Power Engineering - Brazilian Minister rules out self-dealing in new model

30 July 2003 - Brazil's mines and energy minister Dilma Rousseff ruled out all self-dealing within the electric power sector, as she unveiled some more details for the new model on Tuesday at IBC's Energy Summit in Rio de Janeiro, as reported by Business News Americas.

Existing self-dealing power purchase agreements would be respected, but once they expire power from the generators concerned will have to be included in the generation pool, which will be managed by a new body, ACEE, the minister said.

Rousseff will now begin a process of discussing the details of the new model with all the market players, she added.

Distributors linked to the generators will then have to buy their power requirements from the pool, Rousseff explained. Most large power companies in Brazil will be affected by this measure, including state-owned companies such as Copel and Cemig, as well as private sector companies such as US-based AES (whose distribution units, Eletropaulo and AES Sul, buy power from AES Tiete) and Belgium's Tractebel Energia.

"Self-dealing has led to very expensive power contracts - such as those of the thermoelectric power plants - which are then passed on to consumers at extortionate prices," said Mauricio Tolmasquim, executive secretary at the mines and energy ministry, speaking to BNamericas after the minister's speech.

Tolmasquim refused to comment on the controversial stance of Parana state governor Roberto Requiao, who said last week that he would not allow Parana utility Copel to join the pool. Requiao argued that Copel would have to sell its cheap hydroelectric power to the pool at low prices and would be forced to buy back at higher prices.

The government will also raise the amount of power requirements that distributors have under long-term contracts to 100 per cent, up from the current level of 95 per cent, the minister said, adding that each distributor would be allowed a certain amount of leeway.

Referring to concerns that distributors would not be able to provide sufficient financial guarantees for power purchased from the generation pool, Tolmasquim said that the mechanism is simply a modification of the existing guarantees that distributors provide today under power purchase agreements (PPAs), and that he did not envisage any problems.

Rousseff once again ruled out resolving distributors' serious financial problems in this model, adding that they would be dealt with in parallel to the new model.

"It seems to me that the problems of distributors are much more related to the drop in demand than to capitalization," the minister said.

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