Brazil to put main part of power sector model into place by July

Brazil's government plans to put in place the main part of the regulation needed to implement the new power sector model by July, senator Delcidio Amaral of the ruling Workers' Party (PT) told. Amaral, a former mines and energy minister and power and gas director in federal energy company Petrobras, studied and negotiated the decree that instituted the new model.
Although the negotiations led to many changes, the main part of the government's proposals is intact and the successful implementation of the new model will depend upon its regulation, he said.

The regulation will be carried out through ministerial decrees and legislation that will be published by the mines and energy ministry.
"We must double the attention to the regulation because the success of the new model is highly dependent upon such regulation and the adjustments that need to be introduced during its implementation," he said. "However, I am optimistic because the model reinstated the essential role of the state, especially in the planning and monitoring of construction works to guarantee they are in line with demand to avoid power rationing," he added.

According to Amaral, private sector agents must monitor the regulations to ensure they create the conditions to attract investment because the "government does not have the 20 bn reais ($ 7 bn) a year that the sector needs." The model was thoroughly negotiated and attends to some private sector demands, he said.
The most important changes made by the senate increased the transition period for independent power producers to 2006 from 2005 and rolled back the operations start date of generation plants that will be allowed sell power at auctions for new power capacity to 2000 from 2003.

Another change removed federal power holding company Eletrobras from the national privatisation program (PND).
"Eletrobras will now reassume a position as an investor and will take up more room in the system, together with other state-controlled companies," he said.

Amaralalso said an article that forces power companies to separate generation, distribution and transmission assets will remain unchanged, despite pleas from state-owned companies such as Cemig, Celesc and Copel. The senate will vote on 35 amendments to the decree that lawmakers decided to debate separately. None of the amendments change the basic structure of the new model, according to Amaral.
The senate will also vote on the second new power model decree, known as MP 145, which creates a federally-owned research company. After the vote both decrees need to be ratified in the lower house.