Legal battle may create multi-billion hole in power industry

CTG Brasil, controlled by Chinese company, questions change in firm energy of its plants; R$500m have already been charged from consumer

08/05/2022


CTG’s hydroelectric plant in Rosana — Foto: Henrique Manreza/Divulgação

CTG’s hydroelectric plant in Rosana — Foto: Henrique Manreza/Divulgação

A legal imbroglio in the power industry may open precedents for a multi-million hole in the consumers’ electricity bills. The hydroelectric plants of CTG Brasil, controlled by China Three Gorges, caused an impact of R$496.1 million in the electric sector due to an injunction that prevents the review of the firm energy of the Capivara (643 MW), Chavantes (414 MW), Taquaruçu (525 MW) and Rosana (354 MW) plants, sources say.

In technical jargon, firm energy is the volume of power that an project can deliver to the system and determines the form of remuneration of the companies. In May 2017, the Ministry of Mines and Energy (MME) published Ordinance No. 178/2017, which defined the new firm energy values for power from centrally dispatched hydroelectric plants, valid from January 2018.

It is the up to the ministry to define every five years the maximum energy that can be sold by the power plants, since new concessions for multiple uses of water have changed the flow of rivers. The measure reduced by 4.9% the firm energy of CTG’s hydroelectric plants in relation to the one in effect in December 2017.

Before that, when CTG bought Rio Paranapanema Energia, it modernized the plants and requested an extraordinary revision of the firm energy to the Brazilian Electricity Regulatory Agency (Aneel). In the lawsuit filed against the federal government, CTG says that there are illegalities in the ordinance, since the reduction of the firm energy was made before the five-year period since the last revision.

The Capivara, Rosana and Taquaruçu plants were the subject of extraordinary reviews in May 2015, and the Chavantes plant, in June 2013, and, according to CTG, the value of firm energy could only be reviewed again in May 2020 and June 2018, respectively.

The Ministry of Mines and Energy says that this argument does not apply to extraordinary reviews. In addition, CTG presented a contribution in the public consultation without questioning the revision process.

The Chinese company also says that the reduction of firm energy in more than 4.8% causes distortions, since the plants have a history of generating 22.1% more. However, as recommended by the Federal Court of Accounts (TCU), the federal government reviewed the firm energy of the plants involved because it considered them overestimated, and also to standardize the criteria for firm energy calculations for all players.

Another argument of the company is that the action represents an act of confiscation, because it restricts the right to economically exploit its concession. Power generation companies heard by Valor, which are in the Energy Relocation Mechanism (MRE), a risk-sharing system to avoid shortages during periods of drought, have another understanding.

The plants have an interconnected operation and when a company wins a concession, it must submit to the rules of the sector and the operation is commanded by the national grid operator ONS. This happened, for example, in the water crisis, when the ONS needed to save water in the Paranapanema basin and requested that some hydroelectric plants reduce their generation.

Of the R$496.1 million, nearly 60% was paid by the energy consumer and the rest was borne by the MRE companies. The situation raises the concern that other companies will go to court to avoid a reduction in the firm energy of their plants.

“Distribution companies are bothered because they foot the bill and fear default, power generation companies bear part of the burden, and the average consumer has not yet realized that they are paying most of this cost,” says a source who asked not to be named.

CTG Brasil said that the judgment of the appeal filed by the company in the review process of the firm energy of its plants is still in progress. “An eventual favorable outcome to the company will not bring impacts to the energy market, since the company’s request is aimed at preserving the firm energy amounts of its plants, which were reduced in disagreement with the legislation,” it declared in a statement.

Marcos Meira, a lawyer and president of the Special Infrastructure Commission of the Brazilian Bar Association (OAB), disagrees. For him, a decision that is eventually favorable to a generation company causes an imbalance in cascade, generating several other lawsuits of competing ventures. In other words, decisions handed down in these cases have the potential to impact the entire system, because it operates like a communicating vessel.

“A favorable decision obtained by CTG will arouse the interest of other companies, which will also seek to reverse the proposal to reduce the firm energy of their plants in the courts. The arguments are almost always the same … ranging from the economic-financial imbalance of the contract, to exogenous political interference,” explains Mr. Meira.

Much larger power plants, like Jirau, Santo Antônio, and Teles Pires, have had extraordinary reviews recently and in theory could use the same thesis as CTG.

To Valor, the leader of an association, on condition of anonymity, points out the lack of a more incisive action of the Ministry of Mines through the Federal Attorney General’s Office (AGU) in solving the case. The matter was under the care of the then-executive secretary Marisete Dadald, but with her departure, the ministry has not given the case the proper attention.

“At the hearing of the case, the oral argument was made only by the CTG’s lawyer. The government, which was the one who created the rules and should watch over this, didn’t show up. An incomprehensible disregard.”

Without giving any details, the ministry only informed that it is working on the suit so that the injunction is denied.

In the event of an unfavorable decision to CTG, the doubt remains as to how this amount will be reimbursed to consumers, since, according to the Electric Energy Trading Chamber (CCEE), any recalculation of the amounts cited will depend on the terms defined by an eventual court decision.

*By Robson Rodrigues — São Paulo

Source: Valor International

https://valorinternational.globo.com/