ANEEL starts Public Hearing to discuss changes proposed to the apportionment of default in the CCEE Short Term Market Financial Settlements

The National Electric Power Agency (“ANEEL”) started, on 09/14/2017, the Public Hearing No. 50/2017 (“PH No. 50/2017”), whose purpose is to collect contributions from society for the alteration of the apportionment of amounts defaulted on financial settlements of the Short Term Market (“MCP”) made by CCEE, and the method of charging the System Service Charges (“ESS”).

The PH No. 50/2017 will have two phases. In the first phase, Technical Note No. 144/2017-SRM / ANEEL and the Normative Resolution draft will be submitted for evaluation, and the deadline for contributions ends on October 28, 2017. In the second phase, starting on November 1st, 2017 and ending on November 15th, 2017, the interested parties will be given an opportunity to express their opinions on the contributions received in the first phase.

The PH No. 50/2017 emerged after requests made by the Brazilian Association of Thermoelectric Generators (“ABRAGET”) and by Petrobras, since, according to ABRAGET, its associates (among them Petrobras itself) are being strongly affected in the receipt of their credits due to the current high default rates in the MCP’s financial settlements.

With regard to the change in the way the ESS is charged, ANEEL considered that the scrutiny of the topic should be further examined by analyzing the possibility of creating a specific financial settlement for all the charges currently charged in the financial settlements of the MCP.

Regarding the form of apportionment of the defaults in the financial settlements of the MCP, the idea is that this should be done among all CCEE agents, in proportion to their votes in the Chamber[1], that is, including creditors and debtors. Currently, the apportionment is made only among the creditors in the settlements, in the proportion of their credits.

ANEEL has agreed with CCEE’s argument that the change in the apportionment form will provide “an improved, safer and more righteous environment by eliminating incentives for unwanted behavior and inducing all agents to value the financial security of the MCP as a common responsibility”.

Thus, the proposal put to discussion is that, on the date of the financial settlement, CCEE will inform all agents of the additional amounts that will have to be paid as a result of the default in that settlement, whether that default is due to non-payment, court decision or a decision issued by ANEEL, subject to the withholding of the credits of the creditor agents.

The defaulting agent will be excluded from apportionment of amounts not paid by itself, but will participate in the apportionment of amounts defaulted by the other agents.

It is important to emphasize that creditors may have to endure financial amounts if their credits are lower than the amounts they will have to bear as a result of their participation in the default apportionment. In short, the agents with the highest participation in CCEE’s votes will be the ones most impacted by possible defaults.

If there is a default in relation to amounts resulting from the apportionment, such remaining amounts will be apportioned again, but this time only among creditors, in proportion to their net credits. In addition, the resolution draft provides that an agent who fails to pay the amount resulting from the apportionment for these debts will be liable for these debts in a subsidiary manner to the original debtor, and will be subject to a shutdown procedure before CCEE.

Upon completion of the settlement, the defaulted amounts will be bilaterally treated, and CCEE may represent the creditor agents in this collection. Today, the defaulted amounts in a given settlement are inserted in the accounting immediately following, whose receipt by the creditors is dependent on the effective payment by the debtors, which can prolong the default. In this scenario, the purpose of this rule is to not charge any defaults for the subsequent accountings, restricting the damage to that settlement.

Another change suggested by ANEEL is the imposition of interest and fine on the amounts suspended by court decision if their liability is restored, so that these debts would be paralleled with other defaults, for which interest and fines are already applied. The agents will be allowed to set different levels of fines, proportional to the delay, up to the limit of 5%.

ANEEL also proposes the regulation of the treatment to be given to CCEE agents who have received judicial reorganization. In this case, CCEE shall: (a) apportion any remaining overdue debts, under the terms proposed in the PH No. 50/2017; (b) represent the creditor agents in the Judicial Reorganization; (c) inform the court if the judicial recovery plan does not have a specific item for the cost of electric power; (d) require selling agents to submit contracts for the purchase and sale of electric power; and (e) register such contracts for the entire term of the agreement, preventing any changes in such registrations.

In the event of any default by the agent during the processing of its judicial reorganization, CCEE shall (i) request the conversion of the judicial reorganization into bankruptcy procedure, (ii) apportion its debts and, (iii) after being declared bankrupt, deactivate the agent.

Finally, other changes were also put to discussion, such as:

(i)       Revocation of ANEEL Resolution No. 552/2002, which sets the procedures related to the settlement of operations in the MCP, financial guarantees and penalties, the provisions of which will be incorporated by the Trade Convention;

(ii)     Incorporation into the Trade Convention of the regulations regarding the approval and inspection procedures of the Administrative, Financial and Tax Costs of CCEE in the management of sectoral accounts;

(iii)   Possibility for the agents to express their opinion on the choice of financial institution to carry out the financial settlement services and custody of financial guarantees; and

(iv)   Possibility to the agents to accept installments, partial remission, granting of term and of special conditions, receipt of guarantees of any nature, for payment of defaulted amounts, being any tariff repercussions are forbidden.
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[1] In accordance with art. 26 of the Trade Convention, established by ANEEL’s Normative Resolution No. 109/2004, each General Assembly has one hundred thousand (100,000) votes, which are distributed among the agents as follows: five thousand (5,000) votes are equally divided among all agents and the remaining ninety-five thousand (95,000) votes are divided among the agents in proportion to the energy traded by each agent in the CCEE. In addition, it should be ensured that no single category of agent holds the majority of the votes.

For further clarification on the contents of this memorandum, contact:

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Rosi Costa Barros
rosi.barros@nbfa.com.br
(11) 3007-8370

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William de Figueiredo Lins Junior
william.lins@nbfa.com.br
(11) 3707-8370

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Luisa Tortolano Barreto
luisa.barreto@nbfa.com.br
(11) 3707-8370

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