The agents of the electricity sector, in general, agreed with the proposal of ANEEL (National Electric Energy Agency) to ease penalties for generators that requested authorizations to guarantee the benefit of using the wire. Those who did not like the proposal at all were the associations and councils representing electricity consumers.
On May 22, the deadline for sending contributions to Public Consultation No. 15/2023 ended, which seeks to adopt an exceptional mechanism for terminating CUST (Transmission System Usage Contracts) entered into by generating plants and revoking the grant of generators that demonstrate the unfeasibility of implementing their plants.
In total, there were more than 100 contributions, with massive participation from associations representing generators and consumers, as well as electricity generation and transmission companies.
The race for concessions intensified with the publication of Law 14.120/21, which established the end of the 50% discount on transmission and distribution system usage rates (TUSD/TUST) for renewable energy projects and defined that the benefit of the wire discount would only be valid for projects that filed the concession request by March 2, 2022 and for projects that come into operation within 48 months after the concessions.
This change in legislation triggered the so-called “gold rush”, which resulted in the accumulation of 108 GW of installed capacity of generation projects by the end of March 2023, equivalent to approximately 13,5 years of typical generation expansion in the country. Approximately 17 GW will pay CUST this year without the projects being in operation.
The agency's proposal is to achieve an amicable termination of the CUST of the generating plants, concomitant with the revocation of the respective generation licenses and exemption from any applicable fines by the ANEEL, but with some conditions such as consent from broadcasters; no debts with broadcasters; waiver of legal dispute related to the CUSTs entered into; and no contracts marketed in the regulated contracting environment.
Divergence between agents
The views of generators and consumers were antagonistic on this topic, considering the contributions sent to CP No. 15/23, to which the Canal Solar had access. While the generators agree with the proposal of ANEEL, consumers are advocating for greater rigor on the part of the regulator, at the risk of further burdening energy consumers.
Almost all generator associations were in favor of the solution. ANEEL, including ABIAPE (Brazilian Association of Investors in Self-Production), APINE (Association of Independent Electric Energy Producers), ABSOLAR (Brazilian Association of Photovoltaic Solar Energy) and ABEEólica (Brazilian Association of Wind Energy and New Technologies).
To ABSOLAR, the mechanism must cover all generation agents, without prohibiting the participation of enterprises with electricity traded in the captive market, ensuring the obligation of generators to replenish ballast through bilateral contracts with distributors that are not interested in entering into agreements to terminate CCEARs (Energy Commercialization Contracts in the Regulated Environment).
A ABSOLAR understands that the scope should encompass:
- The revocation of the generation grant and the consequent termination of the CUSTs and Transmission Connection Contracts – CCTs entered into;
- Authorization for distributors to enter into bilateral agreements to revoke CCEARs from plants included in the mechanism, maintaining the right to Involuntary Exposure;
- Exemption from administrative penalties and termination fines from the CUST for agents with contracts terminated due to non-payment;
- Authorization for payment in up to 3 installments of outstanding EUST debts;
- Removal of the application of the fine for late payment of EUST installments;
- Commitment of ANEEL and the ONS in agreeing, in court, with the generators' request for resignation in ongoing legal proceedings on the subject;
- Resignation of ANEEL and the ONS regarding the legal fees for the ongoing legal proceedings on the subject; and
- Temporary suspension of inspection actions and punitive processes that may lead to the revocation of concessions for projects that present a letter of demonstration of interest by June 6, 2023.
The conditions for voluntary participation in the regulatory mechanism would be:
- Be in compliance with your sectoral obligations and charges;
- Not have EUST debts with the transmitters;
- Present proof of request for waiver of any legal dispute related to the CUSTs entered into through the Declaration and Other Agreements; and
- Exclusively to eliminate the possibility of applying administrative penalties, present, within a timely period, a term of discharge of all obligations for reimbursement and compensation for costs and investments related to the termination of the CCTs.
ABIAPE said it agrees with the exceptional regulatory treatment, as it understands that the measure seeks to reduce the spread of injunctions that suspend the payment of EUST (Transmission System Usage Charge). It is estimated that 7,1 GW are under judicial review.
ABIAPE understands, however, that the mechanism should be applied only once, in order to avoid legal precedents for breaking network usage contracts.
“The mechanism will also be important for removing projects with low probability of implementation from the generation base, improving the signal of generation expansion, which is crucial for the proper functioning of the operation and planning of the electricity sector. Additionally, the proposal may open space for the ONS to review requests for access, denied or subject to conditions, relating to projects with economic viability and financial capacity to compete for the remaining transmission margin in the system through the Competitive Margin Procedure (PCM).”
“APINE is in favor of the proposed exceptional regulatory mechanism, with a reservation regarding the need for the broadcaster’s consent. As this is a condition for adherence, and depends on the agreement of a third party (broadcaster), there may not be a quick agreement between the parties and, as a consequence, the requirement may not be met by June 30, frustrating the agent’s adherence.”
ABEEólica aligns itself with the suggestion of ANEEL, but highlights that the situation is opportune to open a discussion on approaches that can address other situations that are equally impacted in the context of regulatory evolution.
ABRAGET (Brazilian Association of Thermoelectric Generators) disagreed with the proposal submitted for public consultation, as it believes that the termination of the CUST, without payment of the termination fine, will result in an increase in the TUST distribution for generators in operation that have not had their TUST stabilized, in order to maintain the recovery of the RAP (Permitted Annual Revenue) of the transmission companies. This also applies to the increase in TUST for consumers. For the association, the ideal would be to reduce the fine from 3 years of termination charges to 1 year.
According to calculations by ANACE (National Association of Energy Consumers), considering the average TUST in the Basic Network for the generation segment, which for the 2022-2023 Cycle was R$ 9.130/MW, the usage charges due for the sum of all this potential, even considering a 50% discount on tariffs, would be approximately R$ 970 million per year. Therefore, the “termination fine” equivalent to 3 years of EUST would reach approximately R$ 2,91 billion.”
For ANACE, the 'pardon' proposed by the regulator seems like an “excessively generous” offer for entrepreneurs who assumed the risks of their venture, in addition to setting an extremely dangerous precedent for the system and the entire electricity sector, which is not at all desirable, warns the director of Technical and Regulatory Affairs, Mariana Amim.
The National Energy Consumers' Front expressed concern about the solution presented and said that the Agency disregards the potential impacts on energy consumers, who will have to bear the additional costs of the transmission system, starting from the next tariff cycle, in the event of termination of contracts without any type of penalty, until new plants are connected to the system.
The entity understands that the measure demonstrates a lack of equality among agents in the electricity sector, as it imposes costs on users of the transmission network arising from entrepreneurs who failed to comply with their contractual agreements.
“It is always worth highlighting that every enterprise is subject to market risks and that the entrepreneur is aware of the existing rules before making his/her decision. The creation of mechanisms that mitigate potential exposures, in an already consolidated theme, opens space for precedents, which in the future can be used by other agents in an opportunistic manner”, says ABRACE.
For ABRATE (Brazilian Association of Electric Energy Transmission Companies), the simple fact of allowing entrepreneurs to request a grant without a preliminary assessment by the distribution concessionaires or the ONS (National System Operator), in itself, was already an act of carelessness that caused the ANEEL authorized generating plants without even checking whether there were substations with sufficient space to accommodate this generation and transport its energy.
He also said that “the analysis of the problem of major default, with potential atypical risk that directly impacts the transmission companies, was not included in the context. By disregarding the issue, the problem of default on the connection charge and the CUST termination fine will be attributed in its entirety to the transmission system, thus burdening exclusively the transmission segment, with issues arising from a cyclical and exceptional situation.”
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