Energy Newsletter No. 2 – June 2021

HIGHLIGHTS          NEWS         PUBLIC CONSULTATIONS AND FORUMS         WHAT’S NEXT…

Check out our second edition of the 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 June.

June was filled with regulatory news, most of which is focused on trying to minimize the effects of the current water crisis in the country. It’s worth checking out!

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

MME expands guidelines for temporary dispatch of thermal power plants

On June 7, 2021, the Ministry of Mines and Energy (“MME”) enacted Ordinance No. 13/2021, which modifies Ordinance No. 5/2021 and expands the guidelines for temporary dispatch of thermal power plants.

The previous Ordinance included only gas-based thermal power plants, while the new Ordinance takes into account the current and exceptional situation facing the sector due to rain scarcity and low water levels in Brazilian reservoirs.

Among the changes, the following can be highlighted:

  • The dispatch of thermal power plants, regardless of the order of merit, may occur for a determined period, limited to 6 months, observing the energy demand, the total cost of the dispatch and operational safety procedures.
  • The dispatch period may be extended (i) provided that the plants’ owners prove to the National Systems Operator (ONS) and ANEEL the need to consume the fuel contracted but not used due to the modulated generation; or, (ii) following a decision by the Power Sector Monitoring Committee (“CMSE”);
  • The dispatches are conditioned to requests made to ANEEL by plant owners toreduce the variable costs established in paragraph 1, article 2 of the Ordinance, upon presentation of the Fuel Supply Agreement.

According to the MME, it is expected that the amendments to the Ordinance will promote an increase in the power supply to the subsystems of the National Interconnected System (SIN) at competitive prices.

Read in full (available only in Portuguese)

CEEE-T privatization auction rescheduled to July 16, 2021

The Environmental and Infrastructure Department of the State of Rio Grande do Sul announced changes to the Auction No. 01/2021, which has as its purpose the privatization of the State Electricity Transmission Company (“CEEE-T”). The changes are as follows:

  • The minimum economic value for the proposal is BRL 1,699,199,620.04 for the total shares held by the State of Rio Grande do Sul (through the holding company CEEE-Par), in accordance with the model approved in the Extraordinary General Meeting of Shareholders held on May 12, 2021;
  • Proposals must be submitted by July 12, 2021;
  • The public session will start on July 16, 2021.

Read in full (available only in Portuguese)

ANEEL opens Call for Public Contributions regarding the opening of the free trading market 

On June 18, 2021, ANEEL opened the Call for Public Contributions No. 010/2021 in order to study the regulatory measures that will allow the opening of the free trading market of energy for consumers with demand below 500 kW, including the regulated trading agent. It is expected that the opening will occur by January 1, 2024.

Interested parties must present considerations on ten issues presented by ANEEL, such as the impacts of opening the energy market, how the deal with the energy that utilities companies have already contracted, the need for special regulatory treatment in order to protect residential consumers when purchasing energy, etc.  

The schedule for opening the Market, as established through MME’s Ordinance No. 514/2018 follows below:

 

 

Interested parties can contribute until August 17, 2021.

Read in Full (available only in Portuguese)

 

Provisional Measure for Eletrobras Privatization approved and will be passed into Law

On June 17, 2021, the Brazilian senate approved Provisional Measure No. 1.031/2021 (“PM” or “PLC No. 7/2021”), regarding Eletrobras’s privatization, with 28 new amendments. The PM returned to the House of Representatives and was approved on June 21, 2021. We highlight the following measures:

  • The Federal Government will have a golden share, with veto powers in resolutions at Shareholders Meetings;
  • Power Purchase Agreements signed through the Program to Encourage Alternative Energy Sources (“PROINFA”) will be extended for 20 years;
  • Natural gas-based thermal power plants, totaling 8MW of capacity, will be contracted for 15 years and will be installed in the North, Northeast, Southeast, and Center-West regions of the country, even in places not yet supplied by gas pipelines;
  • Employees dismissed after the privatization may use their severance packages to purchase shares in Eletrobras, or those dismissed within 12 months after the privatization may be hired in other federal state-owned companies for a position of the same nature;
  • Eletrobras must reduce the costs for generation in the ‘Legal Amazon’ area;
  • The construction of Tucuruí Transmission Line (“Linhão de Tucuruí”), which will connect the State of Roraima to the National Interconnected System (“SIN”), can be authorized and commenced;
  • Eletrobras subsidiaries Chesf, Furnas, Eletrosul, and Eletronorte cannot be dissolved, merged, or have their headquarters changed for 10 years.

At this point, the PM will proceed to the President of the Republic to be passed into Law.

Read in Full (available only in Portuguese)

ANEEL opens Call for Contributions on Distributed Energy Resources (DER)

On June 24, 2021, ANEEL opened the Call for Contributions No. 011/2021, for the purposes of analyzing regulatory models for the incorporation of Distributed Energy Resources (“DER”) into the Brazilian Power Sector.

DERs include, for instance, distributed generation (DG), energy storage, electric vehicles, demand response, microgrids, and virtual power plants.

According to ANEEL, the dynamic changes in the power sector in the last few years has created the need for ANEEL to study the regulatory models adopted abroad to adapt to such changes and assess the need for new regulatory measures.

To assist parties interested in participation, ANEEL has made available Technical Notes about DER, the main business models, international cases studies on technical and economic regulation of DERs, and a proposal with regulatory models applicable to Brazil.

Interested parties can make contributions until September 27, 2021.

Read in full (available only in Portuguese)


PM to address the current water shortage published

On June 28, 2021, the Federal Government enacted Provisional Measure (“PM”) No. 1.055/2021, which establishes measures to address the current water shortage in the country. Among the relevant measures, we highlight:

  • Creation of the Chamber of Exceptional Regulations for Hydropower Management (“CREG”), that will establish emergency measures to optimize the use of hydropower resources in order to ensure the continuity and security of the Brazilian power supply;
  • Power generation concessionaires can be reimbursed for operational costs incurred from the implementation of mitigation measures. Reimbursement is made through the System Service Charge (“ESS”), provided for by Law No. 10.848/2004, since the extraordinary costs are not covered in the concession contracts;
  • Decisions of CREG will be mandatory for government entities, the National System Operator (ONS), the Electric Power Trading Chamber (CCEE), concessionaires, and those authorized in the power and Oil & Gas sectors.
  • The CREG will last until December 30, 2021.

Read in full (available only in Portuguese)


NEWS

ANEEL recalculates premium for hydrological risk negotiation

On June 18, 2021, ANEEL issued Normative Resolution No. 935/2021, which establishes the premium related to the hydrological risk negotiation in the Regulated Contracting Environment (“ACR”) as of January 2021, effective from 2022.

The amount was established by ANEEL’s Normative Resolution 684/2015, which determines the criteria and conditions for renegotiation of hydrological risk.

The renegotiation in the ACR occurs by transferring the hydrological risk to the consumer, while the generators pay the premium. The risk is established by the lack of generation by the Energy Reallocation Mechanism (MRE).

Read in full (available only in Portuguese)

Enactment by Federal Government of vetoed part of Law No. 14.120/2021 benefits generators

On June 11, 2021, the Federal Government enacted the vetoed part of Law No. 14.120/2021, which reallocates resources in the electricity sector to allow the reduction of energy tariffs, among other provisions.

The reinstatement of vetoed part includes the paragraph 12 of article 26 of Law No. 9.427/1996, which guarantees to the generators an extension of their authorization, from the date of declaration of commercial operation of its first generation unit. Interested parties must request such benefit from ANEEL, conditioned to agents: that hold a 30-year authorization, whose plants commenced commercial operation by September 1, 2020, and who have not incurred penalties related to the construction schedule of the respective plant.

Read in full (available only in Portuguese)

Vetoed part of Law  No. 14.146/2021 grants additional exemption from electricity bills for state residents of Amapá

On June 11, 2021, the Federal Government enacted the vetoed part of Law No. 14.146/2021, which establishes measures to address the consequences of the blackout that occurred in the State of Amapá in November 2020.

In accordance with the Law, the utilities company Companhia de Eletricidade do Amapá will use the remaining balance contributed to the Energy Development Account (“CDE”) to exempt low-income residential and rural consumers from 3 monthly consumption bills.

Read in full (available only in Portuguese)

MME establishes Guidelines for A-1 and A-2 Auctions

On June 11, 2021, the Ministry of Mines and Energy (“MME”) enacted Ordinance No. 14/2021, which establishes the guidelines for the A-1 and A-2 Existing Energy Auctions, which will take place on December 3, 2021 .

Interested parties with projects for the A-2 Auction must submit documents for Technical Qualification by August 31, 2021.

The power supply periods and the respective Power Trading Contracts in the Regulated Environment (“CCEARs”) are:

  • A-1 Auction supply period: from January 1, 2022 to December 31, 2023. The agents must sign a CCEAR under the category “by quantity of electricity” and the sellers must bear the costs incurred for hydrological risks;
  • A-2 Auction supply period: from January 1, 2023 to December 31, 2024. The agents must sign a CCEAR under the categories “by quantity of electricity”, for which the sellers must bear the costs incurred for hydrological risks, and “by availability” , for which the buyers must bear the costs incurred for hydrological risks, with the right to transfer the referred costs to end consumers.
  • A-1 Auction must take place before A-2 Auction. Unsuccessful purchases from A-1 Auction will not be contracted in A-2 Auction.

Read in full (available only in Portuguese)

MME modifies regulation about interruptible imported power from Argentina and Uruguay

On June 11, 2021, the Ministry of Mines and Energy (“MME”) enacted Ordinance No. 523/2021, which modifies Ordinance No. 339/2018, which in turn establishes guidelines to import interruptible power from Argentina and Uruguay.

The modification allows the Power Sector Monitoring Committee (“CMSE”) to consider the import of an additional resource to National Interconnected System (“SIN”), under the following terms:

  • The import of electricity may occur for a determined period, limited to 6 months;
  • The term of validity of the offer price must be compatible with the terms of validity of the dispatch;
  • The agents whose offers were accepted can place new offers if the additional energy is not already compromised by the dispatch.

Such Regulation is one of the measures that the Federal Government is taking to address the current water shortage.

Read in full (available only in Portuguese)

ANEEL applies 90day extension to measures related to the pandemic for distribution sector

On June 22, 2021, ANEEL issued Normative Resolution No. 936/2021, which modifies Normative Resolution No. 928/2021, which in turn establishes measures to preserve distribution services during the Covid-19 pandemic.

In accordance with the amendment, distributors must credit the offset to consumers’ electricity bill invoices, as provided for in article 7, sole paragraph, of Normative Resolution No. 928/2021, issued up to March 31, 2022.

Read in full (available only in Portuguese)

ANEEL modifies PRODIST Modules 6 and 10

On June 22, 2021, ANEEL issued Normative Resolution No. 937/2021, which approves the revision of Modules 6, entitled “Required information and obligations” and 10, ”Geographic- Regulatory Information System” of the Power Distribution Procedures in the National Electric System (“PRODIST”) – a set of rules and procedures for the electric energy distribution segment –, and also approves the first version of the Instruction Manual for Distributor’s Geographic Database (“BDGD”).

According to ANEEL, a system for geographic information provides a greater capacity for representation, analysis and data management for power distribution services, and contributes to the improvement of processes related to control of ownership, engineering, planning, programming, operation and maintenance of the system.

Read in full – Resolution (available only in Portuguese)

Read in full – Manual (available only in Portuguese)

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PUBLIC CONSULTATIONS AND FORUMS

CALLS FOR CONTRIBUTIONS (ANEEL)MATTERPERIOD FOR CONTRIBUTIONS
No. 10/2021Study about regulatory measures that will allow the opening of the free market to consumers with demand below 500 kW. The opening is scheduled for January 1, 2024Until August 17, 2021
No. 11/2021Proposals for regulatory models to insert Distributed Energy Resources (“DER”) in the Brazilian Power Sector.Until September 24, 2021

  

PUBLIC FORUMS (ANEEL)MATTERPERIOD FOR CONTRIBUTIONS
No. 11/2021Proposals for Regulatory Impact Analysis (AIR) Report, regarding the consolidation of normative acts related to “Rights and duties of users of electricity distribution public services”.Rescheduled to July 21, 2021

  

PUBLIC CONSULTS (ANEEL)MATTERPERIOD FOR CONTRIBUTIONS
No. 18/2021Proposals for Normative Resolutions regarding the consolidation of normative acts related to “Rights and duties of users of  electricity distribution public services”, “Transfer of Public Lighting Assets” and the Regulatory Impact Analysis Report.Extended to July 22, 2021
No.  28/2021Modifications to CCEE’s Power Trading Rules, considering the regulatory measures for hydropower displacement justified by inflexible thermoelectric generation.Until July 12, 2021
No. 33/2021Consolidation of rules regarding the Universalization Program.Until July 23, 2021
No. 35/2021Notice of A-5 Auction, 2021.Until July 26, 2021
No. 36/2021Proposals for Normative Resolutions to regulate article 4-C of Law No. 9,074/1995, which establishes the procedure for the agents to present to ANEEL a corporate control transfer plan, as an alternative to the annulment of the authorization.Until August 9, 2021

  

PUBLIC CONSULTATIONS (ONS)MATTERPERIOD FOR CONTRIBUTIONS
External ConsultationComments and suggestions on a new version of Submodule 7.3. of the Grid Procedures entitled “Verification of Compliance with Requirements by Transmission Facilities”. ONS revised the document to include the BDIT Project (Power Transmission Facilities Database) in its scope.Until July 13, 2021

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WHAT’S NEXT…

July 8, 2021 – New Energy Auctions ‘A-3’ e ‘A-4’, 2021
New projects. Hydroelectric, wind, solar photovoltaic and biomass thermal sources.

Notice: ANEEL
More information here
July 19, 2021 – Privatization – CEEE-T
Disposal of control of CEEE-T, approximately 66.08% of the share capital.

Notice: Environmental and Infrastructure Department of the State of Rio Grande do Sul
More information here

July 30, 2021 (delivery of envelopes) – Divestment – CEMIG’s participation in Taesa
Operation comprising the steps: (i) Due Diligence of interested parties; and (ii) Auction.

Notice: CEMIG
More information here

September 30, 2021 – Auction ‘A-5’ of 2021
Wind, photovoltaic, hydroelectric, biomass thermoelectric and energy recovery from urban solid waste projects.

Notice: ANEEL (to be published)
More information here
December 3, 2021 – Existing Energy Auctions A-1 and A-2, 2021
Biomass, coal, gas and others

Notice: ANEEL (to be published)
More information here

 

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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.