Lula unveils new power sector model

Brazil's President Luiz Inacio Lula da Silva unveiled Thursday a new electric model that aims to attract investment, reduce the risk of power shortages and cut electricity rates. "The model will guarantee that everything will be done after being very well planned," Lula said. "The days of power rationing are a turned page in our history." In his speech, Lula confirmed government planning and the creation of two energy trading markets: a regulated pool buying power from generators and sharing the costs between distributors under set prices, and a free-market environment where distributors and generators can sign bilateral contracts. The new model will also restore power to the mines and energy ministry to plan and grant concessions, a role up to now undertaken by the electricity regulator Aneel, which will in turn be redirected towards regulating and overseeing that agents are following concession rules. Lula also said that the ministry would hold competitive tenders for new generation plants, awarding concessions for a minimum of 15 years. Concessions will be awarded based on the lowest price offered. The government will secure feasibility studies and environmental licenses prior to tendering the concessions. Lula emphasized the need to introduce more government planning into the electric power system. The new model will require long-term contracts and planning, projections of demand growth and short-term monitoring of demand, he said. For this purpose, three new bodies will be created: the Company for Energy Research (EPE), responsible for long-term research; the Chamber of Electric Energy Commercialization (CCEE), a body that will oversee trading in the pool, and the Electric Sector Monitoring Committee (CMSE), which will oversee the system to look for short-term supply risks, the President said, adding that the new model will have a transition period to allow existing contracts to expire.