Aneel overturns injunction and confirms thermals that will cost R$ 39 billion from 2022 to 2025

In the midst of a legal dispute and under criticism from the market, Aneel (National Electric Energy Agency) ratified in an extraordinary meeting this Saturday (6) the results of the auction for hiring emergency thermal power plants for the next five years.

The auction contracted an average of 775.8 MW (megawatts) for delivery from 2022 to 2025, with a total cost of R$ 39 billion during the term of the contracts. The government justifies that this energy will be needed to recover the hydroelectric reservoirs to safer levels.

Aneel would discuss the matter on Friday (5), but substitute federal judge Diego Amorim Vitório granted an injunction to suspend the approval of the auction, in a public civil action that questions the contracting model and the impacts on the consumer.

The plaintiffs, Érica Conceição Passos and Gerenilza Passos, allege irregularities and vices in the competition rules, by guaranteeing the purchase of energy even when the system does not need it.

“The rule has been completely twisted, carrying a lot of inefficiencies into the system,” they say. “In a way never seen before in energy auctions, [o governo] sought to hire inflexible thermoelectric projects, which generate energy all the time.”

With inflexible contracting, they argue, the government “forces the consumer to pay for more expensive energy, which should not necessarily be produced at that time, considering the various sources available [como a eólica, por exemplo]”.

The market questions the authorization for 100% inflexible projects to participate in the dispute, when the normal is to limit the inflexibility so that the thermal plants operate only when there is no water in the reservoirs or when solar and wind power plants are generating less.

By granting the injunction, the judge said he understood that the damage to the consumer could be irreversible, since the cost of this energy will be considered in the composition of the tariffs. “The transfers of values ​​to the consumer will generate a great impact on their assets,” he said.

The injunction was overturned this Saturday by judge Italo Fioravanti Sabo Mendes, president of the TRF (Federal Regional Court) of the First Region, in response to an appeal by the AGU (General Attorney of the Union).

In his order, the judge says that there is no proof of illegality and unconstitutionality of the auction and, therefore, the presumption of legitimacy of the government’s decision must be preserved, “in order to respect, ultimately, the space of discretion of the public manager”.

The auction was approved in September by Creg (Chamber of Operational Rules for the Management of the Hydroenergetic Crisis), a group led by the MME (Ministry of Mines and Energy) responsible for the strategy to face the water crisis.

The objective was to guarantee the supply in 2022 in case of a new summer with below-average rainfall and to help recover the reservoirs to more reliable levels in the following years, reducing the risk of a new water crisis.

The government argues that long-term contracts, on the contrary, save taxpayers money, as the thermal plants in the auction are cheaper than the emergency plants that are currently being activated.

The process, however, began to be questioned by the industry as well. In a podcast released on Friday, the president of Abrace (Brazilian Association of Large Energy Consumers), Paulo Pedrosa, said that the cost of these thermal plants could be even higher, if fuels continue to rise.

“For three years, these 800 MW will cost Brazilian consumers more than R$ 40 billion. These same R$ 40 billion could be used to build 5,000 megawatts of wind power that would deliver energy almost for free for 30 years “he says.

Pedrosa also claims that this “very expensive energy” will be paid by a different bill from the thermal plants already in operation, currently charged by a charge called ESS, and this masks the real cost of thermoelectric generation in the country.

“This worries the consumer, compromises the country’s production cost for 2022, just when the economy needs to recover, and draws attention to the greater importance of modernizing the electricity sector, of focusing on actions that will make our sector more efficient and bring competitive energy to society.”

The process was also questioned by senator Weverton Rocha (PDT-MA), who petitioned Aneel asking it not to ratify the results, claiming that the rains reduced the risk of energy supply.

At the meeting this Saturday, Aneel’s board said it understood that the conditions for the auction were established by the granting authority, with legal support in the provisional measure that created Creg.

Senator Rocha’s petition, therefore, will be forwarded to the Ministry of Mines and Energy. In the agency’s understanding, the approval of the competition already gives the auction winners the right to sign the contracts.

In a statement after the meeting, Aneel reinforced that the auction, which generates investments of R$ 5.2 billion, had the objective “to streamline the processing of contracting processes as a way to face the difficulties of hydrological scarcity that the country is going through” .