Workshop apresentado pelo presidente da CCEE, Luiz Eduardo Barata, à escola de negócios da Universidade Northwestern - Kellogg School of Management. Em inglês.

1. Brazilian Electricity Market
Workshop: Wholesale Electricity Markets
Hurdles to Overcome
Kellogg School of Management
Northwestern University
January 30, 2013
Luiz Eduardo Barata Ferreira
Chairman
CCEE - Electric Energy Commercialization Chamber

2. Agenda
Main Facts and Figures about Brazil
Update on Brazilian Electricity Market Operation
Update on Brazilian Electricity Market Design
Technical Exchange CCEE – EPEXSPOT – ECC

3. Main Facts and Figures about Brazil

4. Main Figures and Facts about Brazil
BRAZIL
 Territorial Extension 8,514,876 km²
 Population (Aug 2012) 193.9 million
 GDP 2011* US$ 2.221 trillion
ELECTRICITY SECTOR
 Installed capacity (Dec 2012) 121 GW
Hydro 66%
Thermal 27%
 Transmission lines 103,362 km
 Consumption (Nov 2012) 59,187 average GW
Captive Market: 73.8 %
Free Market: 26.2 %
NUMBER OF MARKET PARTICIPANTS
Generators: 514
Traders: 149
Total (Jan 2013): 2,364
Distributors: 47
Free Consumers: 1,654
(*) US$ = R$1.865 on 12/31/2011
4
Source: ONS

5. Update on Brazilian Electricity Market Design
5
1) Regulation of Retail Trading
2) Balance Responsible Entity Proposal
3) Ex-ante Nomination and Price Transparency
4) Federal Government Tariff Reduction Initiative

6. 1) Regulation of Retail Trading
(Public hearing by the regulator [ANEEL] closed on July 13, 2012)
Objective: to simplify the operation of NCRE* consumers and small generators at
CCEE that don’t have insufficient know-how and infrastructure for managing
contracts and operations at CCEE
The retailer will be responsible for portfolio management and operations at
CCEE on behalf of the small agents
Accounting and settlement will be consolidated by the retailer
Update on Brazilian Electricity Market Design
6
(*) NCRE: Non-Conventional Renewable Energy

7. 2) Balance Responsible Entity Proposal
Objective: to improve the collateralization methodology ​​for settlement of the
spot market
1st phase: concluded in January, 2013
Long contract position that exceeds the operational limit will automatically not
be accepted, avoiding an uncollateralized short position in the spot market
2nd phase: 2nd semester 2013 (estimate)
The credit risk of the agents will be assessed by financial institutions
Financial institutions will guarantee the agents’ debts up to their operational
limits regarding the spot market
The operational limit will be predetermined by CCEE and approved by ANEEL
Update on Brazilian Electricity Market Design
7

8. 3) Ex-ante Nomination and Price Transparency
Objective: the new regulation, by order from Ministry of Mines and Energy in
August 2012, to be in force in July 2013, was designed to improve default risk
management and enhance information symmetry
Obligation to nominate the free market bilateral contracts before the energy
delivery (ex-ante), in a weekly basis
Obligation of reporting price information to CCEE, allowing the creation of
price references in the free market (price indexes and forward curve)
Update on Brazilian Electricity Market Design
8

9. 4) Federal Government Tariff Reduction Initiative – Bylaw 12,783 (January, 2013)
Objective: reduction in end-user tariffs expected to be around 20%
I. Renewal of concessions in the electricity industry – Generation, Transmission
and Distribution
 Conditions for renewal of generation concessions:
 Regulated prices (reduction estimation from US$ 44.36 to US$ 14.79)
 All the energy will be allocated to distributors in long term contracts
(regulated market)
 Representation of Renewals
 Generation: 13% of the current installed capacity (15,279 MW)
 Transmission: 67% of the national interconnected system
 Distribution: 35% of the regulated market
II. End or reduction of some charges of the electricity industry
Update on Brazilian Electricity Market Design
9

10. Update on Brazilian Electricity Market Operation
10
1) New approach for Market Surveillance
2) New Accounting and Settlement System
3) Liquidity in the Brazilian Electricity Market

11. Update on Brazilian Electricity Market Operation
11
1) New approach for Market Surveillance
 CCEE is restructuring its market surveillance area and processes, reinforcing
that this activity is essential for a smooth functioning of the wholesale
market
 Monitoring the market trading/participants behavior and stress-testing
analyses
 Perceived atypical transactions are placed under deeper scrutiny for
appropriate actions

12. Update on Brazilian Electricity Market Operation
12
2) New Accounting and Settlement System
 Replacement of an obsolete system (+ 10 years)
 Innovative solution for managing the commercial operations of the
electricity market
 Architecture focuses on security of information treatment, speed in the
accounting processes and flexibility to address regulatory changes and
growth of the electricity sector
3) Liquidity in the Brazilian Electricity Market
 CCEE launched the 1st Monthly Liquidity Report in August 2012, using the
churn ratio as a measure of overall levels of liquidity
Accounting and Settlement System
n
consumptio
y
electricit
Monthly
traded
volume
Monthly
rate
Churn 

13. Comparison of Electricity Markets’ Churn Rates
13
Liquidity of the Brazilian and Colombian Electricity Markets:
Far from the Germany and Nord Pool benchmark markets
Actions to improve the liquidity are recommended
Electricity Markets’ Churn Rates
Germany
Nord Pool
GB
Netherlands
France
0
2
4
6
8
10
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Brazil
Colombia
Source: OFGEM/CCEE

14. Technical Exchange CCEE – EPEXSPOT – ECC
14

15. Technical Exchange CCEE – EPEXSPOT – ECC
CCEE has partnered with the European Power Exchange (EPEXSPOT) and the
European Commodity Clearing AG (ECC) for technical exchange formalized by a
Memorandum of Understanding (MoU) signed in February 2012
Objectives
Improving the collateralization methodology of the spot market
Studying trading platform design and clearing solutions
Enhancing quality in price formation
Deliverable Documents
Feasibility study developed by CCEE – EPEXSPOT – ECC
White Paper with a prospective vision to be presented to the Brazilian
authorities and stakeholders – launched in November 2012, in Salvador,
Brazil
Conceptual roadmap containing an indicative timeline to improve the
Brazilian electricity market (under construction) 15

16. Technical Exchange CCEE – EPEXSPOT – ECC
White Paper – Building a Smart Brazilian Electricity Market
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Competitiveness
Financial security
Sustainability
Transparency
Organized market
Neutrality
Symmetry of
information
Liquidity
• Find out complete version of the White Paper: www.ccee.org.br

17. www.ccee.org.br
Thank you!