Brazilian electricity sector restructuring: From privatization to the new governance structure

Abstract

The first market-oriented reform of the Brazilian Electricity Supply Industry, carried out in the nineties, failed to attract investment in the levels required to keep the economy growing and remained incomplete, because the trading arrangements set in place did not emit adequate investment signals and the market organisms themselves became paralyzed. In consequence, a new direction for reform was set up in March 2004. This reform of the reform, besides several structural purposes, is aimed at attracting private investment to the expansion of electricity generation supply, in view of growing demand and restrictions on the State capacity to invest. From an analysis of the governance structure here is a survey done about the market design and rules of the Brazilian Electricity Sector with the aim of presenting the whole process of change and major advances in governance since the major structural and institutional changes of the Brazilian Electric Sector from the 1990s to 2004, to duly analyze the possible effects of these changes on the strategic actions of the economic agents (generation, traders, consumers and distribution companies). This work also aims to identify eventual fragilities in the market rules and in the market design in this period and how they were mitigated by the last reform that took place in 2004 and introduced new structural changes to the Brazilian Electricity Institutional Model (BEIM).