The Energy Regulation and Markets Review - Stikeman Elliott

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Brazil
Ownership and market access restrictions
As a general rule, the companies that operate in the BPS should be located within Brazilian
territory. With respect to the foreign investment made in the BPS, Brazilian legislation
does not restrict the participation of foreign companies in operational companies.
However, with the new regulatory model currently in force, there are strong rules
to separate the activities carried out by the agents from the BPS. Such restrictions preserve
the competitiveness of the power market and also the lowest power rates for the sector.
In this sense, power distribution concessionaires cannot develop any activity related to
power generation, transmission of energy or trading of energy; they can only acquire
energy through an auction procedure based on the lowest price and can only sell energy
to captive power consumers, in accordance with the power rate determined by ANEEL.
On the other hand, power generation companies cannot be either associated
with 8 or controlled by power distribution companies.
iv Transfers of control and assignments
The concession, permission or authorisation of electric power services granted to an
agent is personal. Therefore, any change of control is subject to the prior approval of the
granting authority.
In this sense, Law No. 8,987/1995, 9 which provides the general rules for the
concessions and permissions in the public services, requires the prior consent of the
granting authority in case of a direct or indirect change in the concessionaire’s corporate
control. If this procedure is not complied with, the concessionaire may be subject to
penalties or may even lose the concession. ANEEL’s board of directors has the delegated
powers to review and grant such consent after the study of its Office of Economic and
Financial Supervision.
Participants of the BPS have called for clearer rules, particularly with respect to
trading agents; a new normative resolution relating to the rules applicable to obtaining
prior consent for the transfer of corporate control of agents has recently been subject to
a public hearing. 10
III
TRANSMISSION/TRANSPORTATION and DISTRIBUTION
SERVICES
In the BPS, the services of energy transmission and distribution are considered natural
monopolies, since competition in these segments does not result in any lowering of
electricity rates.
For that reason, transmission and distribution services providers are entitled
to exclusively operate in their respective areas of concession, as provided for in their
concession contracts.
8 A company in which the investor holds material influence (Article 243 of Law 6,404/1976).
9 ‘The concession or corporate control transfer of the concessionaire without prior consent of the
granting authority results in forfeiture of the concession.’
10 ANEEL Public Hearing No. 65/2011.
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