House of Representatives passes Bill amending Legal Framework for DG

On December 06, 2022, Bill No. 2,703/2022 (“Bill No. 2,703/2022” or “Bill”) was approved by the Brazilian House of Representatives. The Bill was drafted by representative Celso Russomanno and introduces amendments to Law No. 14,300/2022 (“Law”), commonly known as the Legal Framework for Distributed Generation (“Legal Framework for DG”). The Bill will be voted by the Federal Senate.

Bill No. 2,703/2022 was submitted in early November, with an urgency request approved on November 22. Bill No. 2,703/2022 proposed, among others, the following changes to the Legal Framework for DG:

• Broadening of the types of projects that can be framed as distributed mini generation, including small hydroelectric power plants (“SHP”) of up to 30MW installed capacity, and whose authorization grant has been granted based on the effective term of the provision..
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• Extension of the transition period (Art. 26), so that current tariff rules remain in force until December 31, 2045, for micro and mini generators that submit a request for access to the distribution company within 18 months, calculated from the date the Law was published (in other words, July 07, 2023). For the SHPs, this period is 30 months (in other words, July 07, 2024). However, the expiry of such deadline is also subject to the submission of calculations regarding costs and benefits of the generation distributed by ANEEL in a public hearing. In the event that such calculations are not submitted, one month will be added to the 18-month period for requesting access for each month that ANEEL fails to submit the calculations..
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• Postponement of the period for gradual incidence of tariff components and temporary costing of components by the Energy Development Fund (CDE) (art. 27), as follows:
  • 15% from 2024;
  • 30% from 2025;
  • 45% from 2026;
  • 60% from 2027;
  • 75% from 2028;
  • 90% from 2029;
  • Incidence of all tariff components from 2030.
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• The beginning of the transition from the current tariff rules to the gradual incidence of tariff components will be subject to compliance with the deadlines provided for in article 26 (30 months for SHPs and 18 months for other sources, considering the extension due to any delay from ANEEL to submit calculations of DG costs and benefits)..
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• Repeal of paragraph 2 of art. 27 of the Law, which established that new tariff rules be levied as of 2031 for those who request access to the distribution network from the 13th to the 18th month after publication of the Law, given that there was an extension of the deadline to initiate the first transition period (until 2045) for those who request access to the distribution network within 18 months, calculated from the publication of Law No. 14,300/2022.

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According to the vote of the Bill’s rapporteur, the transition period would be extended due to obstacles introduced by distribution companies, which are responsible for the inspection and approval of the projects, regarding procedures to admit new users.

The substitutive text submitted to the voting had included the repeal of Article 5 of Law No. 14,300/2022, which prohibits the transfer of the holder of the access opinion or corporate control until the request of the inspection of the connection point by the distribution company. However, in the voting, this text was deleted, and Article 5 of the Legal Framework of DG was maintained.  

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Demarest’s Energy and Natural Resources team is available to provide any further clarifications that may be necessary.