The CMSE (Electricity Sector Monitoring Committee) will decide next Wednesday (13) whether to maintain or change the current risk aversion parameters used in electricity price formation models.
This decision could directly impact the cost of electricity for consumers, industries, and free market participants in 2027.
Energy prices in Brazil are calculated using the Newave, Decomp, and Dessem computational models, which consider factors such as reservoir levels, rainfall forecasts, demand, and power plant dispatch.
Within these calculations, parameters such as VMinOp and CVaR determine the degree of aversion to hydrological risk adopted by the system.
VMinOp establishes minimum reservoir storage levels to reduce the risk of depletion at the end of the dry season. CVaR, on the other hand, is a mathematical mechanism that assigns greater weight to the most critical hydrological scenarios, directly influencing the dispatch of thermal power plants to preserve the water stored in hydroelectric plants.
In the 2025 and 2026 cycles, the new CVaR pair (15,40) came into effect, meaning that the 15% worst hydrological scenarios now have a weight of 40% in the models.
Furthermore, since January 2025, the hybrid Newave model has represented hydroelectric plants individually. According to market analysts, these two changes have significantly increased the conservatism of the models, pushing energy prices upwards.
Liquidity crisis increases pressure on models.
The debate surrounding pricing models has gained momentum amid the current liquidity crisis in the free energy market. Trading companies claim that prospective scenarios have become more unpredictable, hindering management strategies and portfolio positioning.
Recent price volatility has led companies to turn to the courts to preserve operations and contracts amid deteriorating market liquidity.
The issue also began to mobilize political leaders. Federal deputy Arnaldo Jardim sent a letter on April 30th to the Director-General of the ONS (National System Operator), Márcio Rea, warning of the economic impacts of maintaining current levels of risk aversion.
In the document, Jardim describes the scenario as "almost surreal," arguing that the system operates with a structural surplus of energy while market prices rise, affecting the competitiveness of industry and increasing costs for the Brazilian economy.
According to the congressman, the economic effects resulting from the adoption of more conservative hydrological risk criteria have been underestimated. "The free market and the entire trading sector are being stifled by the consequences of this model," the congressman states in the official letter.
The legislator also criticizes what he considers a concentration of profits in the hands of large power generators. According to him, the high prices in the short-term market have encouraged agents to sell energy on the spot market, taking advantage of the high PLD (Price of Energy in the Spot Market), while consumers and traders face difficulties in contracting energy under competitive conditions.
Associations warn of billion-dollar cost.
Industry associations have also intensified pressure on the CMSE. Entities such as ABEEólica, Abiape, Abraceel, Abrace Energia, Anace, Cogen and the National Front of Energy Consumers released a manifesto requesting that the definition of parameters for the 2026/2027 cycle take into account the current market situation.
According to the entities, depending on the model chosen, the additional cost of thermal dispatch could reach R$ 5,4 billion for an estimated gain of only about 2% in the storage of hydroelectric reservoirs.
"The issue, therefore, is not simply a choice between energy security and affordable tariffs. The challenge lies in ensuring energy security to the appropriate extent, adopting technical, economic, and systemic criteria that preserve the reliability of supply without imposing disproportionate costs on society," the associations state in their joint manifesto.
The organizations further argue that maintaining the current parameters already has a strong impact on the operating cost of the electricity system, putting pressure on prices in the free market for commerce and industry and increasing the risk of tariff increases for residential consumers.
"This amounts to a transfer of income from consumers, who will foot the bill, to energy generators," they state.
According to Arnaldo Jardim, the high sensitivity of the models to risk aversion means that small changes in hydrological forecasts cause disproportionate movements in the PLD (Price of Settlement of Differences), a benchmark for future energy contracts.
"In practice, the model currently adopted, due to its instability, is favoring a reduction in the supply of future energy and, without supply, prices simply skyrocket," the document states.
The congressman also states that excessive conservatism ends up favoring large generators in a market considered concentrated, in addition to increasing the risk of triggering tariff flags, with repercussions on inflation and the cost of living for families.
The new risk aversion parameters were discussed in External Consultation No. 01/2026, held between February 24 and April 10, 2026, within the scope of the Technical Committee of the PMO (Monthly Energy Operation Program) and the calculation of the PLD (Price of Energy in the Spot Market), coordinated by the ONS (National System Operator) and the Chamber of Electric Energy Commercialization.
The CMSE's decision, scheduled for the 13th, should become one of the main indicators of the regulatory direction of the electricity sector for 2027.
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