New electric model to be in place by Mar.

Brazil's new power sector model will be fully in place in March 2004, mines and energy ministry executive secretary Mauricio Tolmasquim told reporters Monday. There will likely be few changes to the decrees the government sent to congress, which have support from government and opposition parties in congress, he said. Under Brazilian legislation, the decrees must be voted on 60 days after publication. "While we were negotiating, we accepted and included all kinds of suggestions, but now we have a working model that we will not change," he told reporters. The ministry will wait until the full approval of the decrees to publish the necessary regulations, although he admitted some will likely be put in place in coming weeks, Tolmasquim said. Tolmasquim said that criticisms are part of the power game of airing hidden agendas. "Some of the criticisms are so absurd that I won't even answer them, and most were made even before the full technical guidelines came out", he said. He said the new model is more competitive than the previous system because it introduces auctions for new generation capacity and for the sale of electricity, and at the same time it gives freedom for independent producers and generators to buy and sell power. In addition, he said the new model will give total independence to the system operator, ONS. According to Tolmasquim, the government has already started to prepare studies and will start energy auctions in the first half of 2004. In the second half of the year, there will be auctions of the first generation capacity under the new rules. The new capacity will be both thermoelectric and hydroelectric, set to start operations in 2009, and all will have sales contracts of 15-35 years. The first auctions will be small, Tolmasquim said, and could occur in the first half of 2004, with prices well below the current ones at the wholesale energy market (MAE). In 2005, generators will start selling large amounts of energy to renew the initial concession contracts signed with privatized distributors. One of the studies that regulator Aneel is preparing is to measure the real availability of power from existing hydroelectric generators. "The system has an installed capacity, but in a system that is mostly hydroelectric, it is not all available all the time," he said. The government is also preparing a study to guide the necessary mixture of thermal, hydro and other sources of power generation, he told reporters. Currently about 83% of Brazil's generation capacity is hydroelectric and 14% thermal. "We have to find an optimum balance between a constant supply and generation costs because thermal generation will always be more expensive," he said, adding that thermal plants will continue to have an emergency role in the system.