PL 5829: main changes imposed by the GD Legal Framework

With the collaboration of Ericka Araújo

The Chamber of Deputies approved last Wednesday (18), with 476 votes (99%), PL 5829, which creates the Legal Framework for GD (distributed generation). The proposal, authored by deputy Silas Câmara (Republicanos-AM) and rapporteur by deputy Lafayette de Andrada, now goes to the Senate.

To clarify the topic further, the Canal Solar brings the main highlights of the approved text that will be considered by the senators and what the next steps should be.

Consumer profile

The text maintained that microgenerators are consumers who install up to 75 kW of power from renewable sources – such as solar, wind, biomass and others – in their consumer units, whether on roofs, land, condominiums, farms and others.

And mini-generators are those that install a power greater than 75 kW, with a limit of 5 MW. For solar sources, the limit for projects filed after the transition period will be 3 MW.

Maintenance of current rules

According to the approved base text, the current rules will remain in place until 2045 for UCs (consumer units) with micro and mini generators already in operation.

This group also includes consumers who file an Access Request with the distributor, through the SCEE (Electric Energy Compensation System), within 12 months of the presidential sanction of the Law.

These new generators will have the following deadlines to start operation, counting from the issuance of the Access Opinion:

• 120 days for microgenerators;
• 12 months for solar source mini generators;
• 30 months for mini-generators from other sources.

Credit validity

The validity of energy credits remains at 60 months. If they are not used within this period, they will be reverted to the lower tariff (reduction in everyone's electricity bill). As a result, the consumer loses the right to any form of compensation.

Read also PL 5829 divides opinions among integrators

If the contract between the consumer and the distributor is terminated, existing credits will be maintained in the holder's name, unless there is another consumer unit in their name, allowing them to be reallocated to that unit.

Sale of electricity credits

Currently, REN 482 prohibits the commercialization of energy credits from distributed micro/minigeneration. PL 5829 proposes that distributors may purchase credits not compensated by micro/minigenerators, but does not specify the criteria, which will be up to the ANEEL (National Electric Energy Agency). More specific issues, such as the selling price of energy, will also be regulated by the agency.

The bill will also allow the distributor to contract the provision of ancillary services by micro/mini generators, a procedure that must occur through a public call.

Credit allocation and Rural Electrification Cooperatives

Currently, REN 482 restricts the compensation of energy credits within the same concession or permission zone. This will change with PL 5829. Imagine that you have a generation plant in the zone of a rural electrification cooperative, which is a distribution permission holder. Due to the predominantly rural tariff profile and the reduced captive market, there is some difficulty in exploring micro/minigeneration, especially in the Shared Generation modality.

What changes? Knowing that the service areas of permissionaires and concessionaires are compatible, precisely to allow the continued provision of the distribution service, PL 5829 will authorize the energy credit generated in the permissionaire's zone to be offset in the concessionaire's distribution area.

Read more: Professionals and associations give their opinion on the approval of PL 5829

Billing as a B-Optante

Article 100 of REN 414 allows consumers in group A to opt for billing identical to that of group B in certain cases, where payment of the contracted demand is not provided for. Although the application of the provision for consumer units with micro/mini generation was accepted for a certain time, in June 2020, ANEEL took a position on the matter, saying that exercising this option for billing as group B is incompatible with REN 482, except for microgenerators.

What does PL 5829 propose? It will allow the billing of a consumer unit in group A with local micro/minigeneration to be made as a group B option, in cases where the total nominal power of the transformers is equal to or less than 1,5 of the limit allowed for connecting consumers in the group B, that is, less than or equal to 112,5 kVA.

Infrastructure projects: eligible for REIDI and other incentives

REIDI (Special Incentive Regime for Infrastructure Development) is a tax incentive program for federal taxes granted, among other things, to infrastructure projects in the electricity sector. The classification of micro/mini-generation under REIDI was the subject of heated discussions in the market, as the projects were not seen as infrastructure projects. In fact, ANEEL took a position on the matter in Circular Letter No. 10/2017, stating that it was impossible to qualify these projects in REIDI.

What will happen? Bill 5829 proposes to put an end to doubts on the subject. Micro/mini-generation projects will be expressly classified as infrastructure works, which will make them eligible for the special regime. Other benefits will also arise from this classification, such as the possibility of issuing infrastructure debentures (incentivized), as well as allocating resources from Infrastructure Equity Investment Funds to micro/mini-generation projects.

“This measure expands the access of distributed generation entrepreneurs to resources in the national capital market and, consequently, lowers the cost of money for raising new projects, allows the dilution of entrepreneurs' risk, gives access to investors interested in investing in ESG projects, the number of which grows exponentially every year”, comments Tribuci.

“In addition, the tax benefits, whether those inherent to FIP-IE and encouraged debentures or those resulting from adherence to REIDI, should reduce the return period for investments in distributed generation, optimizing Capex, making projects more attractive for all types of investors”, he adds.

Opinion on Access and transfer of ownership of micro/minigeneration

How ANEEL regulated the issue? The agency instructed distributors to only allow the transfer of ownership of the consumer unit with micro/minigeneration after the generation has been effectively connected to the distribution network. If the consumer-generator opted for the transfer, the penalty of loss of the right to the Access Opinion would be applied. The measure would aim to prevent the commercialization of Access Opinions, especially in regions of the country where the number of requests is high.

What does Bill 5829 propose? According to the proposal, the commercialization of Access Opinions will remain prohibited, including expressly. To this end, the transfer of ownership and/or corporate control of the holder of the micro/minigeneration unit, indicated in the Access Opinion, will be prohibited until an inspection is requested.

CUSD Automatic Extension

What's the problem today? REN 482 allows the consumer-generator to carry out reinforcement works and/or improvements to the distribution network in order to enable it to connect the generation plant. However, in cases where there is a delay in connection works carried out by the consumer-generator, there is no regulatory hypothesis to exclude liability, even if the delay is justified.

This means that the distributor can invoice the CUSD (Distribution System Use Contract) and charge the contracted demand, even though the generating plant is not even connected to the distribution network. Liability exclusion cases are only provided for delays in works carried out by the distributor.

PL 5829 aims to change this scenario. The deadline for completing the connection works, carried out by the consumer-generator or by the distributor, may be extended, with the consequent postponement of the beginning of the CUSD. To do so, all that is required is proof of the progress status of the environmental licensing and of the works on the installations themselves.

Requirement of guarantee of faithful compliance

• Projects with a capacity greater than 500 kW and less than 1.000 kW: guarantee: 2,5% of the project value;
• Projects with installed power equal to or greater than 1.000 kW: guarantee: 5% of the project value.
• Projects with an installed power exceeding 500 kW and which have a valid Access Opinion on the date of publication of the law must present a guarantee of faithful compliance within 90 days, unless the CUSD is signed within this period. Guarantee: depending on the installed power, according to the general rule (2,5% or 5% of the project value).

Such a guarantee will not be necessary for shared generation through consortiums, cooperatives and those classified as multiple consumer units. For the others, it will be executed if the access requester withdraws from the Access Opinion after at least 90 days from the date of issuance of the opinion. The values ​​will be reversed in favor of reasonable tariffs.

The guarantee of faithful compliance must be valid for up to 30 days after the connection of the project to the distribution system, under penalty of cancellation of the Access Opinion. It is not yet defined which types of guarantees will be applicable.

However, if we take the ACL (Free Contracting Environment) as a parameter, we would have the following modalities: cash guarantee; national federal public title; surety insurance policy; and bank guarantee letter. Therefore, the ANEEL will still regulate the guarantee of faithful compliance for the GD. However, what is expected, in fact, is the use of the same parameter applicable to the ACL.

Transition

The project foresees a transition of seven to nine years in the payment of distribution transmission for those who request access to the grid after 12 months of the law's sanction. These payments are related to the remuneration of the distribution service assets, the depreciation of the grid equipment and the cost of operation and maintenance of the service (currently known as TUSD Fio B). Thus, of the aforementioned cost, these generators will pay:

• 15% in 2023 and 30% in 2024;
• 45% in 2025 and 60% in 2026;
• 75% in 2027 and 90% in 2028;
• New rules established by ANEEL from 2031 for those who request access between months 13 and 18 after the law is enacted, or 2029 for the rest.

These percentages above will be 100% of TUSD Fio B + 40% of transmission costs (TUSD Fio A) + inspection, research and development charges (TFSEE and R&D) for remote non-dispatchable plants with power greater than 500 kW or for generation shared in which a single holder holds 25% or more of the surplus.

Valuation of GD benefits

The text determines that after the transition period, the units participating in the SCEE will be subject to the tariff rules established by ANEEL, based on the guidelines determined by the CNPE (National Energy Policy Council). How will this happen?

According to the text, the CNPE will hear from society, associations and representative entities, companies and agents of the electricity sector to then establish guidelines for assessing the costs and benefits of microgeneration and distributed minigeneration. The Council will have a period of six months to carry out this process. In the guidelines, the CNPE must consider benefits related to the location of the plant and consider the generation components, electrical losses, transmission and distribution.

After the Council defines the guidelines, the ANEEL will have up to 12 more months to establish the calculations for the valuation of benefits and the new rules will be valid from 2029. For units that file access requests between months 13 and 18 from the publication of the law, the new rules will come into force from 2031. The difference will be covered by resources transferred to energy distributors by the Energy Development Account.

condominiums

The text provides that, in addition to consortia and cooperatives, consumers will be able to meet in “civil, voluntary or building condominiums or any other form of civil association, established for this purpose, composed of natural or legal persons”.

“The possibility of electricity consumers coming together in an association to join the SCEE, in our view, is one of the most relevant advances brought by the substitute for structuring shared electricity generation projects”, analyzed Einar Tribuci.

“It is very likely that this legal type will become the main form of consumer gathering to join the SCEE in the shared generation modality due to the fact that it accepts both natural and legal persons into its ranks and because its constitution and management are quite simplified in relation to the Cooperative (but not in relation to the Consortium, please note)”, he added.

However, the text prohibits the participation in the SCEE of enterprises that have rented land, lots and other properties through a contract that links the rental price to the amount of energy generated in kWh.

Minimum fee

The text did not change the minimum billable consumption values, which are currently 30 kWh (single-phase), 50 kWh (two-phase), 100 kWh (three-phase). The change only affects those who have generators with an installed power of up to 1,2 kW, which should have a 50% reduction in relation to the minimum billable value of other equivalent consumers. However, the text will finally eliminate the double availability cost charge (in reais and energy) that occurs today. Furthermore, new entrants will only pay availability costs if their network consumption (before compensation) is less than this value, in kWh.

Example for new entrants (after transition period): a two-phase consumer that consumes 30 kWh and generates 100 kWh will compensate 30 kWh (paying only part of the TUSD Fio B) and will pay availability cost on 20 kWh (paying for all components). The remaining balance for the next cycles will be 70 kWh.

Webinar on PL 5829

Still have questions? Watch the webinar “PL 5829: Analysis of the text approved by the Chamber of Deputies” tomorrow (24), at 17 pm with photovoltaic market experts José Marangon, Bernardo Marangon and Pedro Dante. During the event, the legal and judicial aspects, payback and other impacts that the Legal Framework for DG should bring to the solar sector in Brazil will be discussed.

Sources: Cortez Pimentel Lawyers (INEL) / Einar Tribuci / Tássio Barboza (Enersol Brazil, INEL) / Chamber Agency