Decree No. 9,143/2017, of August 23, made substantial changes to the rules applicable to auctions in the electricity sector. The new rules have made predictable the system for auctions for the purchase of electric energy in the regulated environment by determining the frequency with which the National Electric Energy Agency (ANEEL) should hold them.

The frequency of the auctions was linked to the type of project involved in the contract:

• Auctions for new energy (years "A-3," "A-4," "A-5," and "A-6");
• Auctions for existing energy (years "A," "A-1," "A-2," "A-3," "A-4," and "A-5");
• Auctions for alternative energy sources (years "A-1," "A-2," "A-3," "A-4," "A-5," and "A-6");
• Auctions for energy from generation projects indicated by the National Energy Policy Council (CNPE) resolution and approved by the President of Brazil (years "A-5," "A-6," or "A-7"); and
• Auctions for new energy, the call for bids for which will occur in conjunction with the transmission assets through which the energy will be delivered (years "A-5," "A-6," or "A-7").

Regarding item "e" above, it is worth mentioning that the possibility of simultaneous bidding for generation and transmission is an old dispute in the electric market, in light of the fact that mismatch between construction of the plants and construction of the necessary transmission facilities to deliver the energy is commonplace in Brazil. The joint auction aims to reduce bottlenecks in transmission lines and thus contribute to the efficiency of the National Interconnected System.

If there is declared demand from the distributors, the auctions will take place at least once a year for the purchase of energy from existing projects, with delivery for the subsequent year "A-1" and at least twice a year, for the contracting of new projects. Auctions for new energy will be divided into "A-3" or "A-4" and "A-5" or "A-6." It will be the responsibility of the Ministry of Mines and Energy to publish by March 30 of each year a schedule with estimates for the auctions.

The decree also gives preference to auctions of existing energy, now beginning to be supplied in a period from the same year as the auction to five years after it, to the detriment of auctions of new energy if both are conducted in the same year and have a date for beginning supply also in the same year. In this case, the auction for existing projects should be conducted before the competition for new projects.

The purpose of these changes is to give greater transparency to generation bidding procedures, thereby encouraging investors to enter into or expand their participation in the Brazilian energy market.

In the same decree, distributors were authorized to negotiate contracts for the sale of energy in the Free Contracting Environment (ACL) to free consumers and other agents of the ACL (generators, marketers, and self-producers), provided that these contracts are linked to excess in energy contracted in auctions.

The idea is to mitigate the problem of over-contracting by the distributors, whose positions are weakened due to impacts from the volatility of the political scenario and the economic retraction in domestic energy consumption.

The treatment given to the concepts of "market recovery" and "involuntary exposure" was another way of curbing over-contracting. In energy auctions for existing projects, distribution agents may contract for energy equivalent to the replacement amount and the market recovery, which is the sum of the non-contracted replacement amount in the five years preceding the year of the auction. This alternative allows retractions and recoveries in the market to be supplied by existing projects, thereby avoiding contracting for new plants and, consequently, additional costs for the consumer.

The scenarios of "involuntary exposure" were increased by establishing that ANEEL, when assessing breaches of energy trading rules, should evaluate the "maximum effort of the distribution agent" in light of (a) contracting for lower than the distributors' declaration of need; (b) alteration of distribution quotas or availability of energy and capacity of Itaipu, PROINFA, and Angra 1 and 2; and (c) migration of free and special consumers to the ACL.