BRAZIL Trends and Developments Contributed by: Márcio Pina Marques, Marina Cristina Rios Silveira de Oliveira and Gustavo Assis de Oliveira, Advocacia Bettiol
Regulatory Oversight, Asset Control and the Formation of Legitimate Expectations Beyond the legal framework governing compensa- tion at the end of concessions, the Brazilian electric- ity transmission model has been shaped by a robust system of regulatory oversight, which plays a deci- sive role in the formation of legitimate expectations. Among ANEEL’s responsibilities is a continuous duty to supervise, validate and monitor the economic and asset-related dimensions of concessionaires’ activi- ties. In this context, the Public Administration has con- sistently required, audited and accepted the Asset Control Reports ( Relatórios de Controle Patrimonial or RCP), the Standardized Monthly Trial Balance ( Bal- ancete Mensal Padronizado or BMP) and the Annual Accounts Report ( Relatório Anual do Novo PAC ) sub - mitted by concessionaires, which include balances yet to be amortised and calculated based on depreciation rates defined by ANEEL itself and on the technical useful life of the equipment, in accordance with the MCSE and the MCPSE. The interaction between regulatory accounting and corporate financial reporting has been further rein- forced by institutional co-operation between ANEEL and the Brazilian Securities and Exchange Com- mission ( Comissão de Valores Mobiliários or CVM). Through a co-operation agreement executed in 2011 and still in force, the CVM oversees the proper incor- poration of these criteria into financial statements, issuance prospectuses, periodic reports and other disclosures required in the capital markets. As a result, the sectoral regulation exercised by ANEEL produces effects that are also relevant to the functioning of the securities market. Through this process, ANEEL has not only supervised compliance with the applicable rules, but has also, in practice, endorsed the economic assumptions under- lying the recovery of investments over the life cycle of the concession. This has strengthened the confidence of investors, lenders and market analysts in regula- tory data as a legitimate source of information for risk assessment, financing structures and capital pricing, thereby supporting long-term investment decisions.
It is also important to emphasise that the legal frame- work has never equated the contractual term of the concession with the complete economic exhaustion of assets. Although Law No 9,074/1995 refers to concession terms associated with the amortisation of investments, this provision has always been inter- preted in a systematic and harmonious manner with the broader legal framework, rather than as a limita- tion on the right to compensation. This interpretation has also been consolidated in administrative practice. The Federal Attorney’s Office has acknowledged that, although investments are generally expected to be recovered over the course of the concession, in the exceptional event that, at the end of the concession term, the concessionaire’s investments have not been fully amortised, the grant- ing authority has the obligation to pay compensation for the remaining balance. The absence of compen- sation in such circumstances, as highlighted by the Federal Attorney’s Office, would constitute unjust enrichment of the granting authority and, ultimately, a form of indirect expropriation without compensation (Legal Opinion No 00237/2015/PFANEEL/PGF/AGU and Legal Opinion No 328/2011/PGE/ANEEL). The former National Department of Water and Elec- tric Energy ( Departamento Nacional de Águas e Ener- gia Elétrica or DNAEE) and ANEEL have historically established depreciation rates linked to the techni- cal useful life of assets, as set forth in the Electricity Sector Accounting Manual ( Manual de Contabilidade do Setor Elétrico or MCSE) and the Electricity Sector Asset Control Manual ( Manual de Controle Patrimo- nial do Setor Elétrico or MCPSE). These instruments, which are binding on concessionaires, establish that asset accounting must follow the technical useful life of the equipment. In this context, the treatment of depreciation and compensation in transmission concessions reflects the concrete application of constitutional guarantees, express statutory provisions, and an interpretative consensus consolidated over time, aimed at balanc- ing the continuity and adequacy of public service pro- vision with the protection of invested private capital.
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