Free energy market has record migration – 07/21/2023 – Market

Brazil registered a record number of consumer migrations to the free energy market in the first half of the year, amid a scenario of low prices and greater supply, but the industry has been complaining about the delay in regulating access to the free market from next year.

According to data provided to Reuters by the CCEE (Electric Energy Trading Chamber), between January and June, the free energy contracting environment gained 3,330 new consumer units, a record for the period and an increase of 52% compared to the first half of 2022.

At the end of June, the country had 34,400 industries and commercial establishments able to buy energy freely, negotiating prices and terms directly with trading companies and generators, and disassociating themselves from the portfolio of energy contracts of distributors.

In the 12 months up to May, companies linked to sanitation, services, transport, the food sector and commerce led the migration to the free market, according to the CCEE, with an increase in participation ranging from 38% to 18%.

In the first half, the flow of migrations was driven by small consumers, especially with contracted demand below 0.5 MW (megawatt) —commercial condominiums and store chains, for example, who are able to migrate to the environment in the load sharing model.

Although most of the adhesions are still concentrated in the Southeast and South regions, where industrialization is more intense, the CCEE observed a significant advance in states such as Pernambuco, Goiás and Ceará.

“There is more space for factories and companies outside the main productive and business axes to have a representative participation in the volume of entrants in the free segment”, pointed out Talita Porto, vice president of the board of directors of CCEE.

With the spot price of energy at the bottom since last year due to favorable hydrological conditions, trader executives report that they have been able to guarantee discounts of 20% to 35% in relation to what consumers pay today on the electricity bill of distributors.

In addition to cost reduction, Porto highlights other attractions of the so-called ACL (Free Marketing Environment) for consumers, such as different terms and conditions for contracting the input, with agreements that are more adhering to their needs, in addition to the environmental appeal of purchasing renewable energy.

The CCEE does not make projections for the future behavior of migrations, but considers that the trend should remain positive, with no signs of “unusual deceleration” in the second half — mainly at a time when the entire electricity sector is preparing for the opening of the market for all consumers connected to high voltage from 2024.

According to CCEE, of the 165,000 consumer units that would be able to migrate to the ACL next year, 93,000 already benefit from distributed micro and mini-generation, reducing the economic viability of the change. There would therefore remain 72,000 units with the potential to join the free segment as of January.

INDUSTRY CLAIMS ABOUT INDEFINITIONS FOR 2024

The expansion of the free energy market takes effect on January 1, 2024 and gives the option of migration to all consumers classified as Group A (connected to high and medium voltage or served by underground network).

This expansion was defined in 2022, based on an ordinance by the Ministry of Mines and Energy. The previous rule said that this was only possible for consumers with demand contracted with the distributor of at least 500 kW (kilowatts). There are plans to fully open from 2028.

At the end of June, Fiemg (Federation of Industries of the State of Minas Gerais) sent a letter to Aneel (National Electric Energy Agency) in which it expresses concern about the delay in the regulation for adherence.

In the document, the federation alleges that the lack of definition of those responsible for the measurement, adjustments in substations, membership and representation in the CCEE are some of the issues that cause apprehension in consumers.

The industry points out that, without regulation, insecurity grows among medium voltage consumers, with contracted demand above 30 kW, who can benefit from the measure.

“These consumers can notify their distributors that they want to buy energy in advance and can have up to 35% savings, if compared to the captive market. It is something that would make the industry competitive”, says Tania Mara Santos, energy manager at Fiemg.

She adds that the ideal would be for the regulation to have come out by June 30 of this year, as interested parties would need 180 days to opt for migration to the new system.

“It is a more simplified model as it is a great opportunity for small and medium-sized companies. In Minas Gerais, 15,000 companies can benefit and there are 150,000 throughout Brazil.”

Measuring the billing system is the main issue to be regulated by Aneel, according to the industry: it is necessary to define whether the consumer will be responsible, investing in adaptations, or whether there will be a simplified model.

In a note, Aneel says that the agency’s expectation is to open a public consultation on the subject at the end of August and finalize the analysis at the last public board meeting of 2023, scheduled for December.

“Many of these issues can and should be resolved bilaterally between the retailer and the consumer. It makes no sense for Aneel to place the obligation on anyone to buy the meter and adjust the entry point of consumption”, says André de Oliveira, partner at Ampere Consultoria. “Some companies should wait for the consolidation of understandings to make their migration decisions.”