KPS obtains an injunction and can operate thermal plants suspended by Aneel

KPS (Karpowership Futura Energia), a Turkish energy company, appealed for an injunction to complete the process that releases the commercial operation of 2 of its 4 gas-fired thermal plants that had been suspended by Aneel (National Electric Energy Agency). The order authorizing the operation was published in the DOU (Diário Oficial da União) this Friday (30).

The four original projects total 560 MW of installed power, enough to supply 2 million people.

Aneel authorized the operation of Karkey 019 and Porsud 1. The projects are floating thermal plants, a model known as powerships, and are located in the Port of Itaguaí, in Sepetiba Bay (RJ).

The KPS plants are among the 11 projects that won the PCS (Simplified Competitive Procedure) but did not start operations until the July 31 deadline. In total, 17 projects were qualified in the competition held in October last year.

The injunction guaranteed the release of documentation from the CCEE (Chamber of Electric Energy Trading) attesting that KPS is compliant (a prerequisite for the regulator to release the operation). The measure also suspended the payment of fines for delaying projects, which already total nearly R$600 million.

In a note sent to the report, the company declared that “it follows the administrative procedures, fulfills all the rules and demands of the authorities, respecting Brazilian legislation. The project is ready to operate with cutting-edge technology and follows high international standards of sustainability”.

The PCS was carried out to contract a kind of blackout insurance. The thermal plants should operate from May 1, 2022 to December 31, 2025 to save water in the hydroelectric reservoirs. As the construction period was short, a high price for the generated energy was offered as incentives, R$ 1,560 per MWh (megawatt-hour).

It was estimated that they would cost BRL 39 billion to consumers in the few more than three years in operation.

By way of comparison, if these plants did not have the PCS contract and started operating today, they would receive R$55 per MWh, the spot market price.

As the risk of rationing was removed and the cost of these thermal plants will weigh on the electricity bill, sector entities demanded the suspension of the contract of plants that did not meet the deadline.

In the first week of August, CCEE notified all delayed developments and asked for explanations. Companies are entitled to present justifications for the delay and request an extension, via a mechanism called exclusion of liability. All 11 used the expedient.

Aneel has already denied 5 of them, 4 of them from KPS, revoking the authorizations for the implementation of the plants. KPS, however, asked Aneel to review the decision, and it was suspended. This made room for the company to comply with the bureaucratic procedure and trigger two of the projects. In parallel, it used the instrument of the preliminary injunction to finalize the process of releasing the commercial operation.

KPS also had problems with the environmental licensing of the projects. In response to requests from environmental defense organizations, the Rio de Janeiro court even suspended the implementation of the plants in July. Environmentalists highlighted that the mangrove area near the floating thermals served as a breeding ground for fish and crustaceans, supporting the largest community of Guiana dolphins in the state.

For almost two months now, Aneel’s board of directors has kept discussions on PCS thermal plants on hold, leaving the projects in a kind of regulatory limbo, according to experts. As long as the PCS contracts are not terminated, this value is valid if the plants are activated at any time.

“Aneel needs to judge the exclusions and terminate the contracts when it evaluates that there is no justification for the delay”, says Vitor Iocca energy director at Abrace (Association of Large Energy Consumers and Free Consumers). “Without this, the agency maintains an environment of uncertainty, as we do not know how many will get the excluder and how much it will cost the energy consumer.”