AES Eletropaulo has just returned to us a crispy stereo and burnt-out microwave oven, both fried in a lightning strike or massive surge or something of the kind last month. Big Government made them do it.
We filed a complaint with the company and receive a voucher in return for repairs services from any one of a gazillion SMEs that keep the electrical system glued together.
Brazil is a country that only works because of the The Guy, as in, need gardening done or pirate cable installed? Call The Guy. There ought to be a monument to The Guy.
At any rate, the rolling blackouts of 2001 had contributed to the defeat and demise of the center-right PSDB-PFL coalition in the elections in 2002, my first whole year spent among the empire of the Brazilians.
No matter what else you have cooked up, policy-wise, the trains, it seems, must run on time, and it has been interesting to watch the Brazilian energy sector go all hot under the collar as the minister of mining and energy rose through the ranks to become the duly elected President of Brazil.
Take this item from the 2003 Wikigate file:
¶1. SBU Summary. On February 6, Embassy hosted a Roundtable on Electricity Regulation in Brazil with participation by 16 executives from 8 U.S. and European companies from both the generation and distribution sides. Companies [sic] main concerns were short-term liquidity issues, continued low electricity demand, and the upcoming periodic review of tariff rates.
There is a good then and now story to be written on this subject.
These companies today face genuine competition in an auction for new concessions starting in 2015; a more consumer-friendly legal and regulatory environment, with less energy piracy and more formal demand; and an attitude that short-term liquidity and debt-obligations are private matters for private companies to resolve privately with their shareholders.
Companies were clearly anxious over the new GoBs impending reformulation of sector regulation, and most attendees noted that their companies have halted further investments in Brazil pending the emergence of a clear regulatory model. Nonetheless, all company representatives termed their access to GoB officials as “good” and their initial impressions of Minister of Mines and Energy MME Dilma Roussef as positive.
Groundwork was laid for a continuing dialogue between the private sector and the Mission. End Summary.
In the 1999-2013 plan for the expansion of transmission (PET), electricity transmission infrastructure received about R$3 billion year in private investments.
¶2. SBU As part of a mission-wide strategy to coordinate our policy approach in Brazils energy sector, on February 6 the Ambassador hosted a diverse group of electric utilities including U.S. companies Alliant, Duke, Enron, AES, Mirant, and PSEG, as well as European companies EDP Portuguese, and Tractebel Belgian. Grupo Cataguazes Brazilian and Endesa Spanish were last minute no-shows.
It was this paragraph that caught my eye, not least for the reference to Enron.
How has this cabal of concessionaires fared in the meantime, since 2003?
My general impression is that U.S. firms have suffered to the benefit of European ones. It would be interesting to build a model of the sector as it has developed over time, as sketched above. Spanish firms seem to have a special knack for winning infrastructure bid here in recent years, as in their success in auctions for the operation and maintenance of toll roads.
Ambassador and CG Rio had already hosted a similar event for hydrocarbon companies in ConGenRio during the last week of January ref A. Ambassador and CGs have also been meeting frequently with U.S. companies on a one-on-one basis. Econ and commercial officers followed-up the February 6 roundtable by making a courtesy call on MME Secretary for Energy Marcelo Poppe. Ambassador expects to make her initial call on Roussef during the week of February 24.
Finally, although encouraging privatization was the Gospel of State back then, it burned its fingers badly on this particular topic.
Background to a Mess
¶3.UThe timing and concerns of the roundtable reflect the current confusion and uncertainty surrounding the electricity sector.
In the mid-90s, the Cardoso administration embarked on an ambitious privatization program to attract much-needed investment to the state-dominated energy sector.
The process was poorly implemented from the start, as Congress failed to pass comprehensive sector reform legislation similar to that created for the telecommunications sector via the General Law of Telecommunications. Instead, Congress carried out the process piece-meal.
Congress first legalized the sale of states distribution companies. In 1995, Espirito Santo sold its distribution company ESCELCA to a group of foreign investors. U.S. companies, led by AES, began investing in ¶1996.
¶4. U Reform legislation continued to trickle through Congress, resulting in the creation of the national electricity regulator ANEEL in 1997, and the creation of the wholesale energy market MAE in 1998. Although the National Council for Energy Policy CNPE, a committee within the MME, was given responsibility for long-term policy planning, the weakness of the MME as an institution encouraged ANEEL to step into the policy realm and complete the sector reform process de facto through regulation. CNPE has met only three times to discuss long-term policy. Roussef has commented on various occasions that the MME will “recapture the policy role” from ANEEL.
I think it is fair to say that ANEEL has dedicated itself more and more to pure regulation, handing out fines and other punitive actions to the applause of both opposition and situation alike. Underperforming concessionaires is becoming a political whipping boy for authorities who suffer from the fact that the two main rivers here both smell strongly of human feces a decade down the road.