By: André Jerusalem

After five years of processing by the National Congress, new conditions were approved for the renegotiation of the hydrological risk of electricity generation or GSF, from the English Generation Scaling Factor, which measures the hydrological risk and concerns the volume of energy generated by the plants and their physical guarantee (minimum amount of energy that a hydroelectric plant can supply in a period).

Hydrological risk is related to the volume of water in the river basins, which depends exclusively on rainfall, and the differences recorded by the plants are added together and shared among all of them, through the MRE (Energy Reallocation Mechanism – a procedure created to transfer energy from one plant to another when one managed to generate energy above its physical guarantee).

Such conditions for the renegotiation of the hydrological risk of energy generation are set out in Law 14,052/2020, which added provisions to Law 13,203/2015, and aims to resolve debts related to the GSF, in view of numerous actions filed in view of the non-compliance of hydroelectric plants, when in mid-2015, due to the reduction of reservoirs caused by the drought in the country and the increase in energy consumption, the Government dispatched energy from Thermoelectric Plants, preventing hydroelectric plants from selling energy, with the intention of saving energy from Hydroelectric Plants.

The dispatch of energy from thermoelectric plants generated an increase in the cost of energy, creating a debt that would subsequently be shared between the energy market – generators, transmitters and consumers.

Furthermore, this scenario was not favorable to the sector, given the legal uncertainty generated by the confusion between the government and the sector. Disputes over the issue were fundamental in limiting investments in energy generation, delaying its development and expansion.

With the advent of the new law and the approval of the respective regulations, for the conditions established in the renegotiation of debts and, a possible legal stability, the Public Authority demands the withdrawal of legal actions, as compensation, extends the term of the concessions to the hydroelectric plants involved.

However, despite the attempt to solve the problem of lawsuits, which prevented investments in the sector, the problem of renegotiating the hydrological risk has not been resolved, since the sector will still be subject to dispatch by decision of the Public Authority. In addition to this, the recent change in the publication of the PLD, with the introduction of the hourly PLD, as well as the possible explosion of economic activity, which in 2020 was repressed due to the COVID-19 Pandemic, there is an erroneous manipulation and without basis in the merits for the definition of the dispatches.

Given this scenario, it would be extremely naive for a businessman who knows the national electricity sector to say that the GSF has been resolved or that there will be no new disputes between generators and the government. Add to this complex equation the interest in privatizing or opening Eletrobras' capital and the results could be excellent. However, for those who knew the sector in the middle of the current decade, anything is possible, including absolute legal uncertainty.

Therefore, we must observe the movement of the hourly PLD and the dispatches of the National Operator to confirm the end of the GSF or whether it was just a palliative to solve the past without directly reflecting on the future.