Useful pages on the regulator website
- Main website: https://www.aneel.gov.br/
- Regulation of the Electric Energy Market: https://www.aneel.gov.br/mercado-de-eletricidade
- André Pepitone da Nóbrega: General Director
- Fabricio Bernardo Pereira: Assistant to the General Director
- Efrain Pereira da Cruz: Director
- Júlio César Rezende Ferraz: Director
The National Electric Power Agency (ANEEL) was created by ex-President Fernando Henrique Cardoso through the enactment of Law 9,427, of 26 December 1996. It is overseen by the Department of Mines and Energy (Ministério de Minas e Energia), which, in turn, is overseen by the National Council of Energy Policy (Conselho Nacional de Política Energetica).
ANEEL was created to regulate and oversee the production, transmission, distribution and commerce of electric power in accordance with the directives received from the Department of Mines and Energy. It has broad powers to oversee agreements with private parties concerning electric power, acting as mediator in conflicts between entities of the electric power system, issuing administrative regulations directed to the electric energy sector, and applying penalties and other sanctions to those that do not fulfil its requirements.
It has also the power to issue rules and to regulate proceedings for the trading of electric energy in the regulated and free markets and to define the tariffs that should be applied to the regulated electric energy sector.
ANEEL has one general director and four other sector directors, all of whom are nominated by the President of Brazil for a non-concomitant five-year mandate.
Reporting and disclosure obligations
ANEEL has three oversight branches:
- Superintendence of Oversight of Generation Services (Superintendência de Fiscalização de Serviços de Geração);
- Superintendence of Oversight of Electric Services (Superintendência de Fiscalização de Serviços de Eletricidade); and
- Superintendence of Financial and Economic Oversight (Superintendência de Fiscalização Econômica e Financeira).
Through these three branches, the agency oversees sector agreements, and its contractual and statutory obligations to guarantee the provision of good-quality electric services in the Brazilian market.
ANEEL has broad powers to initiate administrative proceedings against all participants in the electric market to make sure that all fulfil their contractual and statutory obligations. These administrative proceedings are subject to due process and may result in the imposition of sanctions on the market participants.
Monetary sanctions and recent behaviour
The monetary sanctions that can be imposed by ANEEL are regulated through Normative Resolution 846, of 11 June 2019. All market players are subject to sanctions in accordance with the Normative Statute, including entities responsible for the operation of the system or for the commercialisation of energy, and entities managing the financial resources collected from sectoral levies, except for the Itaipu Hydropower Plant which, given its binational nature, is subject to special rules.
The majority of ANEEL sanctions consist of the imposition of penalties on market participants. Between 2007 and 2013, the agency imposed around 320 penalties each year. The penalties are calculated as a percentage of the party’s net operational revenue.
Non-monetary sanctioning powers and behaviour
The non-monetary sanctions typically imposed by ANEEL are:
- declarations of obligations to perform or no perform certain activities;
- banning of facilities;
- suspension from public bidding;
- withdrawal of authorisations for project development or existing project functions;
- interventions to guarantee proper functioning; and
- cancellation of contracts with the government to generate or distribute energy.
Recent and upcoming developments
In 2019, the federal government enacted Law 13,848, of 25 July 2019, which requires that any changes made by regulatory bodies should be preceded by consultations with the public.
Currently, there are a few changes being analysed by ANEEL, most of which are in respect of levy prices. The agency is also making efforts to develop independent generation facilities for smaller consumers and the production of clean energy (despite raising tariffs for these types of consumers at the beginning of 2020).
One of the most important changes being considered is the creation of market makers for the free market of electric power; that is, to limit the access of small consumers to the free market by creating consolidators to deal on behalf of these consumers. These consumers would then purchase their energy from the consolidators. There are also discussions being held at the Chamber of Electric Power Commercialisation (Câmara de Comercialização de Energia Elétrica) for the creation of a clearing house for energy purchase contracts, given that this market is opaque nowadays and lacks a system of financial guarantees and deposits for margin calls that would impose market and financial discipline on participants.
The federal government, through efforts promoted by ANEEL, published Decree 10,350, of 18 May 2020, to establish rules and aid to energy distributors in consequence of the covid-19 pandemic. In essence, the Decree allows that the CCEE executes a loan agreement with the National Bank for Economic Development (Banco Nacional do Desenvolvimento Econômico) to provide help for energy distributors. This is especially relevant as the government requires that energy distributors may not temporarily exercise power to interrupt the power supply to defaulting clients.
The aid provided to energy distributors will also benefit energy generators since one of the covenants to obtain a loan is that energy distributors may not reduce their energy contracts with generators. Energy distributors will also have to limit the dividends paid to their shareholders if the latter default on any of their energy contracts.
The energy market in Brazil is highly concentrated and the typical consumer has no choice of who to buy energy from. We think it is important for Brazil to expand its trade market as a way to signal the market and it may achieve that by creating an energy clearing house and strict rules and guarantees for market participants. Following these changes, the energy market should have greater incentives for expansion and diversification of the generating capacity.
Interacting with the regulator
We recommend that clients reach out to their local branch of the federal body. Depending on the issues to be pursued, there are different departments within the Agency that specialise in particular matters, such as development, studies, regulations, and management of concessions.
It is very important that the private sector engages with ANEEL in the consultations that the Agency requires for any proposed revisions or changes to regulations. These discussions are typically highly technical, but the agency will be responsive to participants’ concerns and points of view.
Notes for foreign investors
Currently in Brazil there are no rules that impose limits on foreign companies being active in the Brazilian energy market (since 2016, there have been considerable acquisitions made by foreigners – mainly Chinese, Italians and Spanish – of Brazilian energy distribution companies). However, given that the energy sector in Brazil is extremely complex and regulated, prior to making an investment decision, foreigners should seek formal advice from local counsel and technicians.
Other regulators it works closely with
Operador Nacional do Sistema Elétrico
National Operator of the Electric System (Brazil)
As well as ANEEL, it is necessary for generators and operators of electric power transmission lines to work closely with the National Operator of the Electric System (ONS), Brazil’s independent system operator. This non-profit private entity was created under Law 9,648, of 27 May 1998, and is responsible for the execution, control and coordination of generation and transmission operations of the Integrated National System (Sistema Interligado Nacional). Its main function is to guarantee a continuous electric power supply nationwide. The majority of generation facilities in Brazil are hydropower plants that depend on the respective levels of water in each facility. Therefore, it is necessary to shift the distribution of electric power according to the production levels of the hydropower plants, thereby mitigating the risk of power shortages in certain regions resulting from natural causes.
ANEEL oversees and regulates the ONS.
Câmara de Comercialização de Energia Elétrica
Chamber of Electric Power Commercialisation (Brazil)
It is important to highlight that large consumers of electric energy may access the free market of electric power, which functions within the exchange framework operated by the Chamber of Electric Power Commercialisation, which is also overseen and regulated by ANEEL.