The MME (Ministry of Mines and Energy) opened, last Wednesday (3), Public Consultation No. 188/2025, which proposes a new methodology for a competitive mechanism aimed at reducing or settling the R$ 1,1 billion deficit in the MCP (Short-Term Market). The deadline for sending contributions is short: it ends next Tuesday, July 8.
This deficit originates from legal actions that suspended the mandatory payment of the GSF (Generation Scaling Factor) by several agents, generating accumulated default in the settlement of the MCP.
Understand GSF and the origin of the problem
The GSF measures the ratio between the energy actually generated by hydroelectric plants and the physical guarantee allocated in the MRE (Energy Reallocation Mechanism). When this factor is less than 1 (or 100%), it means that hydroelectric plants generated less than contracted – usually due to water shortages and reduced reservoir levels.
From 2014 onwards, the problem worsened: in addition to the water crisis, the intensified dispatch of thermal plants, regulatory restrictions and operational decisions by the ONS (National System Operator) limited hydroelectric generation.
The result was a significant reduction in the GSF, without direct responsibility on the part of the generators, who still had to bear the losses – which led to a wave of legal action in the sector.
In 2015, Law No. 13.203/2015 offered alternatives for renegotiating hydrological risk, such as extending the term of concessions. Some agents agreed, but a significant portion maintained their lawsuits in court, which remain in force to this day.
This judicialization made the MCP structurally in default, hindering settlement among agents, generating legal uncertainty and affecting confidence in the business environment of the electricity sector. To give you an idea, default reached 75% of the MCP settlement.
With the publication of Provisional Measure No. 1.300/2025, the government proposes a new competitive mechanism to address legal liabilities linked to the GSF.
The proposal provides for the conversion of unpaid amounts (protected by court decisions) into negotiable securities; the holding of a competitive auction, in which the agent offering the highest value for the securities will win; the conversion of acquired securities into an extension of the concession term, limited to up to 7 years; the allocation of the funds raised to settle amounts due under the MCP; and the obligation of participating generators to drop legal actions related to the GSF as a condition for joining.
According to the MME, the measure seeks to:
- Significantly clean up GSF's legal liabilities;
- Reduce defaults in the MCP;
- Promote greater legal, regulatory and economic security;
- Reestablish signs of confidence for new investments in the electricity sector.
Only hydroelectric generation agents participating in the MRE with a grant that registers under the terms of the Notice to be published by CCEE (Electric Energy Trading Chamber) may participate in the competitive mechanism as buyers.
The centralized competitive mechanism may, if necessary, be carried out more than once, if not all available titles are negotiated. If the total amount collected exceeds the GSF liability, the surplus will be used to reduce the costs of the CDE (Energy Development Account).
Important: the renegotiation of hydrological risk will be prohibited after 12 months from the publication of MP 1.300/2025. The government's idea is to implement this mechanism before MP 1.300 expires in Congress, in mid-September.
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