedures

On April 1, 2022, Normative Resolution No. 1,012/2022 was published, which consolidates the normative acts related to the subject matter relevance pertaining to “Trading Procedures”, stated in item 70 of the 2021-2022 Regulatory Agenda, without changes to the merits of the Procedures.

Read in full

 

Government regulates the trade of energy generated by Itaipu Binacional

On April 1, 2022, Decree No. 11,027/2022 was published, which regulates the trade of electricity generated by the Itaipu hydroelectric power plant.

The Regulation determines that Empresa Brasileira de Participações em Energia Nuclear e Binacional (ENBpar) – Itaipu’s Trading Agent – is responsible for the trading of energy consumed in Brazil and that the commitment to purchase electricity services will define the contracted power and the amounts of energy associated with it.

It is worth highlighting that Annex C of the Treaty of Itaipu, signed between the governments of Brazil and Paraguay and enacted through Decree No. 72,707/1973, will be revised on August 13, 2023.

Read in full – Decree No 11.027/2022  |   Read in full – Decree No 72.707/1973

 

Government regulates secondary public offering of shares in the Eletrobras privatization process

On April 1, 2022, Decree No. 11,028/2022 was published, which provides for the secondary public offering of shares for the privatization of Eletrobras. The public offering will be carried out with shares owned by the Brazilian National Bank for Economic and Social Development (BNDES) or its subsidiaries.

Read in full

 

Cemig opens public notice for the acquisition of wind and solar assets

On April 4, 2022, Cemig Geração e Transmissão published CEMIG GT Public Call Notice No. 01/2022, for the acquisition and implementation of wind and solar projects and ventures with purchase of assured energy, which are in line with its Business Planning.

Companies can state their interest to CEMIG GT, provided that they hold rights to projects and ventures of wind and solar projects that, since 2017, have been duly qualified for registration and that are authorized within the Energy Research Program (“EPE”) to participate in energy auctions.

One important condition stated in the Notice is that the projects must have obtained a grant from ANEEL, concerning their claim of the TUSD/TUST discount. Alternatively, the grant request must have been filed by February 28, 2022, in which case, the documents involving the business will be submitted with a condition precedent clause addressing not having obtained the grant, including the 50% TUST/TUSD discount.

Other requirements and conditions are established in GT Public Call Notice No. 01/2022. Requests for clarification must be submitted by May 31, 2022, and the statement of interested parties, together with the submission of documents, must be filed by June 14, 2022.

The bidders will undergo a Due Diligence procedure and the announcement of the winners’ results will take place on September 09, 2022.

Read in full

 

MME creates Permanent Commission for Analysis of Methodologies and Computational Programs in the Electricity Sector

On April 5, 2022, Ordinance No. 637/GM/MME/2022 was published, which established the Permanent Commission for the Analysis of Methodologies and Computational Programs in the Electricity Sector (CPAMP), which aims to ensure the coherence and integration of methodologies and computer programs used by the MME, the EPE, the Brazilian National Electric System Operator (ONS) and the CCEE.

The Commission is responsible for proposing improvements to (i) the representation of the physical framework, by associating itself with the methodological development of computer programs; and to (ii) the methodologies and parameters regarding the creation of an operation policy for computer programs that support the planning of expansion in the electricity sector.

Read in full

 

MME approves 2031 Ten-Year Energy Expansion Plan

On April 7, 2022, Normative Ordinance No. 40/GM/MME was published, which approved the 2031 Ten-Year Energy Expansion Plan (PDE 2031).

The Plan aims to establish the prospects for expansion of the energy sector until the year 2031, providing the market with information for analysis of the electricity system’s development and the conditions of suitability of supply in several possible future scenarios.

Read in full – Normative Ordinance No 40/GM/MME  |  Read in full – PDE 2031

 

ANEEL approves Trading Rules on the Determination of GSF Impacts

On April 8, 2022, Normative Resolution No. 1,013/2022 was published, which approved the specific module of the electricity Trading Rules, within the scope of CCEE, version 1.2, entitled “GSF Impact Assessment”. The module aims to determine the extent of the financial impacts caused by the Generation Scaling Factor (“GSF”) of the Power Reallocation Mechanism (“MRE”) agents. Such impacts will be taken into consideration for the extension of the concession of the impacted hydroelectric plants. The module will also determine the extension of the authorization grant, resulting from anticipated future effects that will be caused by restrictions on the transition flow, when such effects, to be assessed by ANEEL, have ended.

Read in full

 

CCEE approves procedures for the approval and accreditation of Arbitration Chambers

A meeting of the CCEE Board of Directors, held on April 12, 2022, concluded with the decision to approve the Arbitration Procedure – Module 1 – Homologation and Accreditation of Arbitration Chambers, in compliance with the Arbitration Convention previously approved at the 68th Extraordinary General Meeting (AGE) of the CCEE on October 19, 2021.

The Arbitration Procedure and its module 1 will come into force following ratification of the Arbitration Convention by ANEEL. As a result, CCEE will have at its disposal more than only one Arbitration Chamber to resolve conflicts involving waivable rights.

According to art. 44 of ANEEL Normative Resolution No. 957/2021, which approves the CCEE Power Trading Agreement, the following types of disputes are subject to arbitration: (i) between two or more CCEE Agents, provided that the dispute does not involve matters under the direct competence of ANEEL or, in the event that it does, , all administrative instances concerning the subject matter of the dispute have been exhausted; (ii) between one or more Agents of the CCEE, provided that it does not involve matters under the direct competence of ANEEL or, in the event that it does, all administrative instances concerning the subject matter of the dispute in question have already been exhausted; and (iii) between CCEE Agents, if due to Bilateral Contracts, provided that the event that triggered the divergence is rooted in the respective contracts or in CCEE’s Trading Rules or Procedures, and affects the obligations of the contracting agents within the scope of the CCEE.

Read in full

 

MME establishes guidelines for Electric Energy Purchase Auctions resulting from new generation projects

On April 18, 2022, Normative Ordinance No. 41/GM/MME was published, which established the guidelines for carrying out the “A-5” and “A-6” Auctions for the Purchase of Electric Energy resulting from new energy generation projects.

Businesses that wish to include projects in the “A-5” and “A-6” New Energy Auctions in 2022, must complete the registration of their projects and submit them to the EPEfor technical qualification  by May 11, 2022. Distribution agents must, in turn, submit the Declarations of Need to Purchase Electric Energy for New Energy Auctions between July 20 and 29, 2022.

Read in full

 

MME reopens Public Consultation on the Review of Physical Guarantee of Centrally Dispatched Power Plants in the SIN

On April 18, 2022, Ordinance No. 641/GM/MME was published, which reopened Public Consultation MME No. 123/2022 in order to receive contributions to the Report “Ordinary Review of Hydroelectric Power Plants’ Physical Energy Guarantee – Centrally Dispatched UHEs in the National Interconnected System – SIN”. The report introduces  assumptions, methodologies, and criteria concerning the ordinary review of the physical energy guarantee to be initiated in January 2023. Agents will have until May 02, 2022 to submit contributions.

Read in full

 

ANEEL publishes rule on the provision of financial guarantees in the MVE

ANEEL Normative Resolution No. 1015/2022 was published on April 19, 2022, which established the obligation to provide financial guarantees within the Surplus Sale Mechanism (“MVE”). The regulation is a result of Public Consultation No. 46/2021 and the discussion on the topic was initiated by several agents in Public Consultation No. 42/2020, which addressed the review of the Trading Rules and led ANEEL to include the topic in the Regulatory Agenda for the biennium of 2021-2022.

Below are a few highlights of the Resolution:

  • The participation of purchasing agents in the MVE will be conditioned to the presentation of Financial Guarantees of Participation and Contracts’ Performance Bond, and the CCEE must directly carry out or, alternatively, outsource to a financial institution, the services of deposit, evaluation, custody and execution of the guarantees;
  • The registration of the contract resulting from the MVE will be conditioned to the full presentation of the Contracts’ Performance Bond. If such guarantee is not presented in full, such fact will be considered non-compliant with the obligation, and consequently lead to the initiation of the process of dismissal of the agent from the CCEE, in addition to the application of a fine;
  • In the case of contractual rescission or partial contribution of the performance bond, the buyer must pay the distributor a fine equal to the remaining volume of contracted energy between the month of rescission and the end of the contract, limited to 12 months, and multiplied by: (i) energy sales price, for products with a fixed price; or (ii) a premium, if positive, in relation to the Differences Settlement Price (“PLD”), for products with variable prices;
  • Distributors who are in default concerning any financial obligation before the CCEE will have their revenue seized for settlement of their debts on the MVE financial settlement date, including the revenue arising from the execution of financial guarantees.

The Resolution will enter into force on the business day immediately following the publication by the CCEE of an announcement on its website informing that the implementation of the systems for operationalizing the amendments to the Resolution has been completed.

Read in full

 

ANEEL publishes Resolution on entry, maintenance and exit criteria for agents in the energy market

On April 25, 2022, ANEEL Normative Resolution No. 1014/2022 was published, which provides for the criteria for entry, maintenance and exit of agents in the energy market. Such rule complements a list of other measures aimed at improving the security of the electricity trading market, according to proposals submitted to the Agency by the CCEE and prioritized by ANEEL in the Regulatory Agenda for the biennium of 2021-2022.

Our team published a client alert including the main highlights of the Regulation, which can be read here

 

ANEEL publishes resolution on the management of the Mineral Coal and Fuel Consumption Account associated with the CDE

On April 25, 2022, ANEEL Normative Resolution No. 1.016/2022 was published, which establishes the rules for: (i) the planning, formation, processing, and management of the Fuel Consumption Account (CCC); (ii) procedures for adapting physical facilities, commercial contracts, and operating routines, necessary for the interconnection of isolated systems to the SIN; and (iii) the criteria for adding renewable source generating units to generating plants in the Isolated Systems. The Resolution also establishes the procedures for reimbursement of the cost of consumption of primary and secondary fuels for thermoelectric generation using national mineral coal, via the CDE. The Resolution is a result of Public Consultation No. 68/2021 and consolidates previous rules on the subject.

Read in full

 

ANEEL publishes resolution on ONS activities

On April 25, 2022, ANEEL Normative Resolution No. 1.017/2022 was published, which authorizes the ONS to carry out coordination and control activities concerning the generation and transmission of electricity in the interconnected systems. This Resolution is a consolidation of all rules addressing the topic “Operation of the Electric System”, which involves both governance issues and actions aimed at the core activity of the ONS that could not be adequately classified under other groups of topics.

Read in full

PUBLIC CONSULTATIONS AND HEARINGS

SUBMISSION OF CONTRIBUTIONS (ANEEL) SUBJECT MATTER

CONTRIBUITION TERM

No 002/2022 Extension of the period for obtaining additional contributions for reviewing the Regulatory Remuneration Base of electricity distributors.

Until June 17, 2022

No 006/2022 Obtaining contributions for the improvement of the rules concerning the participation, the possibility and/or the requirement of incorporation of Special Purpose Entities in sectoral auctions.

Until June 20, 2022

 

PUBLIC CONSULTATIONS (ANEEL) SUBJECT MATTER

SESSION

No 039/2021 Second phase to obtain contributions in order to improve the Regulatory Impact Analysis (AIR) report, which deals with the improvement of regulation concerning the Tariffs for the Use of the Transmission System and the Tariffs for the Use of the Distribution System for generation plants connected at 88kV and 138kV.

Until May 13, 2022

No 007/2022 Obtaining information to improve the draft that deals with the topic of “Infrastructure Sharing”.

Until May 6, 2022

No 009/2022 Obtaining contributions to improve the review of the Allowed Annual Revenue of the electricity transmission concession contracts concerning the bids whose review date is scheduled in July 2022.

Until May 13, 2022

No 010/2022 Obtaining contributions to improve the process of financial safeguards in the electricity market.

Until May 23, 2022

No 011/2022 Obtaining contributions to improve the monitoring of the electricity market.

Until May 23, 2022

No 017/2022 Obtaining contributions for the consolidation of normative acts concerning the topic of “Production and Trading of Power”.

Until June 3, 2022

 

PUBLIC CONSULTATIONS SUBJECT MATTER

CONTRIBUITION TERM

No 123/2022 Reopening — Report “Ordinary Review of Hydroelectric Power Plants’ Physical Energy Guarantee – Centrally Dispatched UHEs in the National Interconnected System – SIN”.

Until May 2, 2022

WHAT’S COMING UP

 

May 2022 – New Energy Auction A-4
Notice: ANEEL (to be published)

More information here
June 2022 – Transmission Auction No.1/2022
Consisting of 13 lots in the states of Minas Gerais, São Paulo, Espirito Santo, Amapá, Bahia, Pará, Rondônia, Mato Grosso, Pará, Santa Catarina, Mato Grosso do Sul, Amazonas and Acre.
Notice: ANEEL (to be published)
More information herei
August 2022 – New Energy Auction A-5 and A-6
Notice: ANEEL (to be published)

More information here
September 2022 – Auction for Contracting Reserve Capacity, in the form of reserve energy and according to Law No. 14.182/2021
Notice: ANEEL (to be published)
Mmore information here
October 2022 – Auction to Supply for Isolated Systems
Notice: ANEEL (to be published)
More information here
November 2022 – Auction for Contracting Reserve Capacity in the form of power capacity
Notice: ANEEL (to be published)
More information here
December 2022 – Existing Energy Auction “A-1” e “A-2
Notice: ANEEL (to be published)
More information here

 

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Este material tem caráter informativo, e não deve ser utilizado para a tomada de decisões. Aconselhamento legal específico poderá ser prestado por um de nossos advogados.