Provisional Measure Limits the CDE Budget and Creates Rebalancing Mechanism
On July 11, 2025, the Brazilian government published Provisional Measure No. 1,304/2025 (MP), introducing significant changes to the Brazilian energy sector. Below, we highlight the main points proposed in the MP.
The MP introduces Article 13-A to Law No. 10,438/2002, establishing that the total amount of resources collected for the Energy Development Account (CDE) will be limited to the nominal total value of the expenses defined in the CDE budget for the year 2026, which may reach nearly R$50 billion as indicated in Technical Note 146/2025-STR/ANEEL.
If there are insufficient resources to cover the CDE, a Resource Supplement Charge (ECR) will be created as a supplementary contribution to ensure the account’s balance without exceeding the budget limit. This charge will be funded by annual quotas paid by the CDE’s beneficiary agents, in proportion to the benefit received, except for the beneficiaries of the following expenses:
- Universalization of electricity service;
- Economic subsidy for tariff affordability for the Low-Income Residential Subclass;
- Expenditures of the Fuel Consumption Account (CCC);
- Amounts related to the administration and operation of the CDE, CCC, and RGR by the CCEE; and
- Certain costs covered by the CCC as provided in Article 4-A of Law No. 12,111/2009.
Payment of the ECR will begin at 50% in 2027, and increase to 100% from 2028 onwards. In 2027, the difference between the total value of the ECR and the percentage paid will be “redistributed” to the CDE.1
Revocation of Regional Auctions for Gas-Fired Thermal Plants and Changes in Auctions for Small Hydroelectric Plants (PCHs) and Other Sources
The MP revokes Articles 20 and 21 of Law No. 14,182/2021, eliminating the obligation to contract, via reserve capacity auction, 8 GW of inflexible thermoelectric generation powered by natural gas in locations without supply of the input. The MP also replaces (i) the contracting of up to 50%2 of the demand declared by distributors, via A-5 and A-6 Auctions for hydroelectric plants up to 50 MW (PCHs) and a maximum price updated according to the ceiling of the 2019 A-6 Auction for projects without an authorization, with (ii) the contracting, via reserve capacity auction, of up to 4,900 MW of PCHs, with supply for 25 years, at the same price ceiling as the 2019 A-6 Auction for projects without an authorization.
The MP also adds §19 to Article 1 of Law No. 14,182/2021, establishing that up to 3,000 MW of the 4,900 MW to be contracted from PCHs must be contracted by the first quarter of 2026, divided into three annual stages of 1,000 MW each, with supply starting between 2032 and 2034.3 The output from these plants will not participate in the Energy Reallocation Mechanism (MRE) and may have daily modulation, according to guidelines from the Granting Authority.
CNPE’s Authority to Define the Need for Auctions of Energy from Ethanol Hydrogen and Wind Power
The MP establishes that the contracting of electricity from any source provided for in Law No. 14,182/2021 will be limited to the need identified by sectoral planning, based on technical and economic criteria defined by the National Energy Policy Council (CNPE), with the exception of the specific PCH contracts mentioned above.
In other words, the CNPE will have the authority to define the need for contracting 250 MW of energy from liquid hydrogen from ethanol in the Northeast by the second half of 2024, and 300 MW of energy from wind power in the South by the second half of 2025, as provided in §15 of Article 1 of Law No. 14,182/2021. Such paragraph had been vetoed by the President during the enactment of Law No. 15,097/2025 (Offshore Energy Potential Utilization Law), but was later reinstated by the National Congress.
New Rules for PPSA and Management of the Union’s Natural Gas
One of the main innovations of the MP is the definition of the conditions for access to the integrated systems for outflow, processing, and transportation for the trade of natural gas belonging to the Union.
The CNPE will be responsible for determining these access conditions, including pricing. The access value for the Union’s gas must be calculated based on fair and adequate remuneration, using a methodology that considers the new depreciated replacement value, the weighted average cost of capital compatible with the business risk, and the maximum capacity of the facilities.
The MP also clarifies the roles and responsibilities of the Brazilian company for the administration of oil and natural gas (Empresa Brasileira de Administração de Petróleo e Gás Natural S.A. — PPSA) in the management and commercialization of the Union’s natural resources. In addition to being exempt from penalties within the integrated outflow and processing systems, PPSA is authorized to enter into contracts on behalf of the Union for the outflow, transportation, processing, treatment, refining, and improvement of oil, natural gas, and other hydrocarbons.
PPSA may also transfer, for consideration, the possession or ownership of natural gas and its derivatives to the marketing agent, as provided in the contract. In situations where Petrobras acts as the trading agent, the transfer of ownership may occur before the gas enters the integrated outflow system, with the possibility of reacquiring possession after processing.
Final Considerations
The MP is valid for 60 days from its publication, expiring on September 8, 2025, and its validity may be extended for an equal period, in which case its validity will end on November 7, 2025. The deadline for submitting amendments to the MP ends on July 17, 2025, as established in Article 4 of National Congress Resolution No. 1/2002.
1 The MP does not detail how and when this “redistribution” will be carried out, but we assume that it will be done in the 2027 budget and funded by all CDE beneficiary agents.
2 Under the previous wording of Law 14,182/2025, after contracting 2,000 GW, the minimum percentage would be reduced to 40% of the demand declared by the distributors in the A-5 and A-6 auctions held until 2026.
3 Although the MP did not revoke the provisions of §§14 and 16 of Article 1 of Law No. 14,182/2021, which were reinstated by the National Congress through the rejection of presidential vetoes during the enactment of Law No. 15,097/2025 (Offshore Energy Potential Utilization Law), it is understood that the newly added §19 establishes a new contracting schedule for PCHs, replacing the schedule proposed by §14, whose dates had already expired.
