End of R$9bn litigation reopens electricity market
The Brazilian Electricity Regulatory Agency (Aneel) defined on Tuesday the last details of the proposal, awaited by the sector for at least five years, to end litigation motivated by power generators that refused to shoulder losses related to production at levels below those stablished in contract. The problem will be addressed with the renegotiation of the so-called generation scaling factor, or GSF, which sets how much of their capacity hydropower plants can actually generate.
The Aneel command unanimously approved the rule that indicates the step-by-step for participating, the methodology to calculate the compensation and the timeframes. To take part in the renegotiation, power generators must relinquish lawsuits and any claim. On the other hand, they will be compensated through the extension of the hydropower dams' concessions.
When presenting the resolution proposal, Aneel Director Elisa Bastos, who handled the case, said the elimination of open debts because of provisional court rulings will be capable of returning the "normality" and the "liquidity" to the short-term market.
"The expectation is of restoring the legal security of the power market," Ms. Bastos said when concluding the reading of her vote in the board meeting.
Aneel Director General André Pepitone assured that the agreements would not affect electricity prices, precisely because the compensation would only include extension of the concessions.
Hydropower plants started grappling with this issue in 2012, when water reservoirs had a sharp reduction. With lower water levels, the plants are forced to generate less and need to buy electricity on the spot market or from costlier thermal plants in order to fulfill supply contracts. The situation aggravated in 2014, when a drought further reduced the reservoir levels. In 2015, generators began a war of lawsuits that is currently locking up about R$9 billion in financial settlements at the Electric Energy Trading Chamber (CCEE).
The government had already managed to renegotiate this cost with hydropower generators of the regulated market, which have long-term contracts with distributing concessionaires. Generators that trade on the spot market didn't like the first proposal. The new proposal, which Congress passed in the first half and the Aneel regulated on Tuesday, will cater to this second group.
Despite the R$9 billion locked up in the CCEE, the net debt is about R$5 billion. This is because some agents have accounting...
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