sector rules out breach of Enel contract defended by mayor

The São Paulo blackout on November 3rd, when a major storm left more than 2 million people without electricity, generated a strong political reaction against the concessionaire’s service Enel. In the capital, Mayor Ricardo Nunes (MDB) even declared that he expects the contract with the company to be canceled. The extreme measure is considered remote by experts in the energy sector.

The expiry requires the breaking of several points of the concession with the possibility of contingency problems and Enel, despite the population’s current perception of service, meets the parameters required by Aneel (National Electric Energy Agency), the federal body that regulates the sector.

The high tension between the public authorities and the concessionaire also had repercussions on the Legislative Assembly of São Paulo (Alesp), which intensified the work of the Parliamentary Inquiry Commission (CPI) that investigates Enel’s actions.

The promise is to deliver the final report on the concessionaire before the parliamentary recess and demand compensation from affected consumers.

Last Tuesday (21), São Paulo’s Procon fined Enel more than R$12 million due to the delay in restoring electricity, which in some units took around a week, when the maximum tolerable time is 48 hours, with financial losses for residents and businesses in the state.

Despite the deterioration in the company’s image, the expiry of the contract is closer to political discourse than technical reality. Director of the Brazilian Infrastructure Center (CBIE), Bruno Pascon states that there is no possibility of canceling the contract based on Aneel’s parameters. The Italian concessionaire has a loss of 10.52% of energy, when the average in Brazil is 16.5%. Also according to him, quality indicators such as call duration and frequency, with the exception of recent events, meet regulatory parameters and the concession is up to date with sectoral payments.

“When the mayor of São Paulo says he is going to request the cancellation of the contract, he knows that there is no prerogative for that. It is much more to provide an answer for the population who, obviously, suffered from the lack of light for a long time. But this prerogative belongs to the federal authorities, through Aneel, which is the regulatory agency”, comments Pascon.

If the concessionaire does not meet contract clauses, such as reconnecting the network below the expected time, the company may be fined up to 2% of revenue by Aneel. In the assessment of the CBIE director, a billion-dollar fine would be one of the most extreme sanctions in the case of Enel and considers the forfeiture “almost impossible”, and the concessionaire can still claim an unprecedented “force majeure event”, with the storm accompanied by gusts above the electrical grid support capacity.

“For expiry, the concessionaire must be in default, with constant quality standards below those required for several quarters. Firstly, he receives a yellow card to present a contingency plan with the aim of returning to Aneel parameters. In other words, you can count the cases of expiry in Brazil on one hand, a process that can still be avoided by changing control. With a new dealership, the expiry process is interrupted”, ponders the expert. Last Tuesday, Aneel recommended the expiration of the company’s contract Amazon Energy after rejection of the request for transfer of corporate control.

The director of Technical and Regulatory Affairs at the National Association of Energy Consumers (Anace), Mariana Amim, highlights the need to follow sectoral legislation that guarantees ample contradiction to Enel, before any attempt to withdraw services. For her, the concessionaire must still account for the measures adopted to “address a completely adverse and fortuitous event”.

“That was not enough, it is necessary to consider that the problem gained a political bias, in a dispute between Enel and the city hall, which, in turn, also has its share of blame in the event in view of the tasks that are affected, such as tree pruning. , removing trees that could cause accidents and cleaning drains”, he analyzes.

Wanted by People’s GazetteAneel responded that the inspection process against Enel was initiated immediately after the blackout, in conjunction with Arsesp (Public Services Regulatory Agency of the State of São Paulo), and says that it has given “maximum priority” to the issue, with forecast of the first results in 30 days.

“In this process, several dimensions of the problem will be analyzed, such as: the preparation of distributors for critical events, the performance in preventing their effects, the capacity to restore, suitability, preparation and quantity of the teams used in the recomposition, the execution of the contingency plan, dialogue with other institutions involved in the reestablishment process, among others. In this process, responsibilities will be determined and appropriate sanctions will be applied”, Aneel responded in a note.

Through its press office, Enel responded that it will not comment on the matter. Until the publication of this report, São Paulo City Hall did not respond to the request for a position on the matter.

After Enel blackout, new concessions must require robust network for weather events

Climate change with more frequent extreme events in Brazil should require more lasting solutions from concessionaires, which will assume around 65% of the supply of electricity to Brazilian consumers in new contracts between 2025 and 2030.

“The renewal of concessions will require robust network security in this new scenario, it will have more rigorous criteria, with technologies to improve trust in the network, such as automatic reclosers. But forcing the network to be buried is very difficult, as the cost is exorbitant”, analyzes the director of the Brazilian Infrastructure Center (CBIE), Bruno Pascon.

He remembers that companies in the electricity sector have experience with climate events, as the Brazil is the record holder for lightning due to the characteristics suitable for tropical storms during the spring and summer seasons, with the national ranking of electrical discharges being led by São Paulo, Mato do Grosso do Sul and Minas Gerais. In total, there are more than 75 million lightning strikes recorded annually in the country.

Even so, Pascon assesses that the intensity of extreme weather situations has increased in recent years and the electrical grid is not prepared to withstand gusts of wind, above the capacity predicted by the structures. “Winds between 80 km/h and 100 km/h were recorded, typhoons in the south of the country and, in some cases, storms with gusts reaching 110 km/h. The network and the trees themselves can withstand a maximum of 80 km/h. The high voltage power transmission system covers up to 100 km/h. Thinking about renewing concessions, a discussion that will have to take place is the replacement with a more robust system to sustain winds above 100 km/h, which has become the new normal”, he predicts.

Considered the ideal solution, burying electrical wiring can increase the energy bill by up to 30 times, according to Pascon, who calculates that a person who spends R$150 would start paying a bill of R$4,000 per month, if the concessionaire pass on the investment to the end consumer. For the burial of 100% of Enel’s network over 42 thousand kilometers, the planned budget is R$320 billion, with the company’s asset base being R$11.3 billion.

“A kilometer of buried network costs 10 times more than the overhead system. It’s not an immediately viable solution. An alternative is to talk to store owners, like at Oscar Freire, in São Paulo, where the wiring is buried. It was the shopkeepers who paid for this. It is an interesting solution, because if the capex [investimento] It is not made with the concessionaire’s money, it does not go towards tariffs, it does not burden the consumer and it improves the perception of the quality of the service, in addition to benefiting commerce in this case”, he analyzes.

In the assessment of the CBIE director, the safer networks must be installed in a staggered manner, prioritizing the 2,700 municipalities with the highest risk of climate adversity in the country. Within cities, the areas most vulnerable to extreme events would be addressed, first, by replacing the network and part of the buried wiring.

“A program that involves city hall, the state of São Paulo, neighborhood associations, institutions in the service sector and the concessionaire, to slowly phase out the undergrounding of the network, with part of the fund raised by the city hall with public lighting for investment. It has to be a set of solutions, as only the most expensive solution is not viable for the consumer”, he declares.

Another suggestion for the new concessions is to have a “solidarity” regulation so that, in extreme events, affected companies can receive teams from other concessionaires in the country to speed up service and support without transferring the outsourced service to the consumer’s account.

“A number of companies called Enel offering teams as a result of the event on November 3rd. But precisely because it does not have regulatory treatment, this creates a certain insecurity. It is not known whether the regulator will consider this support as a third party and the cost will be passed on to the energy bill. This would be an interesting solution to apply throughout Brazil, solidarity between distributors. The network is one and the system is interconnected”, argues Pascon.