BRAZIL Law and Practice Contributed by: Débora Yanasse, Bruno Salzano and Luisa Tortolano Barreto, Tauil & Chequer Advogados in association with Mayer Brown
such plants by the first quarter of 2026, with supply commencement scheduled for 2032, 2033 and 2034. It further provides that the CNPE will be responsible for determining the need to contract new energy aris- ing from hydrogen-from-ethanol in the north-east as well as from wind farms in the south. The Law also allows the CCEE to participate in oth- er energy markets and provide additional services, including contract guarantee management, registra- tion management and energy certification, subject to administrative, financial and accounting separation. The Law further authorises the CCEE to contract com- panies and natural persons to monitor market agents and operations, and it provides that such companies and persons, as well as the managers of the market agents, are directly liable, civilly and administratively, for damages resulting from wilful misconduct or gross negligence, as well as violations of laws and regula- tions. Finally, the Law also provides for a mechanism for the settlement of the remaining amounts under dispute regarding hydrological risks. Capacity Reserve Auctions (LRCAP) The Capacity Reserve Auction ( Leilão de Reserva de Capacidade or LRCAP) is a mechanism designed to ensure the operational reliability of the SIN by remu- nerating the availability of generation capacity, rather than energy effectively generated. Contracted plants must remain available for dispatch by the ONS and must comply with minimum operational flexibility requirements. In March 2026, the second LRCAP was conducted in two sessions. The first auction (18 March 2026) targeted new and existing natural gas-fired thermal plants, existing coal-fired plants and expansions of existing hydroelectric plants, resulting in the contract- ing of approximately 18,977 MW from 100 projects, with estimated investments of BRL64 billion and total fixed revenue of BRL39 billion to the winning bidders. The second auction (20 March 2026) targeted existing thermal plants fuelled by fuel oil, diesel and biodiesel, with discounts exceeding 50% relative to the ceiling prices. Winning bidders will execute Capacity Reserve Power Agreements ( Contratos de Potência de Reser-
va de Capacidade or CRCAPs) with the CCEE, with contract terms of ten years for existing plants and 15 years for new projects, a fixed annual revenue adjusted by IPCA, and supply commencement dates ranging from 2026 to 2031. Under the CRCAPs, dispatch risk is allocated entirely to the generator, which must comply with ONS dis- patch instructions and meet the flexibility parameters declared at registration. Contracted thermal plants must be fully flexible (without minimum generation inflexibility) and demonstrate fuel supply availability for seven years plus an additional five years or the remaining CRCAP term. For natural gas-fired plants connected to the Natural Gas Transport System ( Sis- tema de Transporte de Gás Natural or STGN), CRCAP execution is conditional upon evidence of firm gas transport capacity sufficient for at least 70% of maxi- mum continuous operation, as confirmed with the National Agency for Petroleum, Natural Gas and Bio- fuels ( Agência Nacional do Petróleo , Gás Natural e Biocombustíveis or ANP). The LRCAP 2026 was preceded by legal uncertainty. The auction was originally planned for 2025 but can- celled by the MME following judicial disputes over the pricing methodology. The MME subsequently refor- mulated the guidelines through Normative Ordinanc- es No 118 and No 119 dated 23 October 2025 and rescheduled the auctions for March 2026. Following the auctions, the Federal Court of Accounts ( Tribunal de Contas da União or TCU) initiated proceedings to examine pricing, competitiveness and tariff impacts, and certain sector associations filed judicial actions challenging the results. On 21 May 2026, ANEEL approved the confirmation of the LRCAP results and the adjudication of the contracted projects, conclud- ing that there was no legal impediment to proceeding with the contracts notwithstanding the ongoing TCU analysis and the non-binding recommendation of the Federal Prosecution Service ( Ministério Público Fed- eral or MPF) to suspend the process. 1.2 Principal State-Owned or Investor-Owned Entities Federal/State-Owned Entities A few companies are still under the control of federal states, as follows:
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