BRAZIL Trends and Developments Contributed by: Márcio Pina Marques, Marina Cristina Rios Silveira de Oliveira and Gustavo Assis de Oliveira, Advocacia Bettiol
Regulatory Limits and Legitimate Expectations in Electricity Transmission Concessions: Asset Compensation and Investment Protection The debate surrounding compensation at the end of electricity transmission concessions in Brazil has re-emerged as one of the most sensitive regulatory issues on the sector’s current agenda. Historically, the Brazilian regulatory model for electric- ity transmission has been structured around a clear economic and accounting rationale: assets are remu- nerated and depreciated according to their technical useful life, based on depreciation rates defined and consistently applied by the regulator. This approach has shaped tariff calculations and the regulatory asset base and, above all, has guided the assessment of concessionaires’ financial statements, financing struc- tures, and investment decisions by both domestic and international capital providers. However, recent interpretative changes that discon- nect compensation from the technical useful life of assets – particularly when applied to contracts entered into under different regulatory assumptions – raise structural concerns regarding legal certainty, regulatory stability, and the proper allocation of risks within concession-based infrastructure models. The issue reflects a challenge faced by regulatory systems worldwide: how to reconcile the necessary evolution of regulation with the preservation of legitimately formed expectations in arrangements designed for long-term horizons. In Brazil, discussions between the National Electricity Regulatory Agency ( Agência Nacional de Energia Elé- trica or ANEEL) and society have been further devel- oped within the framework of Public Consultation No 43/2025, which, among other issues, addresses the criteria for compensating remaining assets. Historical Foundations of Asset Compensation in Transmission Concessions: Legal and Regulatory Framework Upon the expiration of the contractual term, the con- cession is terminated and the assets allocated to the provision of the service revert to the granting author- ity. This mechanism of reversion, however, has never implied that the mere end of the contractual term
would automatically result in the economic exhaus- tion of the assets used in the provision of the service. This observation is particularly relevant in the elec- tricity transmission sector, where assets typically have long technically useful lives that, in many cases, exceed the duration of the concession itself. From a legal perspective, the Brazilian framework applicable to the termination of public service con- cessions – under which reversible assets that have not been fully depreciated or amortised at the end of the concession must be compensated – has always been grounded in a clear constitutional and statutory struc- ture aimed at protecting property rights and ensuring the continuity of the service. At the constitutional level, the guarantee of fair com- pensation derives from the right to private property, granted by the constituent legislator as a fundamental right under Article 5, items XXII and XXIV, of the Brazil- ian Federal Constitution of 1988. This right is further reinforced as a structural principle of the national eco- nomic order by Article 170, item II, of the Constitution, which enshrines private property as an essential ele- ment of economic activity. Building upon this constitutional foundation, the statu- tory framework governing concessions has consist- ently translated these guarantees into operational rules. Law No 8,987/1995 expressly establishes that, upon the termination of the concession, the reversion of assets associated with the service must be accom- panied by compensation for investments that have not yet been amortised or depreciated. Article 36 of that law is unequivocal in linking the reversion of assets to the obligation of compensation whenever residual asset value remains. In the electricity sector, this logic is reiterated by sector-specific legislation. Article 14 of Law No 9,427/1996, which created ANEEL, incorporates into the economic and financial regime of electricity con- cessions the responsibility of the concessionaire to carry out investments in works and facilities that will return to the granting authority at the end of the con- tract, while guaranteeing compensation in the cases and under the conditions provided by law.
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