Energy Newsletter No. 5 – September 2021

HIGHLIGHTS          NEWS         PUBLIC CONSULTATIONS AND FORUMS         WHAT’S NEXT…

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 September.

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

CREG implements Incentive Program for Voluntary Reduction of Electricity Consumption

On August 31, 2021, the Chamber of Exceptional Rules for Hydropower Management (“CREG”) – a specialized working group and member of the Ministry of Mines and Energy (“MME”) -,  issued Resolution No. 02/2021, which provides for the Incentive Program for the Voluntary Reduction of Electricity Consumption for consumer units of groups A and B in the regulated market of the National Interconnected System  (“SIN”).

The Program will grant bonuses on electricity bills in the amount of BRL50.00 for every 100kWh, for those who reduce energy consumption between September and December by  at least 10% compared to the same period in 2020.

The Program applies to group B consumer units belonging to residential,  industrial, trade, services and other activities, rural and public services consumption classes,  and does apply not  to group A consumer units belonging to the  public power, public lighting and own consumption classes of consumption.

Read in full

Sao Paulo decree on ICMS billing for electricity operations is postponed

On May 31, 2021, the Executive Branch of State of São Paulo published Decree No. 65,967/2021, which postpones the entry into force of Decree No. 65,823/2021 to January 1, 2022.

Decree No. 65,823/2021 was published in June of this year and established changes to the Tax Regulation on Operations Related to the Circulation of Goods and on Interstate and Intermunicipal Transportation and Communication Services (RICMS).

The amendment established that the distribution concessionaire is responsible for the release and payment of the tax levied on successive internal operations involving energy, from the stage of its import or production.

The legislation would come into force on September 1, 2021, but will take effect only from next year.

Read in full  – State Decree No. 65,823/2021

Read in full  – State  Decree  No. 65,967/2021

ANEEL temporarily exempts the charge for excess power

On May 13, 2021, the National Electric Energy Agency (“ANEEL”) issued Order No. 2,704/2021, which temporarily exempts the charge  for exceeding the amounts contracted by electric power generating and self-producing power plants for use by electricity transmission and distribution systems, until December 31, 2021.

This measure was established as a result of the  3rd Meeting of the Chamber of Exceptional Rules for Hydropower Management (CREG), in which it was decided that the discount on tariffs should be maintained for the use of transmission and distribution systems, provided for in paragraph 1 of article 26 of Law 9,427/1996, for uses that inject power greater than 30,000kW. Consequently, ANEEL assessed that, in order to make CREG’s decision effective, it is necessary to remove the penalties that generating plants and self-producers could be subject to in relation to the over-delivery of contracted demand,  in transmission and distribution.

Thus, charges on tariffs that have been exceeded for generating and self-producing plants covered by CREG’s  decision is suspended until December 31, 2021.

Read in full  – Order No. 2,704/2021

Read in full – Minutes of the 3rd CREG Meeting, held on August 5, 2021.

Jirau Energy to hold Energy Purchase Auction

On August 25,  2021,  Jirau Energy published Notice No. 04/2021, the schedule of which was modified on September 9, 2021, aiming for the incentivized purchase of energy from wind and/or solar sources in the Free Contracting Environment (“ACL”), with 50% discount on TUST/TUSD.

The products are:

ProductSourceSubmarket*Delivery period**
1SolarSE/CW01/01/2024 to 31/12/2038
2WindSE/CW01/01/2024 to 31/12/2038
3SolarNE01/01/2024 to 31/12/2038
4WindNE01/01/2024 to 31/12/2038

* SE – South East
CW – Center West
NE – North East

** All dates in dd/mm/yyyy format

 

The release of the results of the qualification of the projects will occur until October 14,  2021, at 6 p.m.,  and the auction will be held on October 20,  2021, from 2 p.m. The registration of the Power Purchase and Sale Agreement with the Power Commercialization Chamber (“CCEE”) must be made within 90 days before the start of power supply.

Read in full –  Notice

Read in full  –  Schedule

A few more steps by ANEEL towards resolving GSF issue

In September, ANEEL adopted a few more measures with a view to definitively resolving the GSF issue.

On September 20, 2021, ANEEL issued Resolution No. 945/2021, as a result of Public Consultations No. 53/2021 and 54/2021, to improve the proposed  draft  of a resolution that amends Resolution No. 895/2020, and for the improvement of the Trading Rules contained in the GSF Impact Calculation module.

In addition, on September 23, 2021, ANEEL issued Resolution No. 2,932/2021, which ratifies the extension period for authorization of power plants that renegotiated the hydrological risk. There are 144 plants that renegotiated the hydrological risk approved in this decision, of which 79 are Small Hydroelectric Power Plants  (SHP) and 65 are Hydroelectric Power Plants  (UHE).

Read in full – Resolution No. 945/2021

Read in full – Resolution No. 2,932/2021


ANEEL to carry out simplified competitive procedure for Contracting Reserve Capacity

On September 15, 2021, the Chamber of Exceptional Rules for Hydroenergy Management (“CREG”) issued Resolution No. 4/2021, which determines the implementation of a  Simplified Competitive Procedure to contract reserve energy capacity, in order to optimize the use of hydroenergy resources in the National Interconnected System (SIN) and to ensure the continuity and security of the power supply in the country amid the current water scarcity situation.

In turn, on September 17, 2021, the Ministry of Mines and Energy issued Ordinance No. 24/2021, which establishes the guidelines for carrying out the procedure. We highlight the following guidelines:

  • ANEEL must hold, directly or indirectly, a simplified competitive procedure to contract reserve capacity in October 2021, and it will be the responsibility of such Agency to prepare the Notice;
  • Reserve Capacity  Contracts, differentiated by energy sources,  will  be  negotiated, including biomass  thermoelectric projects, wind projects and photovoltaic solar projects, according to the modality of quantity of electricity; and thermoelectric projects powered by natural gas, fuel oil and diesel oil,  in the modality of availability.
  • The Procedure will adopt simplified procedures for deadlines and requirements for registration and technical qualification of Projects; publication of the Notice; operationalization of the Simplified Procedure; creation of trading rules and procedures;
  • The projects must be connected to the National Interconnected System in the Southeast/Midwest and South Submarkets;
  • Supply period will be from 2022 to 2025;
  • Delays of more than three months for the commencement of commmercial operations will result in the termination of the contract and the application of penalties;
  • Generation projects may not participate in the Procedure that: (i) are not connected in the Submarkets Southeast/Midwest or South, (ii) are hydroelectric, (iii) have installed capacity equal to or less than 3.0 MW for diesel oil plants and equal to or less than 5.0 MW for other sources, (iv ) whose energy is subject to regulated contracts or negotiated in regulated auctions, among others.
  • Deadline for registration: ended on September 29, 2021.

Read in full – CREG Resolution

Read in full – MME Ordinance


OTHER NEWS

CCEE and ONS publish rules for Voluntary Demand Reduction (RVD)

The Power Commercialization Chamber (“CCEE”) published the Provisional Trading Rules and Procedures and the National Power System Operator (“ONS”) published the Provisional Operational Routine, referring to the Voluntary Reduction of Electricity Demand (“RVD”), and in compliance with the provisions of Ordinance No. 22/GM/MME/2021. In addition, the ONS disclosed RVD products and timetable for each of the submarkets.

RVD is a mechanism created by the Ministry of Mines and Energy to address the current water scarcity situation facing the country.

As recently released by the ONS, the technical group of the Monitoring Committee of the Power Sector (“CMSE”) has already approved 442MW of demand reduction in  September. The amount comprises the segments of metallurgy (with greater adherence to the program), non-metallic minerals, chemicals, extraction of non-metallic minerals,  food, wood, paper and pulp, services and vehicles.

Read in full  – Trading Rules on RVD (CCEE)

Read in full  –  Trading Procedures on RVD (CCEE)

Read in full – Provisional Operational Routine (ONS)

Read in full  –  RVD Products  and Timetable  (ONS)

CCEE finalizes Technical Note with regulatory improvements in market security  

The Power Commercialization Chamber (“CCEE”) published Technical Note CCEE 04925/2021, which presents a regulatory modernization strategy to increase market security. We highlight below the main measures addressed and suggested by the CCEE in the Technical Note:

  1. New criteria for monitoring the agents, adopting as reference the prudential approach. The CCEE intends to build a unique methodology, approved by ANEEL, that will be used as a tool for calculating and quantifying risk by the agents themselves;
  2. Exemplification of “anomalous conduct” that may pose risks to the market, such as artificial demand creation, price manipulation, fraudulent operation, omission of information and actions that cause serious and imminent risk to the market;
  3. Establishment of a gradation of penalties for these anomalous conducts, which would range from a warning, a pecuniary fine according to the severity of the infringement, registration conditioned to the economic-financial balance of operations for a period of 1 to 12 months, suspension of access to the system for a period of 3 to 12 months and mandatory termination of the agent.
  4. Creation of a specific  procedure  to investigate evidence of anomalous conduct, preserving the exercise of adversarial proceedings and the right to a fair hearing;
  5. Incentive for voluntary early delivery of portfolio – “Double Flag”. As proposed by the CCEE, in order for the early registration of contracts to have the exclusive effect of formalizing the negotiation between the parties, it is suggested the creation of a confirmation stage for energy delivery, to be carried out after bilateral billing or the exercise of the bilateral financial guarantee of the contract, close to the accounting of the energy delivered;
  6. Establishment of a period of adaptation to the regulation, which can be of 12 (twelve) months.

As released by the CCEE, the opening of a Public Forum within ANEEL was recommended, opening the debate to all agents and interested parties, for the purposes of improving the regulation.

Read in full

ONS and EPE publish Technical Note on 2021 Capacity Reserve Auction

On September 7, 2021, the National Systems Operator (“ONS”) and the Energy Research Company (“EPE”) released Technical Note ONS NT 0102/2021 – EPE-DEE-RE-101/2021-r0 with the methodology, premises, criteria and configuration of the electrical system to define the flow capacity of installations of the Basic Network, Other Transmission Installations (DIT) and Installations of Exclusive Interest to Generation Plants for Shared Connection (ICG), for the calculation of the margins of the 2021 Reserve Capacity Auction.

Read in full

Federal Decree published with modifications to R&D standards in the electricity sector

On September 8, 2021, the Federal Government issued Decree No. 10,787/2021, amending Decree No. 5,879/2006 and Decree No. 9,022/2017, to provide for the allocation and use of resources to fund studies and research for planning of the expansion of the energy system.

Decree No. 5,879/2006, which provided for investments in R&D and energy efficiency by companies, now provides in its article 3, sole paragraph, that R&D resources will be  allocated to the MME  and its budgetary units.

Decree No. 9,022/2017, which provides for the Global Reversal Reserve (“RGR”),  now provides in its article 25, paragraph 2, that the annual quotas of the RGR that will have as its scope the provision of resources for the cost of studies and research for planning the expansion of the energy system, and for inventory and feasibility necessary for the use of hydroelectric potentials will correspond to  3% of the resources of the  RGR and will be allocated to the MME and their budgetary units.

Read in full

ANEEL will participate in arbitration on economic-financial adjustments of Transmission Line concession

On September 10, 2021, ANEEL issued Order No. 2,812/2021, authorizing the signing of an  Arbitration Commitment Agreement, to be signed between ANEEL and Transnorte Energia S.A. (“TNE”) so that the request for economic-financial adjustments of Concession Agreement No. 3/2012-ANEEL is submitted to arbitration.

The Lechuga – Ecuador- Boa Vista Transmission Line, known as the “Manaus-Boa Vista Interconnection”, was due to enter into commercial operation on January 25, 2015, but had serious difficulties in obtaining the Environmental Installation License (LI). The LI was issued only on September 29, 2021.

The adoption of arbitration has never been tried by ANEEL. However, in the material case analyzed by the agency, the technical and economic benefits  of the arbitration solution were identified, as well as the recognition of the national interest of the Manaus – Boa Vista Interconnection.

This case may be an initial step in the use of arbitration between the government and private sector within the electricity segment, with the expectation of greater speed in resolving of the matters that involve this sector and through decision by arbitrators familiar with the electricity sector. The Order is also accompanied by a draft of the Arbitration  Commitment Agreement.

Read in full – ANEEL’s  decision on the subject

Read in full  –  Ordinance

Read in full – Arbitration Commitment Agreement

Decree creates the ‘Empresa Brasileira de Participações em Energia Nuclear e Binacional S.A.’ (ENBpar)

On September 13, 2021, the Federal Government issued Decree No. 10,791/2021, which creates the Empresa Brasileira de Participações em Energia Nuclear e Binacional S.A. (“ENBpar” – translated as Brazilian Company for Participation in Nuclear and Binational Energy), a public company in the form of a corporation, linked to the Ministry of Mines and Energy. The creation of the company stems from one of the conditions established in Law No. 14,182/2021, regarding the privatization of Eletrobras.

Read in full

Law makes it mandatory to update the registration of beneficiaries of the Social Tariff of Electric Energy

On September 13, 2021, the Federal Government issued Law No. 14,203/2021, which makes mandatory the  update of the registration of beneficiaries of the Social Tariff of Electric Energy. The law amends article 4 of Law No. 12,212/2010 on the subject, to establish that the Executive Branch and concessionaires, licensees and authorized public service electricity  distribution companies must reconcile and update the list of those registered and automatically enroll them as beneficiaries of the Social Tariff of Electric Energy.

This provision will enter into force on January 11, 2022 (120 days from the publication of the Law).

Read in full

Decree regulates conditions for the extension of supply of Proinfa contracts

On September 17,  2021, Decree No. 10,798/2021 was published, which regulates article 23 of Law No. 14,182/2021 (Eletrobras Privatization Law), to provide the conditions for the extension of the supply period of power purchase and sale  contracts of the Incentive Program for Alternative Sources of Electric Energy.

Article 23 of the Eletrobras Privatization Law establishes that a mixed-capital company or public company created to be maintained under the direct or indirect control of the federal government, companies, facilities and holdings, held or managed by Eletrobras, specifically Eletrobras Termonuclear S.A. (Eletronuclear) and Itaipu Binacional, shall assume ownership of Proinfa’s PPAs.

The generator contracted under Proinfa that wants to extend the  PPA for  another 20 (twenty) years must submit a  request to Eletrobras by October 11,  2021. The following prices of the energy contracted for the hydroelectric source generator will be considered: BRL 225.02/MWh; for the wind source generator: BRL 173.47/MWh; and for the biomass source generator: BRL 292.00/MWh.

PROINFA contracts will only be extended if ANEEL identifies tariff benefits in the extension, which will be determined based on the reduction of total costs for consumers compared to the event of non-extension of contracts.

The Decree establishes certain conditions for the extension of PROINFA contracts: (i) change in the contract readjustment index from IGP-M to IPCA; (ii) waiver of the price adjustment by the contract’s IGP-M in the period 2020 to 2021 and use of the IPCA; (ii) extension of the contract for a period of twenty (20) years; (iii) extension of the concession of the generator within a period compatible with the new term of the PROINFA contract; (iv) non-granting of the discount on TUSD/TUST, among others.

In the regulatory scope, the procedures, deadlines and documentation for the operation of the extension of the Program’s Power Purchase and Sale Agreements are regulated by Normative Ordinance No. 26/2021, of the MME.

Read in full – Decree

Read in full – MME Ordinance

ANEEL carries out Call for Contributions for the Regulatory Agenda 2022/2023

From September 2 to September 29, 2021, ANEEL carried out a Call for Contributions, aiming to obtain comments and suggestions on the improvement of the proposal of the Regulatory Agenda 2022/2023 Biennium.

This was the first phase of discussion on the matter. As disclosed by ANEEL, it is estimated that the public forum on the subject will take place in November. The activities of Agenda 2021/2022 will continue or begin in 2022 and involve the distribution, transmission, generation, trade,  electricity sector accounting, tariff, R&D and energy efficiency and organization sectors of ANEEL. 

Read in full  –  ANEEL Technical Note with activities that will make up the Regulatory Agenda

Read in full  – Call for Contributions

PUBLIC CONSULTATIONS AND FORUMS

 

PUBLIC FORUMS (ANEEL)SUBJECTSESSION
No. 23/2021Normative Resolution and the  governance project proposal for the application of Pilot Projects of Tariffs (Tariff Sandboxes).October 6,  2021

  

PUBLIC CONSULTATIONS (ANEEL) SUBJECTCONTRIBUTION DEADLINE
No. 007/2021Phase 2 – Obtain contributions on regulatory impact analysis (RIA)  on cybersecurity in the Brazilian Electricity Sector.Until October 1, 2021
No. 18/2021Phase 2 – Proposals of Normative Resolutions on the consolidation of normative acts related to the “Rights and duties of the user of the public service of distribution of electricity”, “Transfer of Public Lighting Assets” and Regulatory Impact Analysis Report.Until October 3,  2021
No. 39/2021Improvement of regulatory impact analysis (RIA)  report on the improvement of rules related to Transmission System Usage Tariffs (TUST) and Distribution System Usage Rates for connected generation centers at 88 kV and 138 kV (TUSDg).Until October 14,  2021
No. 49/2021Governance Project Proposal for implementation of Pilot Projects of Tariffs (Tariff Sandboxes).Until October 13,  2021
No. 50/2021Amendment of ANEEL Normative Resolution No. 804/2018, which deals with institutional registration standards (CDA) and Electronic Notification within ANEELUntil October 1, 2021
No. 52/2021Proposal for consolidation of normative acts related to thematic relevance “Distribution Procedures – PRODIST”.Until October 3,  2021
No. 55/2021Proposal to complement the Rules of Power Trading to be operationalized from December 2021.Until October 8,  2021
No. 59/2021Rules with performance indicators and targets to be applied in the Organizational Performance program of the National Systems  Operator (“ONS”)  for the 2022 and 2023 calculation cycle.Until November 5,  2021
No. 60/2021Consolidation of rules on Tariff Regulation ProceduresUntil November 12, 2021
No. 61/2021Proposal on regulation regarding contracting of reserve capacity in the form of power, in accordance with Decree No. 10,707/2021Until November 12, 2021
No. 62/2021Review of Submodules 2.15 and 2.16 of Network Procedures, regarding requirements of auxiliary services for telecommunication operation centers for distribution companies and consumers.Until November 12, 2021
No. 63/2021Notice and Annexes of Auction No. 11/2021-ANEEL (Reserve Capacity Auction  of  2021)Until October 19, 2021

 

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WHAT’S COMING UP…

 

October 2021 – Simplified Competitive Procedure 2021
New and existing generation projects that have not entered into commercial operation, with  biomass, natural gas and diesel oil thermoelectric  sources, and wind and solar photovoltaic sources.
Notice: ANEEL (to be published)
More information here
October 20, 2021 – Power Purchase Auction – Jirau Energy
Incentivized electricity from wind and/or solar sources in the Free Contracting Environment (“ACL”) with 50% discount on TUST/TUSD.
Notice: JIRAU
More information here
December 3, 2021 – Existing Energy Auctions A-1 and A-2 of 2021
Biomass, domestic coal, process gas, natural gas and other thermoelectric source projects
Notice: ANEEL (to be published)
More information here
December 21, 2021- Reserve Capacity Auction of 2021
Thermoelectric source projects
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.