Division of generating plants into smaller units

It is no surprise that every innovative business activity almost always has the arduous task of opening new paths and demystifying what has remained untouched until a certain point in time. It is inevitable that the disruption of a market will cause eventual clashes between those who see themselves as “holders” of a certain custom [1] and the pioneers of a new practice.

Coincidence or not, one of the meanings of the word disruption is the abrupt restoration of electrical power that causes sparks and enormous consumption of stored energy [2]. It fits perfectly with what we see today in the distributed generation sector, in the fight between distributed generation entrepreneurs and electricity distributors.

Despite the sparks created by the fight between DG players and distributors, at least part of them could be avoided with the help of ANEEL (National Electric Energy Agency), in fulfilling its role of regulating the market, which is done in the first instance through clear, objective and cohesive standards with the Brazilian legal system.

This article aims to present our opinion on the gap left by paragraph 3 of article 4 of Resolution 482/2012 (Normative Resolution No. 482/2012 of the ANEELBy failing to define criteria for interpreting the expression "division of a generating plant into smaller units," the system creates legal uncertainty, in addition to illegal arbitrariness on the part of the distributors, who were left with the not-so-easy task of monitoring these cases and even denying adherence to the SCEE (Electric Energy Compensation System).

But don't be fooled by this victimization, because that's exactly where the danger lies, because while the ANEEL not fulfilling their regulatory role, distributors will use their role as victims in this relationship that exists in the distributed generation sector, to monitor in their favor – as a market reserve – situations that could be interpreted as the division of generating plants into smaller units, and even “legislating” on the matter.

Official documents issued by SRD/ANEEL

Over the last few years the ANEEL, through the Superintendence of Regulation of Distribution Services, responded to several queries made by consumers and electricity distributors, related to the subject of the division of generating plants. These queries involved real cases of the most diverse nature.

When analyzing the responses that were given to these letters, we can notice that there is no uniformity on the part of the SRD regarding the understanding of what is or is not permitted to be done in terms of project formatting, and which can be interpreted as a division of generating plants in disagreement. with the Resolution 482/2012.

For legal professionals, the arguments presented in the respective official documents are striking in determining when and how Resolution 482/2012 was violated with regard to the attempt to divide smaller generating plants for the purpose of meeting the power limits for distributed microgeneration or minigeneration.

One such example is Official Letter No. 0377/2019-SRD/ANEEL, who analyzed one of the situations as follows:

“Regarding Case 1 (...), the fact that there are 8 access requests totaling 20 MW of generation on the same land indicates that the division of the plants into smaller capacities below the 5 MW limit for mini-generation was a decision by the investors, since it would be technically feasible to install only one 20 MW plant, but intended for the sale of energy in the free market or participation in energy auctions in the regulated market. Therefore, even if there is a subdivision of the land and different owners in each consumer unit, inclusion in the Electric Energy Compensation System is prohibited, as provided for in Article 4, §3 of REN No. 482/2012.” 

In one fell swoop ANEEL managed to violate the Federal Constitution three times:

1. The principle of free enterprise is based on the understanding that investors would have the possibility of installing a single 20 MW plant and entering the free market or participating in energy auctions in the regulated market. For this absurd reason, it prohibits them from operating more than one 5 MW plant in the distributed generation market.
2. The social function of property, as it prevents a given area from being used for distributed generation, even if the area is subdivided among different owners, if there is an installed capacity of more than 5 MW in the surrounding area; and
3. Equality is paramount, as different owners would be prevented from exploiting their property for distributed generation purposes due to the existence of other projects in the surrounding area, which together exceed 5 MW.

With this statement the ANEEL Perhaps you have not realized that you are restricting the freedom of entrepreneurs to choose which market to operate in, that the owner of a certain area does not have the freedom to explore his property as he sees fit, within the limits of the law, and that pioneering the exploration of distributed generation activity in a certain region impedes the right of other neighbors to operate in the same segment, giving more rights to some than to others. This is illegal and completely outside the sphere of competence of the ANEEL.

Regulation by distributors

As stated initially, the blame for this David and Goliath struggle over what it means to divide generating plants into smaller units lies with ANEELIt is to be expected that David will be crushed, since the "judge" of this fight is Goliath himself, who has the supposed "burden" of identifying when attempts at division occur in violation of Resolution 482/2012, but the regulation itself does not provide any list of criteria, either objective or subjective, in this regard.

And that is precisely why there are initiatives like Cemig's, to create coercive rules and traps to be used against distributed generation entrepreneurs, which are completely illegal.

Cemig prepared the Normative Legal Opinion JE/DE N° 033/2019, which brought supposedly objective parameters to evaluate the compliance of requests from applicants for distributed generation with the regulatory prohibition on dividing a generating plant into smaller units to fit within the limits of power for distributed minigeneration.

In brief, users are segregated into 3 different groups:

1. In the first group, it must be evaluated whether access requests with geographic coordinates within the same municipality or in neighboring municipalities exceed the power limit for microgeneration or distributed minigeneration in contiguous areas of the same or different ownership as long as they belong to partners in groups of common interest;
2. If contiguous areas are not considered, a second group must be analyzed: dismemberment of plots of land into smaller plots of land, in which there is more than one access request from the same applicant (same CPF or CNPJ) or from those belonging to groups of common interest that go beyond the power limit for microgeneration or distributed minigeneration;
3. And a third group to be evaluated by the distributor together with the first two groups: applicants whose geographic coordinates are located in the same municipality and who have distributed generation access documents.

To facilitate the work of its employees, Cemig's regulatory opinion even includes a checklist, as shown in the flowchart below:

First, it is important to point out that Cemig's practice is illegal, since with this document it intends to legislate [4], for which it has no competence. In the aforementioned opinion we can observe two main illegalities, since its criteria are not established in any norms, much less in Resolution 482/2012.

The first reason is that Cemig conducts corporate analyses, and if it is understood that the owners belong to groups with common interests, they would be prohibited from accessing the grid to connect distributed generation systems that together exceed 5 MW. The second reason is that it interprets the 5 MW limit not only for contiguous land but also for municipal perimeters.

As if this anomaly created by Cemig wasn't enough, the company has been requiring consumers to sign a declaration form when requesting access, which, in popular jargon, aims to create a loophole.

The relevant document is not included in the exhaustive list of documents that the distributor may request from the user, as per Resolution 414/2010 (Normative Resolution No. 414/2010), which in itself is illegal. In this document, the consumer must declare:

• That the property where the consumer unit is located is not the result of recent property dismemberment;
• That the company does not have a micro or mini generating plant or requests or access opinions from Cemig whose combined powers exceed 5 MW;
• That the company does not have a corporate relationship with other entities, which together have micro or mini generation of more than 5 MW; and
• That the electrical interconnection of distributed generation installations served through different connection branches is prohibited.

If the respective agreement is not signed, the access request is not accepted, preventing the consumer's right to access the Cemig network. Worse than that, companies have been notified by Cemig that consumer units will be disconnected because it has been identified that there are already connections exceeding 5 MW in the same municipality and/or belonging to the same business group.

This is not only a faulty act but it is a cat's litter. In fact, it is worthy of a red card and suspension from playing the entire season resulting from the bad faith implicit since the conception of the orchestrated trap.

Administrative proceedings before the ANEEL

At least two administrative proceedings are discussing the topic foreseen in §3 of article 4 of Resolution 482. One of them is proceeding no. 48500.004024/2017-80, whose administrative appeal aims to review the action taken against ENEL-CE for improperly connecting two 5 MW wind power generating plants in contiguous areas, and for dividing 19 generating plants of 55 kW, totaling a total installed capacity of 1.060 kWp, a project developed by Prátil, controlled by the Enel Group, and whose projects were intended for remote self-consumption by pharmacies of the Pague Menos group.

Despite this being the first inspection carried out by ANEEL in this sense, in our view, the decision handed down does not form case law, as the factual aspects of these two cases are very specific, and do not have the power to guide what should be interpreted as the criteria for dividing smaller generating plants.

The other process is number 48500.006591/2019-32, which aims to suspend the application of the criteria and guidelines contained in Normative Opinion JE/DE No. 33/2019, still pending a decision, but which has already resulted in Cemig revoking the respective opinion. However, those requesting access are still required to sign the declaration form, as per the previous section, to request access, which should be immediately rejected by Cemig. ANEEL.

Conclusion

There are certainly distributed generation entrepreneurs who are circumventing Resolution 482/2012 to gain advantages that generally do not exist, such as avoiding the cost of minimum contracted demand, connection costs, tax optimizations, among others. On the other hand, distributors have also been giving interpretations without any legal basis with the sole objective of denying distributed generation connections to those who are complying with the regulation.

It is also worth mentioning that after the opening of public consultations no. 10/2018 and no. 25/2019, ANEEL received several contributions and complaints on the subject of dividing smaller generating plants, including from the firm Tribuci Advogados – but so far the ANEEL was absent from facing.

And that is why the ANEEL is responsible for this entire situation, because while it does not define which criteria are to be analyzed for the purposes of classifying the division of smaller generating plants, the conflict between distributed generation entrepreneurs and distributors will continue, and will have to, once again, be pacified in the judiciary, when in fact it is its responsibility, under the terms of Law No. 9.427/1996, which instituted the ANEEL.

References

1. Brazilian Dictionary of the Portuguese Language. Michaelis. Melhoramentos Publishing House, 2021. 1. Habitual tradition or frequent practice;
2. https://michaelis.uol.com.br/moderno-portugues/busca/portugues-brasileiro/disrup%C3%A7%C3%A3o/;
3. § 3 It is forbidden to divide a generating plant into smaller units to comply with the power limits for microgeneration or distributed minigeneration, and the distributor must identify these cases, request the readjustment of the installation and, if not complied with, deny adherence to the Electric Energy Compensation System;
4. The opinion concludes: 34. Based on the foregoing, we express our understanding, of a normative and general guidance nature to the company's bodies, that there is legal and regulatory basis for Cemig D to use objective parameters in order to standardize its understanding of the conformity of requests from distributed generation applicants to the regulatory prohibition of dividing a generating plant into smaller units to comply with the power limits for distributed minigeneration (§3 of art. 4 REN 482/2012).

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