Energy Newsletter No. 3 – July 2021

HIGHLIGHTS        NEWS         PUBLIC CONSULTATIONS AND FORUMS         WHAT’S NEXT…

Check out our third 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 July.

We are available to help you with any questions and hear your ideas and suggestions on how we can improve even more.
Enjoy reading!

Demarest Energy and Natural Resources Team


HIGHLIGHTS

Decree qualifies Auctions A-3, A-4 and A-5 in the PPI

On July 2, 2021, the Federal Government enacted Decree No. 10.738/2021, which qualifies the New Energy Auctions “A- 3”, “A-4” and “A-5” of 2021, under the Investment Partnership Program (PPI).

The qualification of projects in the PPI constitutes giving them national priority.

The New Energy Auctions “A- 3” and “A-4” of 2021 took place on July 8, 2021. In Auction A-3, 33 projects were contracted and the investments totaled BRL 2,2 billion. In Auction A-4, 18 projects were contracted and the investments totaled BRL 1,8 billion:

Auction A-3/2021
SourceProjectsStatesInvestimentsCapacity (MW)Negative goodwill
Hydroelectric3RSBRL 242,7 million35,25024,89%
Wind23BA, RNBRL 1,02 billion251,70024,96%
Solar5PE, PBBRL 618,8 million169,336,60%
Biomass2PR, SPBRL 314 million91,14039,51%

 

Auction A-4/2021
SourceProjectsStatesInvestimentsCapacity (MW)Negative goodwill
Hydroelectric3RS, MTBRL 515,4 million77,01829,03%
Wind10RN, BABRL 750,2 million167,823,89%
Solar2PBBRL 289,3 million10031,16%
Biomass3GO, MS, SPBRL 296,7 million92,532,87%

 

Regarding Auction A-5, of 2021, the public session will take place on September 30, 2021. 

Read in full (available only in Portuguese)

State Audit Board of Minas Gerais notifies CEMIG about the divestment of its shareholding in Taesa

On July 8, 2021, Companhia Energética de Minas Gerais (CEMIG) published a Material Announcement to inform of receipt of a notification in which the State Audit Board of Minas Gerais (TCE-MG) requested the presentation of all the documentation related to the competitive process initiated in May 2021, for divestment of its shareholding in Transmissora Aliança de Energia Elétrica S.A. (Taesa).

In accordance with the Material Announcement, the notification stems from requests presented by Minas Gerais’ State Representatives to suspend any acts related to the competitive process for divestment of its shareholding in Taesa, until CEMIG carry out prior technical studies that demonstrate the benefits of the intended divestment.

TCE-MG recommended that CEMIG abstain from any action related to the divestment process until the Technical Unit of TCE-MG analyzes all the documentation requested.

Read in full

Eletrobras Privatization Law is published

On July 13, 2021, the Federal Government enacted Federal Law No. 14.182/2021, which results from Provisional Measure No. 1.031/2021 and which deals with the privatization of Eletrobras.

Check out here our Client Alert, with highlights on the main measures. 

Operating rules of the Chamber of Exceptional Regulations for Hydropower Management are approved

On July 20, 2021, the Chamber of Exceptional Regulations for Hydropower Management (CREG) enacted Resolution No. 1/2021, which sets out its operating rules.

CREG was created to establish emergency measures to optimize the use of hydropower resources and address the current water shortage in the country, to ensure the continuity and security of the Brazilian power supply.

The Resolution establishes the composition of CREG and its attributions, such as the issuance of normative acts and decision-making when the subject is within its competence, as well as establishes proceedings for discussions and voting in plenary meetings.

Read in full (available only in Portuguese)

MME establishes guidelines for the additional supply of generation from Thermal Power Plants to serve the Nacional Interconnected System

On July 23, 2021, the Ministry of Mines and Energy (“MME”) enacted Ordinance No. 17/GM/MME/2021, which establishes guidelines for the additional supply of generation from Thermal Power Plants to serve the Nacional Interconnected System (“SIN”). This measure forms part of the set of measures related to the current water shortage in the country.

Among the relevant measures, we highlight:

  • The Power Sector Monitoring Committee (“CMSE”) will deliberate on the use of the additional generation supply offers from Thermal Power Plants by the National System Operator (ONS) as an extra resource to meet the demands of the SIN;
  • The supply can derive from thermal power plants whose energy has been traded through contracts in the Regulated Contracting Environment (“ACR”) or the Free Contracting Environment (“ACL”);
  • Thermal power plants with power equal to or less than 5.000 kW, provided for by article 8 of Federal Law No. 9.074/1995, will not have their supply offers accepted;
  • The offering parties must be agents of the Electric Power Trading Chamber (CCEE);
  • The extra generation will be accounted for on the Short-Term Market (MCP) and will be paid to the power plant owners. However, the additional supply offers provided for in the Ordinance will not be subject to the MCP’s loss sharing, which provides greater guarantees to the power plant owner to receive revenue.
  • The additional supply offer for generation from Thermal Power Plants will be effective until December 31, 2022.

Read in full (available only in Portuguese)


OTHER NEWS

ANEEL extends Demand Response Pilot Program

On July 2, 2021, ANEEL enacted Normative Resolution No. 938/2021, which extends the effectiveness of  the Demand Response Pilot Program until June 27, 2022. The program has been extended 3 times already.

The Demand Response is a mechanism provided for by Resolution No. 792/2017, which allows consumers to manage their energy consumption, according to price fluctuations and in compliance with the directives of the National System Operator (“ONS”). As a result, the consumer earns financial compensation and has greater control over his consumption.

According to ANEEL, in recent years the program has seen low accession by consumers. Thus, its extension was justified by ANEEL to enable greater accession by consumers and, consequently, a better assessment of possible improvements to the Resolution. 

Read in full (available only in Portuguese)

ANEEL updates the Benchmark Prices Database for the distribution sector

On July 2, 2021, ANEEL enacted Normative Resolution No. 939/2021, which updates the Benchmark Prices Database for the distribution sector. The database is provided for by Submodule 2.3. of ANEEL’s Tariff Regulation Procedures (PRORET), entitled “Regulatory Asset Base” and represents the regulatory average costs for the acquisition of equipment, minor components as well as extra costs.

Read in full (available only in Portuguese)

MME issues regulation that allows the transfer of Fuel Consumption Bill (CCC) to distributors

On July 6, 2021, the MME enacted Normative Ordinance No. 15/2021, which allows the transfer of the Fuel Consumption Bill (CCC) to power distribution companies, provided for by article 4-C of the Federal Law No. 12.111/2009 (distribution companies that are not connected to the SIN). The transfer will occur monthly, based on the forecast of the ‘overcontracting’ financial effect, calculated annually by ANEEL, based on CCEE estimates related to (i) the amount of energy ‘over-contracted’ until the distributor’s next tariff process; and (ii) Settlement Price of Differences (PLD) until the next tariff process of the distributor.

Read in full (available only in Portuguese)

Municipality of São Paulo publishes Public Call for distributed generation Project

On July 15, 2021, São Paulo Municipality published the Notice for Public Call CH/001/2021/SGM-SEDP, aiming to receive technical, operational, engineering, and financial studies from interested parties for the development of a distributed generation project. The project will involve the implementation, management, operation, and maintenance of energy efficiency projects in public buildings of the Municipality of São Paulo. Interested parties can request technical visits until August 6, 2021, and can request clarifications until August 8, 2021. The interested parties must request registration to perform studies by August 13, 2021.

Read in full (available only in Portuguese)

ANEEL regulates the Light for All Program

On July 16, 2021, ANEEL issued Resolution No. 940/2021, which regulates Decree No. 10.221/2020, which establishes the National Program for Universalization of Access and Use of Electrical Energy in the Legal Amazon – “Light for All”. The Program aims to provide power for those who live in remote regions in the Legal Amazon region.

In accordance with the Resolution, distribution companies in operation in the Legal Amazon must adhere to the program. The initial goals of the Program will be approved by ANEEL, based on the demand declared by the distributors. 

The initial goals are provided for in Resolution No. 2.891/2021.

Read in full – Resolution No. 940/2021 (available only in Portuguese)

Read in full – Resolution No. 2.891/2021 (available only in Portuguese)

Power Trading Chamber (CCEE) deliberates on “Express ‘Re-accounting’”

The Power Trading Chamber (CCEE) decided on the matter of “Express ‘Re-accounting’” in its 1162nd Extraordinary General Meeting. “Express ‘Re-accounting’” is a new ‘re-accounting’ procedure that allows CCEE to anticipate the financial effects of a ‘re-accounting’ adjustment process requested by CCEE’s agents for the next monthly accounting cycle of the Short-Term Market (MCP).

To have an “Express ‘Re-accounting’” procedure approved, the CCEE agents must meet certain criteria, such as: the re-accounting request must be related to adjustments in metering data or to modifications in a contract of the Free Contracting Environment (ACL), as well as that court decisions in progress must not be interfered with, among others.

ANEEL approves amendment to the rules on Regulatory Impact Analysis (RIA)

On July 22, 2021, ANEEL issued Normative Resolution No. 941/2021, which revises the rules governing the Regulatory Impact Analysis (RIA) by ANEEL, provided for in ANEEL’s Organization Rule No. 40. The amendment occurred due to the new provisions on the subject provided by Federal Law No. 13.848/2019 (Regulatory Agencies Act), Federal Law No. 13.874/2019 (Economic Freedom Act), and Decree No. 10.411/2020 (which regulates the RIA).

The RIA is one of the instruments that contributes to better regulation and the regulatory quality of regulatory agencies. Among the innovations, we highlight, for instance, the indication of methodologies to assess the reasonableness of the economic impact resulting from the regulation, and the possibility to waive the RIA when the regulation is characterized as having low impact.

Read in full (available only in Portuguese)

ANEEL revises rules on calculation criteria for investments related to non-amortized or non-depreciated reversible assets of generation concessions

On July 22, 2021, ANEEL issued Resolution No. 942/2021, which amends Resolution No. 596/2013, which in turn establishes criteria and procedures for calculation of the indemnification of investments related to reversible assets not amortized or not depreciated, of projects whose concession period was extended or not, in accordance with Federal Law No. 12.783/2013.

The amendments were made in order to adapt the current rules to define the conditions for indemnification of investments made in the form of improvements in hydropower plants, covered by Federal Law No. 12.783/2013.

Read in full (available only in Portuguese)

ANEEL revises definition of delay of generating units in cases of reduction in Power Trading Contracts in the Regulated Environment (“CCEARs”)

On July 23, 2021, ANEEL issued Normative Resolution No. 943/2021, which modifies Normative Resolution No. 595/2013. The modification adjusts the definition of delay of generating units, for cases in which there is a reduction of power amounts in the Power Trading Contracts in the Regulated Environment (“CCEARs”).

According to the Regulation, the time reference characterizing the delay will be that which occurs between (i) the Commercial Operation Date provided for in the authorization; (ii) the date of the beginning of the supply provided for in the PPA; or (iii) the start date of the obligation to deliver energy, for the fully reduced contracts.

Read in full (available only in Portuguese)

 

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PUBLIC CONSULTATIONS AND FORUMS

CALLS FOR CONTRIBUTIONS (ANEEL)MATTER PERIOD FOR CONTRIBUTIONS
No. 10/2021Study on regulatory measures necessary to allow the opening of the free market to consumers with load demand below 500 kW. The proposed opening is scheduled for January 1, 2024.Until August 17, 2021.
No. 11/2021Proposals for Regulatory models to insert Distributed Energy Resources (“DER”) in the Brazilian Power Sector, including Demand Response, virtual power plants and microgrids.Until September 24, 2021
No 12/2021Input on the need for regulatory intervention related to the sharing of transmission facilities.Until August 13, 2021

  

PUBLIC FORUMS (ANEEL)MATTERPERIOD FOR CONTRIBUTIONS
Nº 20/2021Regulation with criteria for contracting energy derived from distributed generation, aiming to reduce operation and maintenance expenses or to extend investments, as well as the drafting of the Distributed Generation Agreement.August 25, 2021
No 21/2021Input on regulation to improve and consolidate Power Trading Convention Rules and rules related to the former Electric Energy Wholesale Market – MAE.August 13, 2021.

  

PUBLIC CONSULTATIONS (ANEEL)MATTERPERIOD FOR CONTRIBUTIONS
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
No 39/2021Improvement of the RIA report on regulation related to tariffs for the use of the electric transmission system (“TUST”) and tariffs for the use of the electric distribution system for generation plants connected to 88 kV and 138 kV (“TUSDg”)Until September 29, 2021
No 40/2021Proposals for regulation with criteria for contracting energy derived from distributed generation, aiming to reduce operation and maintenance expenses or to extend investments, as well as the drafting of the Distributed Generation Agreement.Until August 31, 2021
No 42/2021Input on the subject “Operation Control and Coordination”, to consolidate transmission services rules.Until August 23, 2021
No 44/2021Input on improvement of the regulation on procedures to communicate extended unavailability and serious incidents of transmission facilities (Submodule 6.2.-OP of Grid Network Procedures)Until August 6, 2021
No 45/2021Input on Draft of the Bidding Notice and Annexes related to Existing Energy Auction A-1 and A-2, 2021Until September 9, 2021
No. 46/2021Input on improvement of Technical Note No. 62/2021-SRM/ANEEL, the RIA No. 3/2021-SRM/ANEEL and draft rules that improve regulation by requiring the presentation of financial guarantees in order to participate in the Surplus Sale Mechanism (MVE)Until September 10, 2021

 

 

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WHAT’S NEXT…

 

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.