National Electric Power Agency (Brazil)

Agência Nacional de Energia Elétrica

Country

Location

Regulated area

Brazil

Sao Paulo

Energy & natural resources

Useful pages on the regulator website

Key individuals

  • André Pepitone da Nóbrega: General Director
  • Efrain Pereira da Cruz: Director
  • Elisa Bastos Silva: Director
  • Hélvio Neves Guerra: Director
  • Sandoval de Araújo Feitosa Neto: Director

Regulatory oversight

The National Electric Power Agency (ANEEL) is a special autarchy that regulates the electric power market in Brazil. It was created in 1996 by Federal Law No. 9.427/1996, which further provides for the concession regime for the electric power system.

Federal Decree No. 2.335/1997 which regulates Federal Law No. 9.427, establishes the structure of ANEEL, its positions, committees and branches. Both the Law and the Decree emphasise the administrative and financial autonomy of ANEEL as a means to prevent any detrimental interference of the government in the policies of ANEEL.

The internal regimen of ANEEL is established in the Ministry of Mines and Energy Order No. 349/1997, which provides more detailed descriptions of the competencies of each Branch of the agency and those of the board of directors.

The main purpose of ANEEL is to regulate and oversee the production, transmission, distribution and commercialisation of electric power and to implement the public policies of the sector, in accordance with the directives received from the Ministry of Mines and Energy. It has broad powers to oversee agreements with private parties concerning electric power, to act as mediator in conflicts between entities of the electric power system, to issue administrative regulations directed to the electric power sector and to apply penalties and other sanctions to those that do not fulfil its requirements.

ANEEL is also empowered 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 power sector.

The board of directors of ANEEL is composed of one general director and four sector directors, all of whom are nominated by the President of Brazil for a non-concomitant five-year mandate. The President of Brazil, according to the Federal Constitution, has a four-year mandate, which means that although the President may elect the directors of ANEEL, their mandates will not coincide with the President’s mandate, which gives more autonomy and freedom to their actions.

ANEEL has a very solid presence in the market and is one of the most mature regulating agencies of Brazil, with a strong regulatory system that affords the sector considerable stability.

Reporting and disclosure obligations

The market players that are under ANEEL’s jurisdiction are the concessionaires, licensees and authorised service providers, as well as all entities responsible for the operation of the electric power system, for the sale of electricity or for the management of resources (article 1, of ANEEL Resolution No. 846/2019).

The audit of the system and the players is granted to three oversight branches, one for each specific sector:

  • 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.

Through these three branches, ANEEL oversees sector agreements and its contractual and statutory obligations to guarantee the provision of good-quality electric power services in the Brazilian market.

According to the Ministry of Mines and Energy Order No. 349/1997, the Superintendence of Oversight of Generation Services is competent to audit generation services, considering (i) the implementation or expansion of their operation; (ii) the system operation and energy trading agents; (iii) sectorial charges and government programmes related to generation agents and (iv) compliance with the obligations contained in the concession contracts and authorisations.

Additionally, the Superintendence of Oversight of Electric Services is competent to audit (i) transmission services and facilities, including system operation agents and the analysis of relevant disturbances in the electric system; (ii) compliance with the obligations contained in the distribution concession and permission contracts, especially with regard to the quality of technical and commercial services; (iii) the government programmes related to transmission and distribution agents and (iv) the reports of fixed assets.

In its turn, the Superintendence of Financial and Economic Oversight is competent to audit (i) concessions, permissions and authorisations of electric power services and facilities, including the management of sector funds, as well as commercial and corporate operations; (ii) the economic and financial balance sheets of concessions and permits; (iii) the accounting procedures of the regulated agents and (iv) the National Electric Power System Operator in economic and financial aspects and in the commercialisation activities within the scope of the CCEE.

ANEEL has ample powers to initiate administrative proceedings against all participants in the electric power market to ensure compliance with 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.

The sanctions that can be imposed by ANEEL are regulated by its Resolution No. 846/2019 and the penalties are the following:

  • warning;
  • pecuniary fine;
  • embargo;
  • interdiction;
  • affirmative and/or negative covenants;
  • temporary suspension of participation in bidding processes, as well as impediment to contract with ANEEL;
  • early termination of the concession or permission contract;
  • cancellation of the authorisation; and
  • intervention.

In 2020, ANEEL issued Resolution No. 896/2020, which provides for the indicators and procedures for monitoring efficiency in relation to the economic and financial management of public service concessions for the distribution of electricity, as well as the procedures applicable in the case of non-compliance of the contracts.

Monetary sanctions and recent behaviour

The majority of the sanctions imposed by ANEEL consists of pecuniary fines on market participants. Between 2007 and 2013, the agency imposed around 320 penalties yearly. The penalties are calculated as a percentage of the party’s net operational revenue. Unfortunately, we do not have recent data from ANEEL to provide a more accurate number up to 2021.

In 2020, ANEEL charged Abengoa with the biggest fine in the history of the agency up to the amount of 198,700,000 reais, which corresponds to 10% of Abengoa’s concession contract. The fine was charged for the non-compliance with the services and works established in the concession contract and was applied after the early termination of the concession contract.

Non-monetary sanctioning powers and behaviour

In March 2021, ANEEL decided to commence an administrative proceeding to declare the early termination of the concession contract of CEEE-D, a public company of the State of Rio Grande do Sul.

The administrative proceeding was grounded on non-compliance with the efficiency criteria in economic and financial management of the company for two consecutive years.

However, CEEE-D was privatised in April 2021, which may lead to the cancellation of the administrative proceeding.

Recent and upcoming developments

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.

In 2019, the Ministry of Mines and Energy enacted Order No. 465/2019, which reduces the requirements to become a free consumer. The limits shall change as follows:

  • up to 2021, consumers with a load of 1.500kW or more and any voltage level;
  • up to 2022, consumers with a load of 1.000kW or more and any voltage level.
  • up to 2023, consumers with a load equal to or greater than 500kW and any voltage level.

In addition, a deadline has been set for ANEEL and CCEE to present a study on the regulatory measures necessary to allow the opening of the free market to consumers with a load of less than 500kW, starting in 2024. The deadline for submitting the study is January 2022.

Currently, Brazil has been experiencing scarce rainfall levels that affect electricity generation, which is still highly dependent on hydropower plants. To address this crisis, the federal government, in July 2021, issued Provisional Measure No. 1.055, under which was created the Chamber of Exceptional Rules for Hydroenergy Management (CREG), which is responsible to establish emergency measures for the optimisation of the use of natural resources and for coping with the current situation of water scarcity, to ensure the continuity of the country’s power supply.

The Chamber, which is expected to exist until 30 December, shall create guidelines to establish limits on the use, storage and flow of hydroelectric plants and any associated mitigating measures. The guidelines shall be followed by the departments and entities of the direct and indirect federal government public administration, the National Electric Power System Operator, the Electric Energy Trading Chamber and the electric power generation concessionaires.

In addition, Provisional Measure No. 1.055/2021 allows the contracting of the reserve capacity through simplified competitive procedures, to be established by the Ministry of Mines and Energy.

Challenges

The power sector in Brazil is highly concentrated and the average consumer has no choice of whom to buy energy from. It is important for Brazil to expand its trade market and it may achieve that by creating a power clearing house and strict rules and guarantees for market participants. Following these changes, the power 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
ONS
National Operator of the Electric System (Brazil)

It is important for generators and operators of electric power transmission lines to work closely with the National Operator of the Electric Power System (ONS), Brazil’s independent system operator. This non-profit private entity was created under Federal Law No. 9.648/1998, and is responsible for the execution, control and coordination of generation and transmission operations of the Integrated National System (Sistema Interligado Nacional). The main function of ONS is to guarantee a continuous electric power supply nationwide. Most 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
CCEE
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.

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