The Brazilian electricity sector, which operates under an integrated and hydrothermal system and with a strongly established free market, is founded on a regulatory framework that provides investors with considerable safety. The market underwent a major restructuring process in the 1990s when it was opened for private investments, and was submitted to further regulatory reform in 2004. Security of supply, regulatory stability and competitiveness provide the basis for the regulatory framework.

The main power source used in Brazil is hydropower (60 per cent of the installed capacity, excluding small plants), while thermal power plants play an important role in complementing the mix and assuring security of supply (23 per cent of the installed capacity).2 In addition, alternative power sources, notably wind, biomass and solar, have gradually increased their share and gained additional importance in the electricity portfolio. Renewable energy has more recently been encouraged by net metering policies, and has become more competitive over the past few years, as evidenced by the latest power auctions.

The electricity system is connected by transmission facilities that enable electricity produced in remote areas of a continent-sized country like Brazil to be transported to major consumers’ markets, mainly located in the south-east. The grid has its operation centrally coordinated and controlled, to reduce global costs and enhance security of supply, especially during dry seasons.


iThe regulators

The Brazilian federal government is empowered by the Constitution to provide services and facilities within the power sector. Private companies are entitled to enter the market through government delegation by concession, permission or authorisation.

The main governmental body responsible for formulating public policies within the energy and mines sectors is the Ministry of Mines and Energy (MME). There are currently other arms of the federal government that play an important role in this sector, namely:

  1. the National Council on Energy Policy (CNPE), presidential cabinet for energy policy affairs created by Law 9,478/1997; and
  2. the Committee for Monitoring of the Electricity Sector, part of the MME, mainly created as a response to the rationing in 2001 (by Law 10,848/2004), and responsible for monitoring security of supply and suggesting correction measures.

Since the market’s liberalisation, the industry’s participants have been regulated by the Brazilian Electricity Agency (ANEEL),3 granted with autonomy from central government but attached to the MME. ANEEL, created by Law 9,427/1996, regulates and supervises power generation, transmission, distribution and trading activities to ensure the correct balance between the interests of companies and consumers.

The agency is responsible for implementing the policies and guidelines outlined by the MME, and for monitoring the activities developed in the sector by verifying compliance with its rules and regulations and supervising contract performance. Some of ANEEL’s activities are undertaken by delegation from the MME, such as the conduction of power auctions and the granting of certain regulatory licences. It is important to note that the performance of complementary supervision activities may be decentralised to state regulatory authorities, under the terms established by law.

ANEEL is managed by an executive board composed of a managing director and four other directors, is organised into technical divisions and is charged with performance of administrative functions in different areas such as economic regulation, market studies, supervision, mediation and the granting of concessions and authorisations.

The restructuring processes undergone by the power sector involved the creation of new institutional authorities. The National Electric System Operator (ONS) was created by Law 9,648/1998 as a non-profit association to coordinate and control the operations of the electrical grid, and had its governance system granted even more independence within the 2004 reform. Under the previous regulatory framework, an operational institution was created to manage the wholesale market, which was succeeded by the Electricity Trading Chamber (CCEE) following 2004’s regulatory reform. The CCEE, introduced by Law 10,848/2004, is mainly responsible for the registration of power purchase agreements (PPAs), and for the measurement, accounting and financial settlement of electricity trading operations. Within 2004’s reform, another institutional entity was created: the Energy Research Company (EPE), a public-held company responsible for studies and research on the energy industry with a view to enabling the sector’s planning, as foreseen in Law 10,847/2004.

iiRegulated activities

Since the federal government has the authority to provide electricity services and facilities, private companies need government delegation to enter the market. The regulatory licence required for entrepreneurs to operate in the power sector depends mainly on the segment (generation, transmission, distribution or trading) to be joined, and the extent to which regulation is exercised in each of them. Under the provisions of the legislation currently in force, the MME is the granting authority and may delegate its powers to ANEEL.

Power generation may be operated by means of a concession of use of public assets, a public service concession (former concessions fall within this regime), an authorisation, or even a communication. The regulatory licence required and the applicable regime depend on the plant’s installed capacity, the power source and the reservoir’s size (a requirement for hydropower plants). Given that the power sector regulation is constantly evolving, we find several legal frameworks co-existing, each from different points in time. As a result, the rules relevant to one power plant may not apply to others, even though they fall under the same regimen. The specifics of the applicable law must always be assessed individually, alongside the provisions of the specific concession agreements.

In general terms, as for new large hydropower plants (HPPs) that have an installed capacity in excess of 50MW, the entrepreneur must participate in power auctions to be granted a concession to operate new generation projects (new-project auctions), and is required to sell a minimum percentage of the plant’s output on the regulated market (the remainder may be sold on the free market). The bid entitles the winning bidder (selected by lowest price criteria) not only to operate the new project (by being granted with a concession of use of public asset), but also to sell electricity to the distribution companies participating in the auction. Companies with hydropower plants in operation may participate in power auctions conducted specifically for purchasing electricity from existing projects (existing-project auctions), or may sell their output on the free market.

On the other hand, an authorisation is required from companies willing to operate small hydropower plants (SHPPs) – which have an installed capacity of up to 30MW and a small reservoir – and plants with a capacity not higher than 50MW that do not have SHPP characteristics. Although the granting of authorisation does not require an auction, the existence of more than one interested company in the same hydroelectric potential triggers a competitive process by which ANEEL selects the entrepreneur, under the provisions of ANEEL’s regulations.

Other energy sources such as thermal, wind and solar are subject to an authorisation regime, whose process is conducted by ANEEL. All of them, including hydropower plants subject to authorisation, may participate in power auctions (either new-project, existing-project, or back-up energy auctions) to sell their production in the regulated market, or may sell it in the free market.

When it comes to new projects, plants subject to an authorisation regime may choose to participate in a power auction to be granted the correspondent authorisation and sell electricity in the regulated market.4 They may also decide to sell their production in the free market, when they need to undergo an authorisation process with ANEEL to operate the power plant and freely trade the plant’s output.

Small plants – with an installed capacity of up to 5MW for thermal and renewable energy, including hydropower plants – do not need authorisation, but require a communication to ANEEL in light of their reduced impact on the system.

The regulatory licences mentioned (except for new hydropower concessions, currently only operated by independent producers) can be granted either under an independent power production regime or under a self-production regime.5 Former concessions are also operated under public service regimes.

Please refer to the table below for a general summary of the regulatory licences required from private investors to enter the Brazilian power generation segment.

Regulatory licences required from power generation companies
Power source Installed capacity Regulatory licence Regimes
Hydropower Greater than 50MW Concession for use of public asset (preceded by a public auction) Independent power producer
Greater than 5MW and not greater than 50MW (certain plants may be characterised as SHPPs) Authorisation Independent power producer or self-producer
Up to 5MW Communication
Thermal power plants and renewable energy (except for hydropower) Greater than 5MW Authorisation Independent power producer or self-producer
Up to 5MW Communication

There are currently discussions on whether private investors are allowed to participate in nuclear power plants in the country. It has long being understood that private participation is forbidden on account of the federal government’s operation monopoly, foreseen in the Constitution. For that purpose, the state-owned company Eletrobras has a subsidiary, Eletronuclear, which operates two nuclear power plants currently active. However, more recent opinions argue that the Constitution establishes the monopoly of limited parts of the supply chain, such as research, extraction, enrichment, reprocessing, manufacturing and trade of nuclear mining and metals, which would be restricted to the federal government, and that private partners could participate, for example as partners of Eletronuclear or even controllers (subject to a public procurement).

Power transmission and distribution activities are considered natural monopolies, given their dependence on the electrical grid. In this way, most Brazilian power distribution consumers are still legally locked in to purchasing energy from only one intermediary: the local distribution companies to which they are connected. Although there is a special regulation for those who use between 500kW and 3MW, they can choose to buy energy from incentivised sources or small hydropower plants.

In addition, in light of their importance, their operation requires a public service concession, preceded by a mandatory public bid.

Power trading companies wishing to operate in the power market need authorisation under the provisions established by ANEEL’s regulations.

iiiOwnership and market access restrictions

The Brazilian Constitution establishes that hydropower generation activities must be carried out by Brazilian citizens or companies organised under Brazilian laws, with headquarters and managing offices located in Brazil. The bidding rules of electricity auctions usually do not forbid the participation of foreign companies, but normally establish that:

  1. foreign companies shall organise a special purpose company under Brazilian laws to have the regulatory licence granted; and
  2. if foreign companies bid jointly with a Brazilian company in a consortium, the leadership shall always be exercised by the Brazilian company.

In addition, the bid notice usually establishes that foreign companies shall have a legal representative in Brazil with powers to receive service of process and provide answers in the judicial and administrative spheres, as well as represent them in all phases of the proceedings.

The legislation does not forbid electricity companies, organised under Brazilian laws, from being controlled by foreign companies or private equity investment funds organised under foreign legislation (except for nuclear power plants). ANEEL requires, however, that such companies have a legal representative in Brazil, duly vested with powers to receive service of process and provide answers in the judicial and administrative spheres.

In addition, there are specific restrictions for the organisation of power companies in the economic group. Unbundling, adopted by the sector since its restructuring in the 1990s and further deepened in the 2004 regulatory reform, restricted the activities of distribution companies in the regulated market, limiting their participation in other activities of the supply chain. As such, generation and distribution companies operating in the interconnected system are required to maintain separate legal entities and individual accounting, although they may be part of the same corporate group or share infrastructure and human resources when authorised by ANEEL.

ivTransfers of control and assignments

As a rule, the transfer of the regulatory licence or of the controlling interest6 of the industry’s participants is subject to ANEEL’s prior consent, mainly to adhere to the bidding process and transparency principles.

The regulation in force (ANEEL Resolution 484/12) sets forth that the prior consent of the regulatory agency is required for transfer of controlling interests of public service providers, hydropower companies and nuclear-fuelled energy companies, as well as in any companies, regardless of the power source, whose intended controlling company makes up the corporate group holding or which, with the intended transaction, become the holder of ‘a significant share of the power generation market for the safety of the regulated market’ – a concept yet to be established by the regulatory agency. Some transactions are exempt from consent, under the terms established by ANEEL’s regulations. Nonetheless, the exempt agent has a deadline to inform ANEEL of the implemented transaction and may be also required to maintain a dossier available for inspection.

The rules currently in force may be further amended after upcoming regulation by the regulatory agency on how ‘a significant share of the power generation market for the safety of the regulated market’ is enacted. This matter has been under discussion at the regulatory agency for a while, without any formal pronouncement yet.


iVertical integration and unbundling

The segregation of the different levels of the production chain was implemented mainly to promote efficiency and competitiveness, given that in the 1990s it became apparent that the vertically integrated industry had proven to be unable to provide services efficiently. The unbundling was formally adopted by the restructuring undertaken in the 1990s, and further enhanced under the 2004 regulatory framework.

The primary purpose of the unbundling in the sector was to encourage competition in the generation and trading segments (which may be provided under competitive regimes), whereas transmission and distribution segments remain natural monopolies. Since the 1990s restructuring, the separation between the contracting of the grid’s access and the purchase of electricity had already been adopted as an unbundling measure.

The current regulatory framework also requires that generation, transmission and distribution activities be undertaken by separate legal entities, with specific restrictions on the corporate structure of their economic groups (see Section II.iii).

The 2004 regulatory reform imposed restrictions on the distribution companies within the interconnected system by forbidding them to undertake any activities in connection with:

  1. generation;
  2. transmission;
  3. sale to non-captive consumers;
  4. direct or indirect participation in other companies, except for the funding, implementation and management of financial funds for the provision of service; and
  5. activities unrelated to the purpose of the concession, except for the cases provided by law or in the concession contract.

The legislation has not imposed, however, the unbundling between the segments of generation and transmission, which has remained bundled up in some economic groups.

Furthermore, there is different kind of unbundling under discussion more recently in view of the future expansion of the free power purchase market, and which has not yet been established or implemented. This is the unbundling of distribution services, in order to restrain the distribution monopoly only over electricity transport in the area of concession. Currently, distribution companies have both the monopoly of electricity transport and electricity trade for those consumers qualified as ‘captive consumers’.

iiTransmission/transportation and distribution access

Distribution and transmission companies are subject to regulation of access to their respective grids to avoid discrimination and eliminate barriers to entry. The regulatory framework requires that network companies share and provide access to ‘essential facilities’ to segregate the service provision from the corresponding infrastructure management. For this reason, the electricity sector is governed by the principle of open access to the electrical grid, upon reimbursement of the cost incurred with transportation.

Both ANEEL and the Brazilian Telecommunications Agency (ANATEL) have issued regulations on the reference price applicable to infrastructure sharing (Joint Resolution 04/2014 from ANEEL and ANATEL), because of several disputes over the subject.


Power transmission and distribution companies are subject to price regulation, and thus have their revenues calculated by ANEEL, which aims to set prices to promote economic efficiency as if these segments were competitive and not characterised as natural monopolies.

Rates are based on the price-cap mechanism (revenue-cap for transmission companies), and thus are subject to adjustment by an inflation rate; and a productivity factor called the X factor is also applicable. The initial rates or revenues are established in the concession contract resulting from either the auction’s competitive process (applicable to new transmission assets), or the privatisation process.

After the initial rates or revenues have been set, they are submitted to annual adjustments for inflation, periodic reviews (every four or five years, depending on the concession contract), and even to further extraordinary reviews to restore the concession’s balance upon ANEEL’s approval.

Therefore, in the periods between periodic reviews, rates are annually adjusted for inflation (and the X factor is subtracted therefrom). Under this regime, concessionaires are encouraged to be more efficient by reducing costs up to the following price review, when new pricing levels are defined by ANEEL. The price control review process basically aims at setting new efficiency standards to operational costs and to the return of the investments, to ensure that private companies receive an adequate remuneration and that consumers pay fair electricity bills. The new standards established will be valid for the new period up to the following price review.


iDevelopment of power markets

The 2004 restructuring process that established the current regulatory framework for the Brazilian power sector has envisaged two markets in which participants are able to sell power: the regulated market, and the free market.

Within the regulated market, generation companies sell power to distribution companies participating as buyers in public auctions conducted by the government. Generation companies compete against themselves according to the rules of each auction by the lowest bid price (BRL/MWh) to sell power to the distribution companies. As mentioned above, new-project auctions also involve the granting of concessions or authorisations to enable the winning bidders to operate new power plants.

The regulated market aims at serving the captive market. In other words, the power bought by distribution companies in the auctions is purchased by captive consumers (defined as not having the choice to select their power supplier). As a rule, distribution companies are under obligation to buy power in the regulated market (aside from a few legal exceptions), and to ensure that 100 per cent of their consumers’ demand is met.

There are three types of auctions in the regulated market:

  1. new-project auctions, conducted to promote power generation expansion soon enough to enable plant construction, to meet the market consumption growth;
  2. existing-project auctions, conducted to contract power produced by existing projects, to reduce the financial risks for distribution companies in their demand projections; and
  3. back-up energy auctions, conducted to increase security of power supply.

The auctions for new projects may include HPPs designated by the government, but companies usually also participate with their own projects (SHPPs, thermal, wind, biomass, and solar projects), which need prior technical qualification before the EPE to be entitled to participate in the auctions. There are also auctions for existing projects, in which generation companies with projects in operation may sell power within the regulated market, and renewable energy auctions, which can be launched for new or existing projects. In the last bids, this type of auction has contracted power originated from SHPPs, wind and biomass plants. The auctions are named A-N (A minus N) that ‘A’ is the year ahead in which the plant must enter operation and start delivering power to the grid.

In the free market, power is freely traded between the parties entitled to participate in it: generation and trading companies, as well as free and special consumers. Free consumers, who may choose their power generation supplier, need to have demand higher than 3MW, although, according to an Ordinance issued by the MME in December 2018, this requirement will be reduced twice in the coming months. The first reduction is set for July 2019, when free consumers will need to have demand higher than 2.5MW, and the second for January 2020, when it will drop to 2MW. Special consumers, which may constitute a consumer or group of consumers that share the same interests, are required to have a demand higher than 500kW and may only choose their supplier when buying from specific renewable sources.

iiEnergy market rules and regulations

Sector participants that carry out power trading transactions are under obligation to comply with all of its rules and regulations. As a result of the 2004 regulatory reform, participants must prove that 100 per cent of the power sold in PPAs is associated with generation plants of their own, or belonging to third parties (by means of PPAs to purchase from them), according to the terms set forth by Decree 5,163/2004. While distribution companies need to serve 100 per cent of their market’s demand, sellers need to produce or purchase the same amount sold under PPAs, and consumers need to consume the same amount purchased under PPAs.

If they are not able to produce or purchase the total amount of power traded or consumed, participants will be exposed to the short-term market, proportionally to the amount not produced or purchased, to cover their original PPAs. Financially exposed participants are:

  1. under the obligation to pay the amount equivalent to the difference between the power contracted and the power delivered or consumed (not covered in additional PPAs), multiplied by the price of financial settlement of differences (PLD), which is defined weekly by the CCEE;7 and
  2. also subject to penalties imposed by the CCEE.8

The amount of power allocated to each generation plant is determined by its assured capacity, defined as the maximum amount of power that the plant is allowed to sell and is committed to deliver under PPAs.9 This calculation is very important as it sets the limit on the power (originating from the plants’ own power generation) available for sale.10

The operation of the Brazilian interconnected system may cause the dissociation of the participants’ contractual commitments from the actual physical delivery of the power traded. Power production mainly depends on operational decisions made by the ONS, since a number of power plants are subject to centralised dispatch, which reduces the control that companies have over their own plants’ output. A few regulatory mechanisms have been established to mitigate this risk and avoid financial exposure of these participants for reasons they cannot manage, such as the energy reallocation mechanism, applicable to hydropower plants.

iiiContracts for sale of energy

Within the regulated market, as a result of the auction, long-term power purchase agreements are executed among each of the generation companies that have won the bid and the distribution companies buying at the auction. Similarly, in back-up energy auctions, a back-up energy agreement is executed among the sellers and the CCEE, as a representative of all consumers. All contractual conditions – including supply period, rates (set by the low-bid award criteria), and amounts – are defined within the bid process and are not subject to negotiation.

The contracts’ effective terms depend on each type of auction and power source, and may vary from 15 years to 35 years for new-project auctions, from 1 year to 15 years for existing-project auctions, and for up to 35 years in back-up energy auctions. The PPAs may be executed under two modalities: quantity or availability. Under quantity contracts, sellers assume hydrological risks (variations between the amounts contracted and effectively produced) and deliver the power sold at the submarket where the plant is located. Under availability contracts, buyers assume the risks deriving from the plant’s unavailability resulting in a production lower than the amount contracted.11

In the free market, participants execute PPAs in which they freely establish conditions, supply period (short, medium or long term), price and amounts, provided that the contractual terms comply with the sector’s rules and regulations, particularly the CCEE’s trading rules and procedures.

ivMarket developments

Some developments have been attained recently. Free and special consumers and small generation participants are eligible for representation in their transactions before the CCEE by a ‘retail trading company’, under the terms established by ANEEL’s regulations. Free-market consumers have also been granted the possibility of assigning power to other participants under the conditions set forth in the applicable regulations, despite not being authorised to sell it. Because of concerns raised about over-contracted distribution companies (to serve the relevant market demand) and about the struggle of generation companies to comply with their construction schedules, ANEEL has issued new regulations on selling of surpluses. The surplus selling mechanism will be applied to reduce the distribution companies’ surpluses by selling them on a competitive negotiation system, which works like an auction, carried out by the CCEE. There is also a special auction to terminate back-up energy contracts of projects that will not become reality. In addition, Law 13,360/2016 allowed the sale of the excess energy by distribution companies to free consumers, under the provisions of ANEEL’s regulations.


iDevelopment of renewable energy

One of the most significant regulatory policies adopted to encourage the development of renewable power in the past has been Proinfa, an incentive programme to encourage the use of alternative power sources, created by Law 10,438/2002. This programme was based on feed-in mechanisms to contract wind, biomass and SHPP projects for a 20-year period. According to the programme regulations, a total of 3,300MW was expected to be contracted under the first phase of Proinfa. The second phase aimed at achieving 10 per cent of the annual energy consumption deriving from renewable sources until 2022, a concept that excludes large hydropower plants. For the currently year, the incentive is evaluated in an amount of 4 billion reais. Proinfa costs are shared among all energy consumers, except low income consumers.

Pursuant to recent information made available in the 2018–2027 Energy Plan,12 EPE forecast that in 2027 the installed capacity of net metering would reach 11.9GW by means of in 1.35 million systems. This considers that the total install capacity of this type of projects has tripled since 2016. Currently, there are 792MW in 66.115 systems and 89.081 users. Although solar is the most common source, it also expected that wind, hydropower and thermal projects would increase in next years.

Wind power is the source whose participation through regulated auctions has grown the most. EPE has stated in the Energy Plan that, while wind power has become more competitive in price, competitiveness of SHPPs has decreased particularly because of environmental and construction risks. As for solar energy, its installed capacity is still not significant but is also expected to grow.

Renewable energy sources are entitled to some regulatory benefits (such as a discount on fees for use of the electrical grid, and the option of selling power to special consumers, under the terms established by law), and also to some special credit lines from the Brazilian public bank BNDES, the National Bank for Economic and Social Development. Benefits may change in the future as the sources become more competitive, as anticipated in the discussions of a bill of law to implement certain changes in the regulations.

The Special Incentives Regime for Infrastructure Development, known as REIDI, is a federal tax-incentive scheme for the development of infrastructure that last for five years and is applicable to the purchase of equipment related to power generation and transmission projects, including renewable energy ones, under conditions established by legislation. At the federal level, a tax incentive is granted for ‘infrastructure debentures’ as well. There are also some local incentives granted by states to encourage the development of renewable sources.

iiEnergy efficiency and conservation

The Brazilian power market increase in efficiency during the 2001 rationing, when the market learned how to reduce the consumption required by the government. As the market has suffered unfavourable hydrological conditions in recent years, broad awareness campaigns on the country’s exposure to water-shortage conditions have been conducted, possibly as a way of encouraging energy-efficiency measures without recourse to stricter rationing control.

In addition, since January 2015, power rates have been subject to a band pricing scheme, which, by allowing customers to be charged more when the system incurs higher generation costs, represents an important incentive for demand reduction.13 Moreover, a new pricing scheme is available for certain consumers, those who consume more than 250kWh from January 2019, while others will have the option from 2020. This pricing scheme is also referred to as hourly tariff or white tariff and allows users to pay different rates according to the time and the day of the week of their consumption. ANEEL believes that this change will improve and rebalance the utilisation factor of the system.

iiiTechnological developments

In terms of technological developments, the Brazilian market has taken some important steps towards the implementation of smart grid technologies. In addition to regulations on the band pricing scheme, ANEEL has established a net metering policy for renewable micro and mini distributed generation,14 and has issued regulations imposing a future obligation for distribution companies to install electronic metering for Group B15 consumers. These measures, taken to allow the integration between power supply and communications technology, aim at improving the quality of service provision and reducing operational costs and technical losses in power supply.16


In 2018, the market experienced a slightly different price scenario than 2017, however not as high as in 2014. ANEEL fostered discussions with the civil society on important trends in the markets, including net metering and binomial tariffs, and passed regulation on the recharge activity of electric vehicles.

In compliance with the current net metering regulations, which established that the rules should be revised before the end of 2019, ANEEL launched a series of public consultations and public hearings to discuss concepts, issue a regulatory impact assessment and finally propose changes in the regulations. One public consultation was already completed in 2018, and two public hearings will be held in 2019. The revision aims to rebalance the costs generated by the current system of net metering that are borne by other consumers and distribution companies, and may increase tariffs paid by net metering users in the future. ANEEL is currently considering respecting the financial expectations of those connecting net metering systems before 2020, which may be subject to lower tariffs than those connecting after this year.

ANEEL published in June 2018 a normative resolution that establishes the procedures and conditions for the recharge activity of electric vehicles. The resolution provides broad language that allows consumers to recharge electric vehicles ‘also for commercial purposes and at freely negotiated prices’. Distribution companies can also install recharging stations in their area of concession for public recharge of electric vehicles. In addition, it provides that the regulatory agency will evaluate the regulatory result within three years.

During the period in review, two transmission auctions were successfully conducted, marking the entrance and consolidation of foreign investors:

  1. in December 2018, the bid contracted 7,152km of transmission lines and 14,819MVA in substation capacity in 13 states, with the expected investment of 13.2 billion reais and annual revenue of 1.15 billion reais (46 per cent average discount); and
  2. in June 2018, the bid contracted 2,562km of transmission lines and 12,226MVA in substation capacity in 16 States, with the expected investment of 6 billion reais and annual revenue of 451 million reais (55.26 per cent average discount).17

Generation auctions were also successfully conducted in 2018:

  1. in April, the bid contracted 1GW from new projects of power generation from hydroelectric, wind, solar photovoltaic and biomass power plants (estimated investment of 5.3 billion reais);
  2. in August, the auction sold 2.1GW from new projects power generation from hydroelectric, wind and thermoelectric, starting in 2026 (an investment of 7.6 billion reais); and
  3. in December, the auction sold energy from existing thermal power plants fuelled by natural gas and biomass.18

Mergers and acquisitions transactions were also successfully carried out during the year, including the following:

  1. the acquisition, by Enel, of the distribution company Eletropaulo, in state of São Paulo, formerly owned by AES Group;
  2. the acquisition, by Votorantim and CPPIB, of the generation company CESP, formerly owned by the government of the state of São Paulo;
  3. the acquisition, by Equatorial Energia, of the distribution company Ceal, formerly owned by Eletrobras;
  4. the acquisition, by Oliveira Energia and Atem, of the distribution company Amazonas Distribuidora, formerly owned by Eletrobras;
  5. the acquisition, by Energisa, of the distribution companies Eletroacre and Ceron, formerly owned by Eletrobras;
  6. the acquisition, by Consorcio Oliveira, of the distribution company Boa Vista Energia, formerly owned by Eletrobras; and
  7. the acquisition, by Kinross Brasil, of two hydropower plants in the state of Goiás (155MW), formerly owned by Gerdau.


The Brazilian electricity market continued to be eventful in 2018 in spite of the uncertainity surrounding the elections held in October. The coming years are likely to be even more fruitful following the election of Jair Bolsonaro as president. Although there are issues still to be addressed, the sector has been adjusting well to the new economic and political scenario, and important transactions can be expected in the near future.

The market is already responding to the positive signals from election of the new presidency and his team. Competition and the number of new foreign bidders entering the market is expected to increase, following the expected growth of the economy. In addition, in March, the MME for the first time defined a long-term schedule, detailed below, for next year’s energy auctions from new projects (LEN) as well as energy from existing projects (LEE):

Year Auction Date
2019 LEN A-4 28 June 2019
LEN A-6 26 September 2019
LEE A-1 e A-2 6 December 2019
2020 LEN A-4 23 April 2020
LEN A-6 24 September 2020
LEE A-1 e A-2 4 December 2020
2021 LEN A-4 29 April 2021
LEN A-6 30 September 2021
LEE A-1 e A-2 3 December 2021

The new Minister of Mines and Energy Bento Albuquerque Júnior also stated that the government intends to continue the process of privatisation of Eletrobras through new capitalisation.19

In addition, net metering is expected to continue growing also as a result of the public consultations and public hearing carried out by ANEEL, which may benefit those connecting before the end of 2019 with lower tariffs. Furthermore, the expansion of the free market is already set forth in the regulations, with reduced demand requirements entering into force in July 2019 (to 2.5MW) and January 2020 (to 2MW).

The strength of the Brazilian market’s institutions certainly will continue to play an important role in stability. The EPE estimates that investments in centralised power generation in the years 2018–2027 will amount to 226 billion reais and net metering generation to 60 billion reais, and another 108 billion reais in power transmission and substation.20 In sum, the Brazilian power sector should be viewed as a target for long-term investments, to the extent that investors are knowledgeable of the characteristics of each type of investment and are able to accurately assess the risks involved.


1 José Roberto Oliva Jr is a partner and Julia Batistella Machado is an associate at Pinheiro Neto Advogados. The authors want to thank Lucas José Russo for his assistance with the research to update this edition.

2 Information provided by the Brazilian Electricity Regulatory Agency (ANEEL) on its power generation data centre. In: BRASIL. Agência Nacional de Energia Elétrica. Banco de Informações de Geração. Available at Accessed on 20 March 2019.

3 In a way, the companies were already subject to regulation before the creation of ANEEL, but the previous governmental bodies lacked effectiveness since they were not granted with autonomy and were part of the central government, which also controlled the state-owned companies that were the main service providers within the sector at the time.

4 In this case, the auction usually requires that a minimum percentage be allocated to the regulated market.

5 The importance of the difference between the two regimes has diminished since independent producers are entitled to consume part of their production and self-producers are allowed to sell the unused portion of their own output under the conditions set forth by rules and regulations.

6 The concept of controlling interest adopted by ANEEL is the same as provided in Brazilian corporate law and is associated with prevalence in the company’s corporate and managerial decisions.

7 The CCEE calculates the PLD based on the Operation’s Marginal Cost (CMO) and on a variety of criteria established by legislation (e.g., hydrologic conditions) for each submarket and for each demand level.

8 The CCEE has responsibility for the processes described – the accounting of the market’s traded power amounts and the financial settlement of the values involved in short-term market transactions.

9 The assured capacity considers the plant’s expected production and excludes events of unavailability, and may be lower than the installed capacity of the power plant.

10 While in the regulated market the assured capacity represents the limit available for sale, participants in the free market are able to sell an amount above the assured capacity if they have executed PPAs to cover the total amount sold.

11 Under availability contracts, the remuneration consists of a fixed amount for the plant to be available, and an additional value that varies according to the plant’s effective production.

12 Brasil. Ministério de Minas e Energia. Empresa de Pesquisa Energética. Plano Decenal de Expansão de Energia 2026. Brasília: MME/EPE, 2017. Available at: Accessed on 20 March 2019

pp. 212–216.

13 Green, yellow and red flags indicate lower, medium and higher generation costs. As a result of the recent water shortages, the ONS has continuously dispatched high-cost thermal power plants since the end of 2012, and consumers have had red flags in their bills for some time.

14 Under this policy, possible excess of the consumer’s production is exported into the grid and assigned to the distribution company, and thus may be compensated with credits in the subsequent billing periods, under the conditions set forth by regulations.

15 Residential, rural and other classes, except for low-income consumers and streetlight facilities.

16 Brasil. Agência Nacional de Energia Elétrica. ANEEL regulamenta medidores eletrônicos. 2012. Available at Accessed on 19 April 2015.

18 Information provided by ANEEL. Avaliable at:

20 Brasil. Ministério de Minas e Energia. Empresa de Pesquisa Energética. Plano Decenal de Expansão de Energia 2024. Brasília: MME/EPE, 2017. Available at abertos/publicacoes/Documents/PDE%202027_aprovado_OFICIAL.pdf, p. 247. Accessed on 20 March 2019.