Created in the second half of 2020, B3's seal of confidence for the free electricity market aims to contribute to the formation of a securer, more efficient, transparent, and, consequently, more liquid market, thanks to increased participation by market participants.
To this end, B3 has implemented its own evaluation methodology that identifies the risk inherent to the contract portfolio of market participants voluntarily registered in a specific system. This methodology uses economic, financial, and transactional data to establish indicators that enable a better ability to read and manage risks, especially in relation to the potential loss in the portfolio of each participant registered.
There are two main elements used in this evaluation: submission of the documentation provided for in the regulation for the seal and risk analysis for the portfolio of participants registered, considering the limits of financial exposure.
The main documents provided for in the regulation for the seal that are factored into B3's assessment of market participants are:
- financial statements and the respective audit reports
- contracts for the purchase and sale of electricity
- documents proving the existence of an advisory board and board of directors
- the existence of a corporate governance program, especially in relation to risk management policy
- the existence of a risk management and internal audit area
In practical terms, each document provided for in the Regulation represents a certain score value which, at the end of B3’s review, results in a total score obtained for the participant’s classification into one of the levels provided for registration of the (1, 2, or 3).
Only global data and information of registered agents may be publicly disclosed by B3. This means that the category (level) assigned to the participant is disclosed in the B3 system and website, whereas the specific score assigned to each agent is privately disclosed to the respective participant.
To carry out risk analysis of participants’ portfolios, B3 uses a specific market model to calculate the market risk and liquidity of its participants. The model is based on economic and financial elements, such as generation assets of electric power generating participants, physical guarantee values of these assets and load assets of electricity-consuming agents.
As a result of this risk analysis, the participant may be classified as adherent or non-adherent, and this classification will be disclosed in the B3 system for access by other registered participants. Still under the rules for the seal, B3 does not assign a status to free or special consumers, distributors, and transmitters of electricity.
After analyzing the information and documents forwarded by participants requesting registration, B3 indicates the category assigned to the participant, who may respond and opt for continuation or cancellation of the certification process. Reconsideration of the classification assigned by B3 may also be requested.
Legal entities registered in the Electric Energy Trading Chamber (CCEE) may join the seal system, in addition to the obligations to maintain the authorizations necessary for the exercise of their activities, execution of an association agreement with the system, payment of the applicable costs and charges, submission to B3's rules and procedures for monitoring, and indication of an officer responsible for the relationship with B3.
Although it is applicable only to participants who enter the platform on an optional basis, B3's seal of confidence for the free electricity market represents an advance for modernization of the sector, as it implements a mechanism that strengthens legal certainty and the reliability of the free electricity market.