MME opens Public Consultation on the opening of the free market

The Ministry of Mines and Energy (“MME”) published today, July 26, 2022, Ordinance No. 672/GM/MME, opening Public Consultation No. 131/2022 and announcing a Draft Ordinance on the reduction of the charge limit for the contracting of electricity by consumers in the free market.

Interested parties can submit contributions by August 25, 2022.

The Draft provides that:

• As of January 01, 2024 consumers served with a voltage of 2.3kV or higher can choose to purchase electricity from any concessionaire, permit holder or authorized electricity provider in the National Interconnected System; and
• Such consumers must be represented by a retail trader before the Electric Energy Trading Chamber (“CCEE”).

Currently, consumers with a voltage greater than or equal to 2,3 kV belong to Group A, subgroup A4 (average voltage consumers), which is currently served by the energy distributor, in accordance with ANEEL Normative Rule No. 1000/2021, which establishes the rules on the provision of the Electricity Transmission Services.

In this regard, it should be noted that the definition of the free consumer was established in 1995, through Law No 9,074/1995, when the minimum charge requirement was of 10.000 kW. Five years later, the minimum charge requirement became 3.000 kV.

In 2019, the free market opening movement commenced, when MME Ordinance No. 514/2018 established the decrease in consumer charge limits, followed by MME Ordinance No. 465/2019.

According to MME Ordinance No. 514/2018, as of January, 2021, consumers served with a voltage of 2.3kV or higher can choose to purchase electricity from any concessionaire, permit holder or authorized electricity provider in the National Interconnected System. This charge limit has become 1.000 kV as of January 2022, and in January, 2023, such limit will decrease to 500kV.

Furthermore, MME Ordinance No. 514/2018 states that, by January 2022, ANEEL and CCEE were supposed to present a study on the necessary regulatory measures in order to enable the opening of the free market for consumers with a charge of less than 500 kW, including a proposed schedule of market opening in January, 2024. Ordinance No. 672/GM/MME is introduced in the abovementioned context.

In response to Ordinance No. 465/2019, the following documents were drafted by the National Electricity Regulatory Agency (“ANEEL”), the CCEE and the MME, and introduced in this Public Consultation:

• Conceptual proposal for the opening of the free market, drafted by the CCEE in September 2021;
• Analysis of scenarios and schedule for the opening of the free market, drafted by the CCEE in March, 2022;
• Study drafted by ANEEL in January 2022, on the regulatory measures necessary to enable the opening of the free market for consumers with a charge of less than 500 kW, including the regulated energy trader, and a proposed opening schedule, initiating on January 01, 2024; and
• Evaluation on ANEEL and CCEE studies, drafted by the MME in July 2022.

With regard to the wording introduced in the draft ordinance in Ordinance No. 672/GM/MME and which, in our view, requires correction, is that paragraph 2 of Art. 1 states that all consumers served with a voltage of 2.3kV or higher and that can opt to purchase electricity from any supplier from 2024 onwards, “will be represented by a retail agent.”

Although the regulator’s intention is to ensure that only consumers served with a load of less than 500kV be represented by a retail agent, the wording of the draft can result in uncertainties in regard to consumers whose charge is greater than 500kV and who potentially transition to the free market after January 2024.

As such, it is our understanding that paragraph 2 of Art. 1 of the draft ordinance must be adjusted in order to clarify that only consumers whose load is below 500kV will be represented by a retail agent.

Read in full – Ordinance

Read in full – MME Public Consultation No. 131/2022