The Energy Regulation and Markets Review - Stikeman Elliott

Brazil
invested in the sector, together with the promotion of rate regulation and the continuity
of power supply growth. On such basis, Law No. 10,848/2004 confirmed and developed
both the free power market and the regulated power market.
Under the regulated power market, distribution concessionaires should have their
projected power demand fully contracted, by means of auctions based on the lowest
price. The price for the acquisition of the energy resulting from the auctions is reflected
in the adjustment of the rate approved by ANEEL.
The EPE, based on its studies, establishes a maximum price for the sale of
the electric power by the generators, who then offer to sell energy at the lowest price
considered viable by them. Such procedure protects rate regulation, reducing the final
rate for the captive consumers.
On the other hand, under the free power market free power consumers and
power-trading companies should have all of their demand contracted through power
and sale agreements registered with the CCEE. They may buy energy from any power
generator or other power trading company.
In both power markets there is the obligation for the energy user to contract its
full demand. This rule promotes transactions in the sector and reduces the risks related
to changes in the power price. This structure brings certain comfort to the agents in the
sector since it promotes the signing of power agreements, securing the receivables for
new investments. On the other hand, the government has the ability to decide what type
of energy it intends to promote through the studies prepared by EPE for the auctions,
also protecting the possible lowest price.
ii Energy market rules and regulation
Following the trend in other countries, the BPS protects the natural monopolies
granted to the concessionaires of distribution and transmission services and promotes
competition among the power generators and trading companies.
The Electric Power Commercialisation Convention and the CCEE
Commercialisation Rules and Procedures regulate the sale of electric power. Basically,
all power transactions should be made through power agreements, whose volumes are
registered with CCEE. The CCEE Commercialisation Rules and Procedures establish
the general terms and conditions related to the accounting rules, contract and physical
guarantees, penalties, liquidation and contracting of power reserve and procedures to
make the registration of the contracts. It also establishes the settlement price for the
energy and the forms of disclosure of the results.
iii Contracts for sale of energy
In the BPS, there are two types of contract: the purchase and sale agreement in the
regulated power market (‘regulated contract’) and the power purchase agreement in the
free power market (‘free power purchase agreement’).
The parties, observing the necessity to register its contracted volume with the
CCEE, may negotiate the terms and conditions of a free power purchase agreement;
however, the parties do not negotiate the terms and conditions of the regulated contract.
When the MME determines an auction is going to take place, a public hearing is held
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