ANEEL regulates Decree No. 10,893/2021 for authorization grant requests without submission of Access Information

On August 15, 2022, after a long waiting period and many questions, the National Electricity Regulatory Agency (“ANEEL”) published Normative Resolution No. 1,038/2022 (“Resolution”), which establishes proceedings and guidelines for the application processes for authorization grants filed until March 02, 2022, without the requirement of an access document as per art. 1 of Decree No. 10,893/2021 (“Decree”).

The Resolution has been under intense discussion and long-awaited by the sector, since the publication of the Decree in December 2021 and the opening of Public Consultation No. 8/2022 in order to regulate the topic in March 2022, especially by companies that applied for an authorization grant without submitting Access Information for the connection of the project to the electricity system, as well as by companies whose Access Information had specifications or deadlines different from the authorization request, and which resulted in their authorization request processes being suspended.

More than 8 (eight) months after the publication of the Decree and a little more than 5 (five) months after the deadline for the filing of authorization requests to obtain the benefit of discounts in the tariffs for the use of the transmission and distribution system (“TUST/TUSD”), ANEEL finally issued a regulation that, besides being unnecessary due to the self-applicable nature of the Decree, requires that the applicants for the authorizations execute a declaration to waive their rights.

Race for authorization grant applications:

In March 2021, Law 14,120/2021 was enacted, which altered art. 26 of Law 9,427/1996, to establish the end of the discount in the TUST/TUSD for new generation authorizations. For this, a transition period was established so that those interested in implementing generation projects as of the date of issuance of the referred law would be entitled to the TUST/TUSD discount benefit, with the following conditions:

• apply for the authorization by March 02, 2022 and start operating all of its generating units within 48 months from the authorization date; and
• In the case of an increase in installed capacity, request an extension by March 02, 2022, as well as starting operations of the new generating units within 48 months of the date of publication of the act that sanctions the amendment to the authorization.

Thus, starting in March 2021, a race for authorization grants began. According to data made available by ANEEL[1], there are more than 4,000 (four thousand) authorization requests under analysis. The major bottleneck in this race for authorization had been – and still is – access to the system and the difficulty of obtaining an access report in order to fulfill one of the regulatory requirements for the authorization request, within the timeframe needed to enjoy the benefit of the TUSD/TUST discount. It was in this context that Decree No.10,893/2021 was amended, which waived the submission of the access report as one of the requirements of the authorization requests.

No need for regulation:

Decree 10,893/2021, a resolution hierarchically superior to any ANEEL regulation, establishes that the authorization grants for generation projects requested until March 02, 2022 will be granted without the requirement of access information as to the feasibility of the project’s connection.

The Decree does not establish the need for regulation. Nor could it, because its wording is clear as to the waiver of one of the requirements of the authorization application process. Therefore, the function of ANEEL, as the regulator, should be only to analyze the authorization requests presented to it and the fulfillment of the regulatory requirements for this purpose, and it should issue the authorization with respect to the requests that meet the regulations, except for the submission of the access report.

Following the authorization issuance, it would be up to the holder to request the issuance of the access opinion, according to the normal course of the authorization request processes. However, this was not the Agency’s view.

While authorization applicants were awaiting a position from ANEEL, the conditions for the implementation of their respective projects were changing and even deteriorating, given the uncertainty that the regulator ended up assigning to something intended to be a benefit (the waiver of the submission of the access report) to the applicants. The fact is that this time lapse may have caused many projects to become unfeasible.

ANEEL’s Regulatory Process and Normative Resolution No. 1.038/2022

Prior to the ANEEL Board of Directors’ deliberation of the draft resolution, Technical Note 581/2022-SRG-SCG-SRT-SFG/ANEEL was issued, which analyzed the agents’ contributions to CP No. 08/2022, which was opened for the debate on the “regulation” of Decree No. 10,893/2021, a process that culminated in the issuance of Normative Resolution No. 1038/2022, published on August 15, 2022 (“REN” or “REN No. 1038/2022”).

REN applies to requests for authorization grants or technical specification amendments that result in an increase in installed capacity, filed with ANEEL by March 02, 2022, and accompanied by all documentation required by REN No. 875/2020 and 876/2020 – with the exception of the access document, which is waived.

The authorization process is divided into two steps by REN: (1) the authorization grant for generation and (2) the authorization for the implementation of restricted interest facilities.

With the authorization for generation (1), the agent must make the request for issuance of the access opinion to the National Power System Operator (“ONS”) or the distribution concessionaire, depending on the desired access point. After issuance of the access opinion and execution of the contracts for use and connection to the electric system, the agent can request the authorization for the implementation of the restricted interest transmission facilities.

It is possible to conclude here that there was, in fact, no need for this regulation, since such a procedure has no practical effect on the authorization process currently in force. Such division only puts at a disadvantage the projects that entered their authorization request without the access information.

Furthermore, for the process of requesting authorization for generation without the submission of the access report, the agent must present a declaration through which he waives the right to a request for exclusion of responsibility or change of schedule due to difficulties in relation to the implementation of the project.

Such a requirement is a direct violation of a constitutionally guaranteed right of petition to any agent. Moreover, there may in fact be unforeseen events that go beyond the risks assumed by the project applicant and that may indeed confer rights that cannot be waived in advance.

Below are some highlights of the most relevant points of Normative Resolution No. 1,038/2022:

Requirements of the authorization requests without the submission of the access report (authorization for generation – 1): 

• Applicants must submit Declaration Agreement and Other Covenants;
• The authorization will not consider authorization for the establishment of a restricted interest network for the connection of the generator to the electric system; and
• The distributor or the ONS, as the case may be, must provide the access opinion and execute the contract for the use of the distribution or transmission systems prior to authorization of the generator’s restricted interest system to be issued by ANEEL.

In the case of installed capacity expansion, the requests must be complemented with the presentation of the Declaration Agreement and Other Covenants. For requests that also involve changing the connection point, these will be subject to change of the generator’s restricted interest network only after presentation of the contract for use of the transmission or distribution systems.

Normative Resolution No. 1,038/2022 has also been subject to a lot of criticism –  requiring agents to execute contracts for connection and use of the system in order to receive the authorization grant for the transmission facilities of restricted interest can delay the dynamics of the implementation of the projects, including equipment acquisition, financing, qualification for benefits, etc.

Authorization for the establishment of the generator’s restricted interest network (Authorization for the installation of restricted interest transmission facilities – 2): For cases in which the authorization grant does not include such authorization, the agent must request it before ANEEL, accompanied by (i) a contract for the use of the transmission or distribution systems; (ii) description of the generator’s restricted interest network; and (iii) a simplified single-line electrical diagram.

The authorization will be formalized by ANEEL in an Order notice.

Deadline for the implementation of the plants: Authorization requests filed until March 02, 2022 will have a period of 54 months to start the operation of all the generating units of the plant, counted from the date of publication of the authorization. This term may be extended if the access document presented in the authorization request contains a provision for a longer term.

This period will be effective for existing authorizations in the implementation phase, whose term for commercial operation established in the authorization is less than 54 months, and will not require a specific authorization act from ANEEL.

It is noteworthy that this rule does not apply to projects that sold energy at an auction or that has signed a contract for the use of the transmission systems. Thus, the projects in the implementation phase that are included through Normative Resolution No. 1,038/2022 do not need to worry about the deadline established in the authorization and the consequences in case of its non-fulfillment.

The maximum period established in the authorization for the implementation of the project, however, should not be confused with the term of 48 months counted from the authorization date, and established in Law 14,120/2021 for the maintenance of the TUSD/TUST discount benefit.

According to ANEEL, this period commences as of the date of Authorization of Generation, and not from the authorization of the facilities of restricted interest.

Finally, the issuance of Normative Resolution No. 1,038/2022 looks to be far from resolving the legal uncertainty regarding projects pending authorization and the connection bottleneck, and even has the potential to generate a new wave of lawsuits.

Demarest’s Energy and Natural Resources team is at your disposal for any clarifications on the subject.

Read in full Normative Resolution N° 1,038/2022

[1] Technical Note 581/2022-SRG-SCG-SRT-SFG/ANEEL, which analyzed the comments presented during Public Consultation No. 08/2022 – Paragraph 93 – page 26.