e-book Regulation of the Power Sector (Power Systems)

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Total electricity consumed in was terawatt hour TWh , while annual consumption per capita for the same year averaged 2, kWh. Electricity demand is expected to grow an average of 3. In Brazil, capacity addition traditionally lagged behind demand growth. The income elasticity of demand for electricity is estimated by Eletrobras at above unity. Between and , electricity demand increased on average by 5.

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Investment is therefore needed to boost generation and transmission capacity because there is limited excess supply, despite the reduction in demand following the energy rationing program implemented in in response to the energy crisis. Brazil, together with Chile, is the country with the highest access rate in Latin America. Interruption frequency and duration are very close to the averages for the LAC region. In , the average number of interruptions per subscriber was The weighted averages for LAC were 13 interruptions and 14 hours respectively.

ANEEL's function is to regulate and control the generation, transmission and distribution of power in compliance with the existing legislation and with the directives and policies dictated by the Central Government. ANEEL and the Ministry of Environment play almost no part in which investment projects go ahead, but they only influence how projects are executed once the decision has been taken. Both have had their bosses resign rather than supporting infrastructure projects in the Amazon.

The initial role of the operator was to create a single, integrated commercial electricity market, to be regulated under published rules. This role has become more active since now CCEE is in charge of the auction system. Finally, the Power Research Company EPE was created in with the specific mission of developing an integrated long-term planning for the power sector in Brazil.

Its mission is to carry out studies and research services in the planning of the energy sector in areas such as power, oil and natural gas and its derivates, coal, renewable energy resources and energy efficiency, among others. Its work serves as input for the planning and implementation of actions by the Ministry of Energy and Mines in the formulation of the national energy policy [23]. The Brazilian electricity model is fully deregulated, which allows generators to sell all of their "assured energy" via freely negotiated contracts with consumers above 3 MW or via energy auctions administered by CCEE See energy auctions below.

Currently, Brazilian generation supply can be sold under four types of markets: [14]. Old energy represents existing plants that were already contracted in the s, while new energy refers to that energy produced by plants that have not yet been built, or by existing plants that meet certain criteria. In Brazil, large government-controlled companies dominate the electricity sector. Currently, about 27 percent of the generation assets are in the hands of private investors.


Considering the plants under construction, as well as the concessions and licenses already granted by ANEEL, this figure is expected to grow up to 31 percent in the medium term and to reach almost 44 percent over 5—6 years. Private capital participation in the generation business will likely represent 50 percent of the installed capacity in the years to come [3]. Brazil's transmission system is growing in importance since adequate transmission capacity is essential to manage the effects of regional droughts, allowing to move power from areas where rainfall is plentiful.

As a matter of fact, the rationing that occurred in Brazil during See The crisis below , could have largely been averted if there had been adequate transmission capacity between the south excess supply and the southeast severe deficit. Apart from biomass, which accounts for about 3.

However, the potential for wind energy, which is concentrated in the Northeast, is very large. The program aims to increase the participation of wind power sources, biomass sources and small hydropower systems in the supply of the Brazilian grid system through Autonomous Independent Producers PIA. The medium to long-term objective i.

The power sector in Brazil was essentially in government's hands until the early s. The sector had seen remarkable development in the s. However, by the late s, the state-ownership model was on the verge of collapse.

U.S. Energy Information Administration - EIA - Independent Statistics and Analysis

Efforts to address the deterioration of the sector were not successful, a situation that further intensified the need for deep reforms. A major commitment was made by President Cardoso to carry out a substantial reform of the Brazilian electricity sector. The first reforms introduced in the power sector were aimed to allow the participation of private capital and also to improve its economic situation. The Project for Restructuring the Brazilian Electric Sector, RESEB, which laid down the first steps for the implementation of the power sector reform, was initiated in during the administration of President Cardoso.

The objective of the reform was to build a more competitive power sector with the creation of a level playing field for private sector participation. In addition, state-owned utilities and assets were privatized. Although transmission assets were not privatized, most of the expansion of the transmission network has been carried out by private capital.

Those steps included the creation of an independent operator of the national transmission system ONS and an operator of the commercial market MAE , which did not become operational until As a result of the reforms of the power sector, new capital was attracted, both in terms of privatization and greenfield projects. Some of the state-owned generation capacity was acquired by foreign investors such as Tractebel, AES , Prisma Energy , El Paso and Duke , which became significant producers.

In addition, local investors such as industrial groups, large customers, utilities and pension funds also invested heavily in the national generation sector. However, the reforms were not successful in preventing the energy crisis that was to unfold in Installed capacity expanded by only 28 per cent during , whereas electricity demand increased by 45 per cent. Unfortunately, the needed investment did not materialize and the crisis became unavoidable. Brazil was faced with one of the most serious energy crises in its history in Additionally, several delays in the commissioning of new generation plants and transmission problems in the third circuit from the Itaipu hydropower plant accounted for a third of the energy deficit.

Reservoir levels reached such low levels that supply could not be ensured for more than four months. It was soon clear that strict demand reduction programs would be needed to avoid widespread blackouts. The CGE received special powers among which was the authority to set up special tariffs, implement compulsory rationing and blackouts, and bypass normal bidding procedures of the purchase of new plant equipment. Instead of resorting to rolling blackouts , the government chose to apply a quota system.

Quotas were established for all the consumers based on historical and target consumption level, applying bonuses for consumption well below the prescribed level, penalties for over-consumption and some freedom for the large users to trade their quotas in a secondary market. This achievement allowed the system to overcome that long period without blackouts and brownouts [26] and proved the potential of demand-side management and energy efficiency efforts, which were able to create a virtual capacity of 4, MW, helping the country to bridge the supply demand gap in a very economic way.

In addition, the government launched a program for contracting emergency generation capacity, with bids for a total of 2,MW of new thermal capacity accepted. However, the crisis affected numerous actors. This situation was eventually addressed by an increase of tariffs approved by the government. The pending privatizations of three generation subsidiaries of the large state-owned utility, Eletrobras , were stopped. However, despite initial expectations, the new administration opted for a model that clearly aims to attract long-term private investment to the sector and that heavily relies on competition.

In addition, the existing institutions were preserved and in some cases strengthened, with a new company, EPE, created with the specific mission of developing an integrated long-term planning for the power sector in Brazil. The expansion was linked to a fair return on investments and to universal service access, together with tariff adjustments.

This initiative assisted in the introduction of competition in the power sector and also helped to address some of the existing market imperfections. Under this system, auctions of capacity from new generation projects will be held three to five years in advance of delivery dates. The Ministry of Mines and Energy wants to ensure that the totality of future expansion needs is met and that plants are only built once they have won bids in energy auctions and are guaranteed long-term contracts. The first auction was held in December , with contracts for a total of about 40 GW traded.

Average electricity tariffs for the different sectors in were as follows: [27]. In the last 20 years, Brazil has been one of the main recipients of private capital investment in its power sector. This situation is not considered to be the result of concerns about the regulatory model or auction pricing caps, but it reflects the lack of available projects.

What authorisations are required for the sale of power to customers and which authorities grant such approvals? To obtain the licence an application is made to NERC:. The feed-in tariff for renewable energy sourced electricity provides the tariff framework for renewables at a threshold. Who determines the rates for sales of wholesale power and what standard does that entity apply? Currently MYTO is structured such that a major review is carried out every five years and minor reviews of the indices are expected to be done every six months.

To what extent are electricity utilities that sell power subject to public service obligations? The unbundling of the electric power sector under the Act was intended to encourage private sector investment. Currently there are no public service obligations on the electricity utility companies although at the transition stage NBET, through the vesting contract, ensures that each DisCo gets a minimum MW from the available capacity procured from the GenCos.

Which authorities determine regulatory policy with respect to the electricity sector? NERC is an independent regulatory agency with authority to regulate the electric power sector. Other authorities that determine regulatory policies in the sector include:. As a sector regulator NERC undertakes technical and economic regulation of the power sector, such as: tariff regulation and fair pricing; promoting competition and private sector participation; establishing or approving appropriate operating codes and standards regulation; licencing and regulating entities engaged in generation, transmission, distribution and trading; approval of amendments to the Market Rules and monitoring the operation of the electricity market.

The Act is the major instrument of regulatory control adopted by NERC in carrying out its regulatory functions. The key objective of the Ministry is to develop and facilitate the implementation of broad policies and programmes for the provision of adequate and reliable power supply from all sources of energy in the country.

It inspects, tests and certifies electrical materials, equipment, power systems and electrical installations of the Nigerian power industry.

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Installations are tested for their adherence to technical standards and regulations. Furthermore, NEMSA provides advanced training for technicians as well as licencing of technical personnel. The ECN was established with the statutory mandate of the strategic planning and coordination of national policies in the field of energy. ECN is empowered to carry out overall energy sector planning and policy implementation and promote the diversification of energy resources through the development and optimal utilisation of all resources, including the introduction of new and alternative energy resources.

ECN, among other roles: serves as a centre for gathering and dissemination of information relating to national policy in the field of energy; inquires into and advises the government of the federation or the state on adequate funding of the energy sector including research and development, production and distribution; and monitors the performance of the energy sector in the execution of government policies on energy. How is each regulator established and to what extent is it considered to be independent of the regulated business and of governmental officials?

NERC was established as an independent regulator of the power sector under the provisions of the Act. The Act is designed in such a manner so as to reduce the influence and interference of the federal government in the regulation of the power sector. To ensure regulatory certainty, it provides: defined regulatory functions and objects of NERC which are backed by law; a clear process of appointment and removal of commissioners and chairmen of NERC outside of the normal civil service appointments; isolation from civil service rules, including in relation to reporting structure, compensation structure and retirement benefits of commissioners and staff; and autonomous funding with direct appropriations by the National Assembly, outside of appropriations to the Ministry of Power.

Section 51 of the Act requires NERC to submit its annual budget with proposed expenditure to the Minister of Power, while section 28 provides for the issuance of further directives by the Minister under some circumstances for certain competition transition charges to be made arising from the declaration of eligible customers under section 27, if the Minister so determines after consultation with the President. The agency is not independent of government interference. To what extent can decisions of the regulator be challenged or appealed, and to whom?

What are the grounds and procedures for appeal?

go In addition to the provisions of the Act, nothing precludes an aggrieved person from seeking redress in court. An aggrieved person can challenge the decision of the regulator by commencing an action at the Federal High Court by filing originating processes. Which bodies have the authority to approve or block mergers or other changes in control over businesses in the sector or acquisition of utility assets?