Ilie Bezerra Garden

ANEELANEELHowever, “the fact that the captive consumer has generation capacity, as permitted by Resolution No. 482/2012, does not violate this premise. By installing, maintaining, and operating their asset, using the energy generated by them, the consumer acts as a generator, not a generator holding a concession, permit, or even authorization, but a unique generator, with characteristics of a registered holder and others outlined by Resolution No. 482/2012.” The Federal Prosecutor's Office continues, "the commercialization of the input, moreover, is absent from the scope of activities of this 'consumer'. In fact, not even when he uses the electricity compensation system inaugurated by Resolution No. 482/2012 and injects the surplus of unconsumed energy into the distribution network, appropriating corresponding credits, is the commercialization of the input characterized. Moreover, Opinion No. 108/2012 already addressed the issue, concluding, after analyzing the nature of several contracts, that the electricity compensation operation constitutes a mutual agreement, (...)". Despite Resolution 482/2012 having been superseded by the publication of Resolution 1.059/2023, the precepts contained therein remain, so that the understanding adopted by the Federal Prosecutor's Office remains valid. ANEEL It remains relevant, in terms of the validity of the MMGD model for captive consumers. And this is evidenced by... ANEEL, which asserts “(...) it is imperative to recognize that the new and recent provision in the Law, by explicitly making eligible 'consortium, cooperative, voluntary or building civil condominium or any other form of civil association, established for this purpose, composed of individuals or legal entities that own a microgeneration or distributed minigeneration consumer unit', among others, has enabled the creation of new business models that use the shared generation modality, making the characterization and prevention of possible distortions of distributed minigeneration as generation for self-consumption more complex.” It is in the context of high tariffs and the lack of freedom to choose the electricity supplier that Solar Communities, supported by current legislation, use the possibility of uniting a group of people, sharing the costs arising from the generation of electricity to share the benefits resulting from the joint investment in the system. Starting from this premise, several issues arise, including: the legality of solar communities; the delegation of oversight to distributors; and the lack of clear penalties for irregularities identified by distributors. Legality of Solar Communities: Given the growth of solar farms implemented in recent years, distributors claim that these have subverted the purpose of allowing association for the self-generation of electricity, in practice selling electricity using the free market model to captive consumers. Source: Ministry of Mines and Energy (6) Although we are dealing with a fraction of the captive consumers of the distributors, the real concern of the distributors is with the continued possibility of losing this consumer market, which was guaranteed to them by an old model of the electrical system, of structural monopoly, without the existence of current technologies. Currently, distributors serve 90 million consumer units. Of this total, 2,09 million customers joined distributed generation. However, solar communities do not enter the free market, because to date there is no possibility of choosing an electricity supplier for low voltage consumers, who remain linked to the local distributor. In fact, even if the legislation authorizes remote energy generation, it is not possible for them to be that remote, as distributed generation requires that the consumer-generator be within the same concession area as the consumer unit that will receive the energy credits. In other words, energy consumption and generation must be covered by the same local distributor, there being, therefore, no interchangeability between distributors, and in this sense, there is no freedom of choice, an essential characteristic of the captive consumer model. Deepening the analysis on the issue, obviously not exhausting the topic, it is observed that one of the points of discussion about the existing model is that the costs incurred by the distributors would be borne by other consumers, those unable to participate in solar communities or install systems own. However, we do not believe that conclusion to be true. First, because the distortions are covered by current legislation, which seeks to compensate for any potential loss to the distributor. What we did not realize was taken into consideration when analyzing the topic is that solar communities bear part of the cost of expanding the system, which is used by other consumers, not generators. According to article 108 of Resolution 1000/2021, the consumer-generator must financially participate in the works necessary to increase demand, according to the connection request. It is also important to highlight the obligation of the consumer-generator in group A to pay the minimum contracted demand. It is clear that the increase in load and its costs are not fully borne by the distributor, which will pass it on to its captive consumers, but there is clearly a division of costs with the solar communities, so that the claim that Solar communities would result in an increase in the cost of energy for other captive consumers. The discussion then turns to the legal prohibition on the sale of electricity under the MMGD model. Again, what is observed is a discourse from distributors that solar communities would, in fact, sell the energy generated, which violates current legislation. The legislation is explicit: "It is forbidden to include in the SCEE (Brazilian Electricity Regulatory System) a consumer unit with distributed microgeneration or minigeneration that does not qualify as electricity production for its own consumption." And, "the sale of energy credits and surpluses is prohibited, as is obtaining any benefit from the allocation of energy credits and surpluses to other holders, applying the provisions of art. 655-F if this is found.” It turns out that solar communities do not sell energy, the system is built based on the possibility of compensating the energy generated by the consumer-generator, whose associates are several holders of consumer units. Obviously, this is a private enterprise, which must be maintained through financial contributions at a frequency agreed between the parties. At this point, the Reporting Director of the review of REN No. 482/2012 presented his understanding that “(...) there is not the same regulatory restriction for captive consumers to carry out the activity of self-production of electricity (or self-consumption, according to the nomenclature of Resolution No. 482/2012, of 2012, which seeks to emphasize the consumer characteristic of those who chose to install distributed micro and mini generation), and they can exercise ownership of the land and generation equipment through rental and leasing contracts whose counterpart is not, fundamentally, payment for the energy produced. In other words, equipment contracts may contain clauses defining the payment of variable installments associated with the yield and performance of the equipment, but the value of the principal installment must be fixed so as not to be characterized as the commercialization of electricity. This contradicts what the Specialized Audit Unit for Electrical and Nuclear Energy of the TCU (Federal Court of Accounts) would like to suggest, which asserts that there is an irregular commercial arrangement in the organization of solar farms. It is worth clarifying that, although the understanding was adopted under REN No. 482/2012, the core of the issue is the same under Resolution 1000/2021, the legal impossibility of selling electricity within MMGD. In fact, corroborating this conclusion, the response fromANEELto the TCU: “(...) Nevertheless, unless the commercialization of electric energy between associations/consortiums/cooperatives/voluntary civil or building condominiums and their respective beneficiary consumers within the scope of the SCEE is identified, or irregularities in the constitution of these associative forms, it is not seen a priori that the distributors have sufficient legal support to remove or not allow the participation of these consumers in the SCEE. This is because the law itself explicitly provides for the right of consumers to come together in one of these associative forms to participate in the SCEE (Sistema de Energia Elétrica e Comercialização - Electric Energy Energy Commercialization System) in the shared generation modality. And finally, the distributors themselves use the solar community model, which would be contrary to their own interests, if, truly, this model were harmful to the captive consumer system. We could extend the debate and delve deeper into all the points covered, however, it seems clear to us that solar farms are perfectly in line with the legislation on the subject. Thus, we move on to the next point, the problem of delegating supervision to local distributors of compliance with legislation. The delegation of oversight to distributors: Chapter XI of REN No. 1000/2021 deals with distributed microgeneration and minigeneration and the electricity compensation system, and in its article 655-A delegates to the distributor the responsibility for responding to requests for connection of consumer units, with the distributor being responsible for carrying out the inspection and installing or adapting the metering system. According to article 655-F, in the event of evidence of irregular receipt of a benefit associated with the SCEE, the distributor must adopt measures for its faithful characterization, composing a set of evidence that proves the irregular receipt of the benefit. It is clear that the distributor is responsible for compliance with MMGD legislation and regulations, in accordance with Resolution 1000/2021, which clearly presents a conflict of interest. Local distributors through ABRADEE (Brazilian Association of Electric Energy Distributors) question the validity of solar communities, essentially alleging that they violate the captive market, generating losses for distributors due to the reduction – allegedly – of their effective consumer market, and these same companies are those responsible for monitoring the validity of the energy compensation system. Inspection should be carried out by an independent body whose purpose is to ensure faithful compliance with the legislation. We question, at this point, how to ensure that the inspection body will, in fact, and impartially analyze whether the situation actually complies with the legislation, whether the body responsible for this has an interest in the result of the inspection. We do not stop at this point, but expand to the issue relating to the granting of connection budgets, which are also often denied in a discretionary manner by the distributors, who use arguments, sometimes without any factual support, to deny the connection. It is extremely important to highlight that it is not only up to the local distributor to assess whether the project requesting the connection budget is in line with the legislation during the use of the compensation system, but also at the time of granting the connection budget. To repeat, local distributors are visibly not impartial entities for the role of overseeing the electricity compensation system, and should not have this role delegated to them. Furthermore, distributors – despite the social function of societies – are guided by profitability, not social well-being, and the electrical energy system, which definitely benefit from the growth of MMGD, which is an essential part of the energy transition has been in vogue recently. And, finally, we move on to the topic of legal uncertainty due to the lack of clear definition of penalties and their extent in the electricity compensation system. Lack of clear penalties for irregularities highlighted by distributors. In addition to the impartiality of the agent to whom the inspection was delegated, there is no clarity about what the penalty would be, if the solar communities were, in fact, irregular. Solar farms, as seen throughout this explanation, are in perfect harmony with the electrical energy compensation system, including in the understanding ofANEELThe formation of associative groups in order to reduce costs for using the compensation system does not violate the norm in any way; however, if irregularities were identified, the question we must ask is: how will the solar farm be penalized? We could try to answer this question by analyzing article 655-F of REN No. 1000/2021, which states: “Art. 655-F. In the event of evidence of irregular receipt of benefits associated with the SCEE, the distributor must take steps to accurately characterize it, compiling a set of evidence that proves the irregular receipt of the benefit. (Included by REN) ANEEL 1.059, of 07.02.2023)” (emphasis added). Or, continuing from the above, we must analyze article 655-D, § 3, which reads, as transcribed below: Art. 655-D. The consumer responsible for a consumer unit may participate in the SCEE: § 3. The inclusion of consumers in the SCEE is prohibited in cases where it is detected, in the document proving possession or ownership of the property where the distributed microgeneration or minigeneration is installed or will be installed, that the consumer has rented or leased land, lots and properties under conditions in which the value of the rent or lease is given in reais per unit of electrical energy. And, further on, we look at article 325: “Art. 325. The distributor must offset the billing when there is a difference to be charged or refunded resulting from the following situations: I - defect in the measurement, as dealt with in Section V of Chapter VIII; II - proof of irregular procedures, as referred to in Chapter VII of Title II; or § 1 The distributor must notify the consumer in writing, by a method that allows proof of receipt, necessarily containing: III-A - in the case of irregular receipt of benefits associated with the SCEE, a description of the irregularity and the associated evidence, as well as the amounts to be re-invoiced; and (Included by REN) ANEEL 1.059, of 07.02.2023)” (emphasis added). The above regulation is entirely based on the terms of Resolution 1.000/2021. Although the articles above address the topic, none of them fully answer the proposed question. Assuming that the distributors will indeed act impartially, once the irregularity is corrected, could the consumer-generator be reinstated in the electricity compensation system? How long would it take? After paying the differences found by the distributors in any irregularity found, and correcting the identified irregularity, should the compensation system be reinstated for that consumer unit? When? The insecurity caused by the lack of answers to the above questions is blatant, since, even though solar communities are not essentially for-profit ventures, as they do not involve the sale of electricity, as we have made clear, they are investments whose results are reaped through the compensation of the energy generated, and that In the current system, consumers are at the mercy of the distributors. We consider the indefinite exclusion from the SCEE (Sistema de Energia Elétrica - Electricity Regulatory System) unfeasible, especially with the distributors acting as the agents for monitoring and enforcing the penalty, due to a clear conflict of interest. In our view, there should be a period for correcting the irregularity, allowing the inclusion of the consumer-generator in the SCEE, and furthermore, there should necessarily be... ANEEL to be part of this procedure, in order to guarantee the appropriate penalty. References Consumers covered by articles 15 and 16 of Law No. 9.074/1995 and by §5 of article 26 of Law No. 9.427/1996 Opinion No. 00542/2015/PFANEEL/PGF/AGU Official Letter No. 20/2024 -AIN-ANEEL, from 04/18/2024 https://app.powerbi.com/view?reyJrIjoiZTZhYWU4ZTItNGVjYy00NWIwLTg3ZjMtNGIwMzBiZGNhMDAwIiwidCI6IjQwZDZmOWI4LWVjYTctNDZhMi05MmQ0LWVhNGU5YzAxNzBlMSIsImMiOjR9 (accessed on 04/12/2024) https://abrapch.org.br/2023/08/geracao-distribuida-ja-representa-11-de-toda-energia-gerada-no-pais/ Art. 108. The consumer's financial participation is the positive difference between the budget for the minimum overall cost of the work, proportionalized in accordance with this article, and the charge for which the distributor is responsible. § 1 The distributor must proportionally allocate the budget for the minimum overall cost of the project considering the relationship between the highest demand for load or generation to be met or increased and the maximum demand made available by the budget at the connection point, with mandatory application of article 100. (Wording given by REN) ANEEL 1.059, of 07.02.2023) § 2 The budget cannot contain the items set forth in § 4 of art. 98 Art. 2°. (...) XLV-A - Electric Energy Compensation System - SCEE: system in which active electrical energy is injected by a consumer unit with microgeneration or distributed minigeneration into the local distributor's network, ceded as a free loan and subsequently used to offset the consumption of active electrical energy or accounted for as energy credit of consumer units participating in the system. (...) – REN 1.000/2022 § 5 of article 655-D, of REN 1000/2021 § 5 of article 655-M, of REN 1000/2021 Circular Letter No. 0010/2017-SR/ANEEL, dated 22/03/20217 Official Letter No. 20/2024 – AIN/ANEEL Cemig SIM- company linked to a distributor

Ilie Bezerra Garden

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TCU and the issue of energy commercialization by the solar community