The attention of participants in the electric sector will be directed, until August 4, to discussions of Public Consultation No. 33/2017. It was launched by the Ministry of Mines and Energy with the ambitious purpose of discussing proposals for legal measures that would enable the long-term sustainable future of the electricity sector.

The document that will guide the discussions on the proposed measures is Technical Note No. 5/2017, which, in an educational and pragmatic manner, recognizes the need to improve the regulatory and commercial model in force in Brazil in order to identify what has been conventionally called “basic elements of a vision of the future."

If mere description of the purpose of the discussions is enough to get an idea for the size of the challenge proposed by Public Consultation No. 33/2017, the list of the "basic elements of a vision of the future" confirms that the task, in addition to being necessary, will in fact be arduous.

Removal of barriers to the entry of participants, respect for contracts in force and institutional formalities, incentives to align individual and systemic interests, respect for individual business decisions and economic signaling, adequate allocation of risks, rate stability, security of supply, and socio-environmental sustainability are goals to be achieved and harmonized.

A good part of these issues appeared in the discussions of Public Consultation No. 21/2016, whose purpose was to obtain the view of different participants on the risks and benefits involved in the expansion of the free market. It is precisely for this reason that, the propositions of Technical Note No. 5/2017 revolve, to a greater or lesser extent, around improvements in the business model of the electric sector.

In this sense, the proposals were divided into four different groups, namely:

  • Reform commitments and elements of cohesion - with emphasis on the new rules of self-generation and gradual reduction of the limits on access to the free market, measures aimed at encouraging expansion in generation.

  • Unlocking measures - a group which includes the proposals that are the most incipient and which need to be further developed and specifically regulated, including: the possibility of segregated marketing of availability and energy products; reduction of transmission costs and their centralized settlement with repercussions for existing contracts; and new mechanisms for price formation, with express provision for the creation of a business grant fund.

  • Allocation of costs and rationing - a group in which are found the measures that have been discussed for a long time among the participants in the sector and whose need for adoption, with some degree of variation, is recognized by them. They can be summarized as: recognition of migration as an involuntary exposure of distributors and greater flexibility for relief mechanisms; segregation of tariff components; change in the type of subsidies for incentivized sources that will no longer enjoy discounts in network tariffs in exchange for a premium for effective production; and return of types of contracts based on quantity and availability, with preference given to the first option.

  • Sustainability and litigation abatement measures - possibly the most urgent and, therefore, most controversial measures due to the plurality of interests involved, such as: removal of price restrictions for privatized plants, the return of the RGR (Global Reversion Reserve) and the allocation of its resources for the payment of compensation for transmission concessions; anticipation of the CDE (Energy Development Account); and the easing the frequency of litigation with respect to hydrological risk, by offsetting the compensation for the hydroelectric displacement to 2013, thus reaching all energy not renegotiated and not litigated in that period.

As one can see, the agenda is vast and the time is quite scarce. However, it is a unique opportunity to revisit the Brazilian electric sector model with depth and responsibility. Many participants in the industry will certainly do their best to converge around a cohesive proposal, even if this entails mutual concessions. We all know that the last thing the industry needs is to relive the recent experience of "unmeasured government edicts" and "normative patchwork."