Brazilian electricity market

August 31st,2015

CCEE - Câmara de Comercialização de Energia Elétrica

Brazilian Market Operator

Rui Altieri

Chairman

Chamber of Electric Energy

Commercialization

National Electricity Regulatory Agency Energy Research Company

Power sector governance in Brazil

CNPE: Definition of energy policies, with

focus on ensuring adequate supply

MME: Planning, management and

development of energy sectors

legislation; supervision and control of

energy policies execution; responsibilities

also over the mining sector

EPE: Planning of generation and

transmission expansion; technical

support of energy auctions

CMSE: Monitoring of the power system,

in order to ensure adequate supply

ANEEL: Regulates and supervises

generation, transmission, distribution and

commercialization of electricity.

Regulated tariffs setting

ONS: Optimized operation of the

National Interconnected System, with

focus on ensuring adequate supply at

reasonable costs

CCEE: Operation of the Brazilian power

market and, by delegation of Aneel,

execution of regulated power auctions

CNPENational Council for

Energy Policies

CMSEPower Sector Monitoring

Committee

Electric System National Operator

Ministry of Mines

and Energy

1

CCEE´s role as Brazilian Market Operator

• Created in 1999, CCEE is a nonprofit private legal

entity, regulated and supervised by ANEEL

• CCEE´s mission is to promote the electricity

commercialization activities in Brazil, including

ensuring the smooth market functioning and

fostering discussions about the evolution of the

power sector market

Accounting and

settlement

Tecnology and systems to

improve market operation

Releasing information

and results

Training for players and

institutions

Registering of the power

contracts

Metering (generation and

consumption)

Main atributions

2

CCEE´s Associated Members

• Players of generation, distribution and traders are obligated to become CCEE members, as

well as free consumers

• Regulated consumers and transmission players are not CCEE players

Class [%]

Generation 31 1,0%

Self Producer 58 1,9%

Distribution 49 1,6%

Trading 163 5,2%

Independent Producer 1015 32,7%

Special Consumer 1167 37,6%

Free Consumer 623 20,1%

Total 100,0%

Share

3

CCEE operations in 2015

4

• Operations held by CCEE accounts US$ 7.4 billions

US$ 6.2 bn US$ 339.5 mn US$ 368 mn US$ 509 mnUS$ 38 mn

Short-Term

Market“Old” hydro

quotas

Nuclear Energy

Quotas MCSDReserve

Energy

5 auctions promoted

343,658,129 MWh and U$$ 23.9 bn in contracts

Spot Market Settlement (shallow pool)

RequirementsRequirementsRequirements

ResourcesResources

Spot

Market

Spot

Market

• Each month, CCEE calculates and compares, for every associated company (everyone of the

generators, distribution companies and free customers), power availability and

requirements, considering consumption, production, power purchases or sales.

• The differences between requirements and availabilities are settled in the spot market by

the Price for Settlement of Differences - PLD

Spot market balance Spot market settlement

Exposure

X PLD

(R$ / MWh)

Spot Price

6

Two trading environments

Sellers

Generation of Public Services, Independent Energy

Producers, Traders e Self Producers

Regulated Contracting

Environment

Distributors

Captive consumers

Ambiente de

Contratação Livre

ACL

Consumidores Livres

Consumidores Especiais

Vendedores

(Bilateral) 100% OTC

Contracts freely negotiated

(Pool) Auctions

All seller performs contract with

all Distribution companies 6

Energy Auctions

7

• DISCOs are obligated to contract 100% of their load in pool, through public auctions

• Ceiling prices are defined by the Ministry of Mines and Energy

• Investors compete for concessions / selling energy in long-term contracts

Regulated consumers

Auction

Competition amongst generation investors

DISCO DISCO DISCO DISCO

Auction model

emulates a

Single Buyer

Energy Auctions

8

“A-1”“A-3”“A-5”

Existing Energy Auctions

1 - 15 years contracts

New Energy Auctions

20 - 30 years contracts

“A”

“Adjust”

Alternative Sources Auctions Reserve Energy Auctions

Year A: Delivery year

Sellers: Generators technically approved by EPE or ANEEL

• Hydro: Contracts of 30 years

• Thermal, Wind, PV and Biomass: Contracts of 20 or 25 years

22º New Energy Auction (August 28st)

US$ 3.4 billions in contracts

US$ 1.2 billion of investments

40,586,580 MWh negotiated

Technology: solar

30 plants

Average price = US$ 84.32

Duration of contracts: 20 years

Technology: solar

30 plants

Average price = US$ 84.32

Duration of contracts: 20 years

9

Auctions – Average price by technology (US$/MWh)

10

US$/MWh

Brazilian Free Market

• The Brazilian Free Contracting Environment is an OTC Market

• Contracts are bilateral and CCEE knows only its amount and length

Generators

Self-Producers

Independent

Producers

Traders

Free Consumers

Buyers

Sellers

Bilateral negotiations

Electronic Platforms

• Since June, 2014, Free consumers are allowed to negotiate energy amounts with other

consumers and Free Market players (energy cessions)

11

Thank you

Rui Altieri

Chairman

presidencia@ccee.org.br