Brazil: Highlights Of The Changes In The Brazilian Electric Power Sector

With the rationing crisis in year 2001, the then adopted model for the electric power system showed to be ineffectual in assuring the core objectives of any public utility service, that is, reliable supply, fair electricity rates and availability to all1.

Thus, a new - to some, the newest - model was put in place2 - based on its regulatory milestone, Provisional Measure (Medida Provisória - "MP") no. 144, of 12/11/2003, turned into Federal Act no. 10.848, of 3/15/2004.

However, recently enacted rules substantially changed this model, shown below, albeit in a succinct manner.

Ordinance MME 455, of 8/2/2012 - Registration of Energy Purchase and Sale Agreements within the Free Market Environment - ACL

Ordinance MME 455, of 8/2/2012, provides for the registration of Energy Purchase and Sale Agreements executed within the Free Market Environment - ACL.

The Ordinance above plays two essential roles: (i) to discontinue registration of ex post agreements (article 2 of the Ordinance) and (ii) to gather data on energy rates negotiated in the ACL, to enable CCEE (the Electric Energy Trading Chamber) to calculate and publish indicators to increase the levels of transparency and efficiency to the market (article 3 of the Ordinance).

For a more detailed clarification on the issues addressed in the Ordinance, some brief explanations are required.

As known, all electric power trading agreements, irrespective of the environment - whether Regulated or Free Market Environments - ACR or ALC, must be registered with CCEE, pursuant to Decree 5.163, of 7/30/2004.

The issue on registration was addressed in three different moments, allowing a gradual adjustment of the market to the new rules.

Prior to Ordinance MME 455, of 8/2/2012, and until 11/1/2012 (date set by the Ordinance), the energy trading agreements negotiated in the ACL had to be registered by no later than the month following the month of supply (MS+9du) - the so-called ex post registration - , while the quantity of energy for a certain month could be subject to adjustment after consumption metering up to the 11th business day following the month of supply (MS+11du). This registration was made every month at CCEE.

From that date through 6/30/2013, the electric power trading agreements negotiated in the ACL must be registered prior to the month of supply - thus becoming an ex ante registration -, however, the adjustment could be made after power consumption metering. To this effect, the agreements must also be registered monthly.

And lastly, as of 7/1/2013, the agreements must be registered prior to the month of supply - therefore, ex ante - and the contract amounts can only be changed before the beginning of the supply, as registration with CCEE will be on a weekly basis.

There were basically two reasons for such change: to end distortions and abuses identified upon registration of ex post agreements and make the market more efficient, as it happens in foreign energy markets, where shorter-frequency registrations allow correction of registrations of agreements that do not accurately reflect the actual consumption/supply ratio.

The other deep change introduced by Ordinance MME 455, of 8/2/2012 is the requirement as of 7/1/2013 for the parties to also inform the energy price on registration of the energy purchase and sale agreements negotiated in the ACL, further to the information that was already required (amount of energy, supply period, etc.)

Such requirement was justified as a measure to make the ACL more transparent and effective, as CCEE could calculate and publish the energy price index used in the ACL, assuring consistency between the negotiation environments (the ACR has a regulated rate, while the MCP has the PLD) and making it more attractive, as it is expected to become more transparent.

It should be reminded that Ordinance MME 455, of 8/2/2012, treats the price information as confidential, and is to be disclosed only to CCEE and to be kept confidential, with the sole purpose of enabling CCEE to calculate and publish the price index used in the ACL.

This aspect of the Ordinance is going through criticisms, on allegations that the imposition to inform the negotiated price violates one of the main characteristics of the ACL, that is, free negotiation and free price determination, given that their prices tend to be indexed by CCEE, that is, a type of intervention by the institutional bodies in the market.

Another criticism against this Ordinance is that the Ministry of Mines and Energy, the body performing governmental activities, regulated technical matters concerning energy trading, which should be dealt with by the regulatory agency (article 3, XIV, Law no. 9.427/1996).

Federal Act 12.767, of 12/27/2012 (conversion of MP 577/12) - Intervention in public utility companies

Federal Act 12.767, of 12/27/2012, basically provides for two aspects: (i) the discontinuance of the concession and rendering of temporary electric power public services and (ii) intervention in electric power utility companies, to adjust the quality of the service.

The first aspect brings no new significantly controversial provision, as it only regulates the manner of temporary electric power utility services rendering in cases of forfeiture, bankruptcy or discontinuance of the concessionaire.

The second aspect, in turn, raised several discussions on ANEEL's intervention in electric power utility companies, to assure the proper provision of services and fulfillment of the applicable contractual and legal rules.

The intervention is no news, as articles 32 through 34, Law no. 8.987, of 2/13/1995, already addressed the possibility of an intervention to assure and adjust the provision of public utility services and the full compliance with the agreement and the applicable law. As compared to Law 8.987, of 2/13/1995, however the piece of legislation at issue detailed the intervention procedure.

The major changes brought by such law, resulting from the concrete situation of some concessionaires, would be (i) the impossibility to subject the concessionaire to a court-supervised or out-of-court restructuring (similar to US Commercial Code's Chapter 11) during effectiveness of the concession, as well as (ii) the freezing of assets held by the utility company officers during the intervention period or in case of discontinuance of the concession in view of forfeiture, bankruptcy or liquidation of the utility company, until identification of their actual liabilities.

The second aspect specifically, is bringing uneasiness to the market, as the managers end up with a "preventive punishment" during interventions and cannot do anything until identification of liabilities, which may take more than 2 years.

Federal Act 12.783, of 1/11/2013 (conversion of MP 579/12) - Renewal of the Concessions

Perhaps the most discussed change in the sector is defined by Federal Act 12.783, of 1/11/2013, which provides for the renewal of electric power service concessions, further to the reduction in electric power rates.

As of enactment of MP 579/12, of strong political nature, the provisions therein raised much criticism, with debates on the constitutionality of such measure, as it addressed the matter in a provisional measure (MP, which even ruled out a previous debate in the Congress) and renewed concessions that had already been extended once.

Anyhow, the MP was turned into Law and brought deep changes in the market model currently in effect in the country.

The first major change concerned the renewal of the concession for electric power generation services, which depended on the acceptance of a series of conditions by the utility companies applying for renewal of their concessions.

One of the most important conditions is participation in the so-called quota system, where quotas of the physical guarantee of utility companies with renewed concessions are to be allocated to electric power distributors, which would be remunerated only for the operation & maintenance (O&M) costs, given that they would receive a compensation for the non-amortized investments made on the assets related to the public utility service provided. This reduction is to be transferred to consumers in general, by means of reduced electric energy rates.

Several criticisms were made to this system, which even ended up creating a "special" generator, which did not fit within the definitions of sector agents, introduced by Decree 5.163, of 7/30/2004.

Moreover, unfavorable remarks were made as to consequences that had not been provided for, such as the unpredicted situations to generating companies that did not agree to the renewal and thus were not subject to the conditions provided for in the system. Such fact was, to a certain extent, remedied by MME Ordinance 117, of 4/5/2013.

The same renewal was offered to power transmission companies, which were compensated for non-amortized investments on assets, and started to adopt a rate based on O&M. It should be stressed that the issue on compensation to transmission companies, which considered all existing assets on May 31, 2000 as amortized, raised so much uneasiness and a considerable pressure by the government, that the provision on such issue was amended by Provisional Measure 591, of 12/29/2012.

Another deep change introduced by this Law was the electric energy rate reduction through reduced charges, e.g., exclusion of the payment of a Global Reversion Reserve - RGR to some agents of the sector.

This reduction raised criticism as to possible uncertainty and lack of predictability to the electric system, in the long-term, as the charges would be required for maintenance of the system in years to come.

This Federal Act introduced further major changes, such as the possibility for free consumers to assign surpluses and the extension of the term for special consumers (those who chose to use energy enjoying governmental incentives for being of clean sources) to return to the ACR. Such changes also raised debates and a certain uneasiness to some sector agents.

ANNEL Resolution 531, of 12/21/2012 - Change in the Financial Securities Calculation Method

An agent negotiating energy under the CCEE system must contribute with financial securities that in a certain way mitigate the risk of a possible exposure in the MCP (the so-called short transaction).

The main change, among others, to end or at least mitigate the "loopholes" in the previous security contribution system, is the energy purchaser's liability for the seller's credibility and fulfillment of the agreement.

The reason why is because in case the security offered by seller is not sufficient for the sale made, the registered sales agreement will be adjusted to conform to the security offered, whereas the purchaser must seek a means to compose its reduced security with the adjustment made by CCEE, that is, the amount of energy sold by an agent will be reduced and be equal to the guarantee offered, in case the guarantee is insufficient for the sale made, and purchaser will bear the consequences of such reduction, including a possible exposure in the MCP (short position).

These are a series of changes, some of which yet to be fully implemented, such as the imposition of a financial institution to guarantee the agent's operating limits and the establishment of a fund to guarantee the electric power market, designed to bring it closer to the system currently followed by financial markets.

CNPE Resolution 3, Of 3/6/2013 - Payment Of The Cost Resulting From Deployment Of Power Plants Off The Cost-Based Merit System In View Of Energy Security

For energy security purposes the ONS may deploy power plants off the cost-based merit system to assure the energy security of the system, that is, power plants with a higher generation cost (usually thermal electric plants), so as to assure the supply of energy to the entire country.

One of the events imposing such action by the ONS is a long-lasting drought which jeopardizes the reservoirs of the hydroelectric power plants (which normally have lower generation costs), such as those faced in late 2012 and early 2013.

With such resolution, CNPE decided for the provisional sharing of the costs to deploy thermal electric plants, which is then borne through the System Service Charges - ESS (50% of it), and even imposed an order for the power generation companies to pay the charge (previously paid only within the ACR system and by free consumers) and the differences between the recently established PLD1 and PLDfinal (the remaining 50%).

The PLD1 is used by agents negotiating surpluses in the MCP (long), that is, those that sold their energy through specific registered agreements. This PLD does not take into account the power generation extra costs resulting from deployment of power plants to assure the energy security.

The PLDfinal, in turn, is used by agents with an exposure (short) in the MCP, that is, agents that sold more energy than they had. This amount would include the costs of the energy generated by power plants deployed off the cost-based merit system.

These are some of the several changes introduced in the Brazilian electric power system as of establishment of the current model, which in turn raised several criticisms and have a potential to bring significant consequences to the market, either good or bad. Time will tell.


1 To this effect: TOLMASQUIM, Maurício T. Novo Modelo do Setor Elétrico Brasileiro, [New Model for the Brazilian Electric Power Sector] Synergia Editora, 2011, page 21 et seq.

2 PACHECO, Adriane Cristina Spicciati. A Contratação da Compra e Venda de energia Elétrica pelas Concessionárias de Distribuição [The Electric Power Purchase and Sale Agreements by Distribution Concessionaire], sinRegula ção Jurídica do Setor Elétrico, Coordenação LANDAU, Helena.,Lumen Juris Editora, 2006, page 377

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions