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Legal Update

Public Hearing 085/2013: Improvement of regulations regarding electricity trade in the Free Market

1 August 2013
Tauil & Chequer Legal Update

The Brazilian Electric Energy Agency (“ANEEL”) instituted Public Hearing No. 085, from July 29 to August 30, 2013 (“AP 085/2013”), to obtain contributions to the proposals for improvement of regulations regarding electricity trade by customers in the Free Market (“ACL”).

The proposals especially regulate changes introduced by Law No. 12.783, dated January 11, 2013 and by the Ministry of Mines and Energy (“MME”) Ordinance No. 185, dated June 4, 2013, regarding the term for special customers to return to the Regulated Market (“ACR”), and the assignment of electricity and capacity contracted amounts in the ACL by free and special customers.

According to ANEEL’s proposal, free and special customers must inform their local distribution company about their decision to return to the ACR with a minimum five (5) years advance notice and must enter into the relevant Regulated Power Purchase Agreement (“CCER”).

Customers must also enter into the CCER when they partially migrate to the ACL. In the case of a new consumer unit, the CCER will establish the electricity contracted amount in MW per month. In the case of a consumer unit with a valid supply agreement, the CCER will establish the electricity contracted amount (i) in MW per month, valid as from the date of termination of the supply agreement or (ii) equivalent to the measured amount, valid for the same remaining period of the supply agreement, followed by the CCER in MW per month. Finally, in the case of a consumer unit with a valid CCER whose amounts are equivalent to the measured amount, the CCER shall be amended to establish amounts in MW per month for the remaining period.

The proposed resolution also sets forth that in the event of delay in the customer’s migration to the ACL for reasons attributable to the distribution company, the CCER or an equivalent amendment shall be entered into for the period required for the conclusion of such migration, limited to one hundred and eighty (180) days, and the customer shall pay for the consumed amount based on the lowest of (i) the monthly average spot price (“PLD”) and (ii) the average cost for the acquisition of electricity by the distribution company, as considered in its tariff adjustment process.

On the other hand, if the delay is exclusively attributable to the customer, the distribution company will charge for the net connection and use, and for the monthly amounts agreed in the CCER, if applicable, and the remaining consumed amount shall be paid based on the highest of (i) the monthly average PLD and (ii) the average cost for the acquisition of electricity by the distribution company, as considered in its tariff adjustment process, plus the applicable taxes, and, in addition, on the highest of (i) the monthly average PLD and (ii) the Annual Reference Value (“VR”), as considered in its tariff adjustment process, plus the applicable taxes. The latter amount shall be adjusted by the time of the annual calculation of coverage insufficiency of the distribution company.

Another relevant issue covered by the AP 085/2013 is the regulation of an old demand by customers regarding the assignment of electricity and capacity amounts contracted in the ACL. Accordingly, as from February 1, 2014, a customer may assign its contracted surplus to any agent of the Electric Power Commercialization Chamber (“CCEE”) by executing a Free Contracting Market Power Purchase Agreement (“CCEAL”) in the Assignment Modality, subject to the validity of one original CCEAL, which may also be a CCEAL in the Assignment Modality. This means that successive assignments will be permitted.

The CCEAL in the Assignment Modality may be freely negotiated, so long as the assigned amounts and term do not exceed those set forth in the original CCEAL and there is compatibility of certain conditions with the original CCEAL to avoid any exposure of the assignor customer before the assignee agent.

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