Carlos Augusto Tortoro Jr., partner at Tortoro, Madureira & Ragazzi Advogados and attorney in charge of the energy and litigation area

Published in O Estado de S. Paulo, on September 22, 2018

There has been extensive discussion on renewable energy sources, in particular those related to clean generation, such as solar and wind. Related topics range from public financing of gigantic projects to residential generation microsystems, which is commonly referred to as distributed generation in Brazil.

In regard to the latter, obtaining solar energy through photovoltaic plates installed in private homes or commercial buildings has gained prominence in the market and has been regulated by ANEEL since 2012, by means of Normative Resolution 482/2012, subsequently amended and improved by Normative Resolution 687/2015.

It is important to note that these normative resolutions were preceded by open door hearings conducted by the regulatory agency and had the participation of civil society and Brazilian energy market agents, with important contributions in the development of the standards addressing the matter.

The technology of the electrical energy generation system from photovoltaic plates can mean significant gains for consumers, who will see a decrease in their monthly electricity bill, as, by means of ANEEL Resolution 482/2012, the amount of energy generated by a consumer unit that is not consumed reverts to credits to be deducted from their monthly electricity bill, as is commonly referred to as net metering.

That is, if a residential or commercial consumer generates more energy than what they consume, they receive credit from the distribution utility company, which will be deducted from their electricity bill every month. This will undoubtedly generate immediate consumer benefits by reducing their monthly bill.

However, as this is an era that provides a new way of looking at the energy market, transitional rules are necessary to incorporate it into consumers’ daily lives and not cause losses and insecurity to investors and system users.

In this scenario, the regulator should pay attention to the economic and financial balance of the electricity distribution concession agreements, which will have a significant impact on their cashflow, as more consumer units start generating their own electricity.

Simply, the costs of distributors that make up the price of the electricity tariff are divided into installment A (corresponding to the purchase of energy, transmission and sector charges) and installment B (energy distribution cost). Thus, the final tariff paid by consumers in general is composed as follows: 53.5% (installment A), 17% (installment B) and 29.5% (ICMS and PIS/COFINS).

Considering that in the current regulation of distributed generation, credits obtained by consumers with their own generation of electricity will be deducted from their bill, with no tax incidence, which means that distributors may be affected in the installment that most represents the tariff price (installment A), since consumers will only bear the distribution cost or system availability cost (installment B), which is precisely the smallest part of tariff composition.

Thus, it is possible that distributors collect less amounts with electricity tariffs, which will invariably affect their cashflow and consequently the economic and financial balance of concession agreements.

According to an Aneel survey, today, more than 20 thousand consumer units across the country are already connected to the system, injecting active energy. Clearly, this figure is not currently sufficient to cause any effect on the economic and financial balance of electricity distribution concession agreements.

However, as distributed generation is a trend that is taking shape and becoming a reality, especially with the cheapening of photovoltaic equipment, each day an increasing number of new consumer units will be connected to the system generating their own energy and injecting the surplus into the grid.

Therefore, attention should be paid to the progress of regulation on distributed generation, especially by adopting transition rules that allow the expansion of energy generation in consumer units and enable distributors to diversify their sources of income.

With the advancement of regulation on this matter, one can: a) avoid the financial economic imbalance in the concession agreement of distributors; b) maintain legal certainty in the electricity sector, creating a healthy investor environment; c) stimulate the development of distributed generation and power generation technology in consumer units, for the benefit of consumers and energy security; and d) prevent lawsuits resulting from possible judicialization of the subject.

By adopting transition rules, the regulator will allow for a new era in electricity generation in the country to consolidate, benefiting the economy, society and energy security.