Minister: Govt "fine-tuning" power auction model

Brazil's government is "fine-tuning" its power auction model about one year after the implementation of new power sector regulations that determined all power must be sold through auctions, Brazil's mines and energy minister Dilma Rousseff told reporters on Monday. The government started implementing in March 2004 its new power sector regulations, which increased government participation in planning and oversight and determined that all power be sold through auctions for the lowest possible price. "We are coming to the end of the transition phase of the power sector regulations," she said. "What we are doing now is fine-tuning the model without changing the rules." The next steps in the power auction process will include public hearings about the regulations for existing and future generation capacity auctions, Rousseff said. EXISTING POWER AUCTIONS So far the government has held two existing power auctions in which generators signed eight-year power sale contracts with distributors for the start of delivery in 2005 through 2008. The government planned these auctions to soak up all the excess 7,000MW power supply in the country and give better price signals for new generation projects, but a significant amount of power is still left over. No power for delivery starting in 2009 was sold at a second auction on April 2 to replace 1,200MW of current contracts that will expire that year. The government plans to hold two more existing power auctions: one with deliveries to start in 2006 through 2008 and one for delivery to start in 2009. "I cannot give a detailed schedule for auctions, but I must stress that we have kept to all the schedules we announced in the past," she said. Government officials said the existing power auctions should be held before the end of the first half. The details of the auctions are being decided by a newly created auction committee made up of the mines and energy ministry officials, the federal energy planning company EPE, power regulator Aneel and the power trading board CCEE. Before these auctions, however, the government plans to announce new regulations allowing distributors to swap contracts and meet legal requirements of 100% of their power needs, which should reduce demand at the auctions since distributors can sell their excess to other distributors. FUTURE GENERATION CAPACITY AUCTION The government is also planning to unveil draft legislation for the future generation capacity auction scheduled to take place in the second half this year. The government plans to sell over 15,500MW of power, including some 12,500MW from plants and projects whose concessions were awarded since 2000 but which either do not yet have long-term power sale contracts or have not yet been completed. Although Rousseff declined to give an exact timetable, she said there was nothing holding up the tender and that all 17 future generation capacity projects should soon be cleared by federal and state environmental authorities. Contracts from15-30 years will be traded, with delivery starting in 2008, 2009 and 2010. Long-term power contracts from the auction could be used as receivables in financing of new projects, especially through the project finance structure, Rouseff said. "We are doing all this fine-tuning to be successful in the future generation capacity auction which is the heart, body and mind of the power model," she said.