BRAZIL Law and Practice Contributed by: Débora Yanasse, Bruno Salzano, Luisa Tortolano Barreto and Julia Braga, Tauil & Chequer Advogados in association with Mayer Brown
ber ( Câmara de Comercialização de Energia Elétrica or CCEE), a non-profit private entity responsible for registering, accounting for and clearing all energy transactions in both markets; • the Energy Research Company ( Empresa de Pesquisa Energética or EPE), a federal public company conducting strategic studies and research in the energy sector; and • the Power Sector Monitoring Committee ( Comitê de Monitoramento do Setor Elétrico or CMSE), an executive branch committee monitoring power service conditions and recommending measures to ensure power supply safety. The law also expanded the National Energy Pol- icy Council ( Conselho Nacional de Política Ener- gética or CNPE) role in advising the president on national energy policy. Law No 10,848/2004 further unbundled the industry by prohibiting power distribution con- cessionaires from engaging in generation and transmission, selling to free-market customers, holding equity in other companies, or performing activities unrelated to distribution. In 2012, the government enacted: • Provisional Measure No 577, later converted into Law No 12,767/2012; and • Provisional Measure No 579, later converted into Law No 12,783/2013 (the “Concession Renewal Law”). Law No 12,767/2012 required the granting authority to provide power services if a conces- sion ended and to set new rules for intervention to ensure adequate utility service.
The Concession Renewal Law changed the rules for renewing concession agreements. Gen- eration and distribution concessionaires could renew agreements that had been effective since 1995, and transmission concessionaires could renew agreements effective from before and after 1995 for another 30 years, provided they accepted a new tariff regime set by ANEEL. Re-Allocation of Hydrological Risks In 2015, Provisional Measure No 688/2015, later converted into Law No 13,203/2015, revised how hydrological risks are allocated among hydroe- lectric power plants under the Energy Realloca- tion Mechanism ( Mecanismo de Realocação de Energia or MRE). In 2014 and 2015, poor hydro- logical conditions caused MRE participants to generate less power than their assured energy ( garantia física ), decreasing their Generating Scaling Factor (GSF), a measurement of the pro- portion of power generated by MRE participants against their respective assured energy. These generation deficits resulted in losses for MRE participants, given their exposure to hydrologi- cal risks. Law No 13,203/2015 introduced an optional mechanism allowing each plant to transfer these risks to final customers by paying a risk premium to the government, along with temporary exten- sions of generation concessions and authorisa- tions to offset losses. However, this option main- ly benefited generators in the regulated market, leaving those selling in the free market largely unassisted. New Re-Allocation of Hydrological Risks The Brazilian government launched a new frame- work with Law No 14,052/2020, and ANEEL Normative Resolution No 895/2020, to address additional structural issues in the MRE, this time specific to the free market. In exchange for with-
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