analysis of the brazilian electric sector: the ascend...

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ANALYSIS OF THE BRAZILIAN ELECTRIC SECTOR: THE ASCEND OF THE PUBLIC MONOPOLY Ricardo Moreira da Silva (KTH) [email protected] Claudio Ruy Portela de Vasconcelos (UFPB) [email protected] Raissa Dália Paulino (UFPB) [email protected] Daíse Lopes Porto (UFPB) [email protected] Maria de Lourdes Barreto Gomes (UFPB) [email protected] From the 80’s, the rate of world consumption of electricity has always presented a growing trend higher than the rate of energy supply, so there is a constant lack of production. In fact, the capacity to power generate global from oil is ruunning out and their use is no longer appropriate, because the emission of CO2 into nature and the consequent increase in greenhouse. Other energy sources (such as nuclear and hydro power) do not emit CO2, however have considerable environmental problem to be managed and all sources have other problems, in the environmental, social or economic areas. So there is great concern about the scarcity and sustainable use of energy sources, necessitating good and effective energy management. Brazil still has a power generation capacity of hydropower and alternative (wind power, solar or in the production of biofuels), but does not have the conditions are favourable. The problem is: (1) The country has focused the energy sector for management of neoliberal privatization of companies, imposing a regulation via ANEEL without studying all the consequences and, (2) the cost of production sources such alternatives is very high. Thus, this paper aims to describe and analyze the functioning of the electrical Brazilian. The method used is to present the electric sector in Brazil, then to understand the choices of public policies. The final of the paper shows that in Brazil the current guidelines for public policies do not allow the real integration and use of sustainable energy. Palavras-chaves: Electrical Sector; Brazil; Public Monopoly XVI INTERNATIONAL CONFERENCE ON INDUSTRIAL ENGINEERING AND OPERATIONS MANAGEMENT Challenges and Maturity of Production Engineering: competitiveness of enterprises, working conditions, environment. São Carlos, SP, Brazil, 12 to 15 October 2010.

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Page 1: ANALYSIS OF THE BRAZILIAN ELECTRIC SECTOR: THE ASCEND …abepro.org.br/biblioteca/enegep2010_ti_st_121_786_16561.pdf · capacity; Escelsa was privatized. 1996 The government hires

ANALYSIS OF THE BRAZILIAN

ELECTRIC SECTOR: THE ASCEND OF

THE PUBLIC MONOPOLY

Ricardo Moreira da Silva (KTH)

[email protected]

Claudio Ruy Portela de Vasconcelos (UFPB)

[email protected]

Raissa Dália Paulino (UFPB)

[email protected]

Daíse Lopes Porto (UFPB)

[email protected]

Maria de Lourdes Barreto Gomes (UFPB)

[email protected]

From the 80’s, the rate of world consumption of electricity has always

presented a growing trend higher than the rate of energy supply, so there

is a constant lack of production. In fact, the capacity to power generate

global from oil is ruunning out and their use is no longer appropriate,

because the emission of CO2 into nature and the consequent increase in

greenhouse. Other energy sources (such as nuclear and hydro power) do

not emit CO2, however have considerable environmental problem to be

managed and all sources have other problems, in the environmental, social

or economic areas. So there is great concern about the scarcity and

sustainable use of energy sources, necessitating good and effective energy

management. Brazil still has a power generation capacity of hydropower

and alternative (wind power, solar or in the production of biofuels), but

does not have the conditions are favourable. The problem is: (1) The

country has focused the energy sector for management of neoliberal

privatization of companies, imposing a regulation via ANEEL without

studying all the consequences and, (2) the cost of production sources such

alternatives is very high. Thus, this paper aims to describe and analyze the

functioning of the electrical Brazilian. The method used is to present the

electric sector in Brazil, then to understand the choices of public policies.

The final of the paper shows that in Brazil the current guidelines for public

policies do not allow the real integration and use of sustainable energy.

Palavras-chaves: Electrical Sector; Brazil; Public Monopoly

XVI INTERNATIONAL CONFERENCE ON INDUSTRIAL ENGINEERING AND OPERATIONS MANAGEMENT

Challenges and Maturity of Production Engineering: competitiveness of enterprises, working conditions, environment. São Carlos, SP, Brazil, 12 to 15 October – 2010.

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XVI INTERNATIONAL CONFERENCE ON INDUSTRIAL ENGINEERING AND OPERATIONS MANAGEMENT

Challenges and Maturity of Production Engineering: competitiveness of enterprises, working conditions, environment. São Carlos, SP, Brazil, 12 to 15 October – 2010.

2

1. Energetic Policies

The human being needs to consume electric energy, but it should be a condition sine qua non

generating and consuming electricity in a sustainable manner (following economic, social and

environmental criteria), but there are problems:

From the viewpoint of production systems, the generation of electric energy can be represented as

a simple configuration comprised of input, processing, output and feedback, with the

administrative management activities providing the link between the stages of the production

process of electrical energy.

A characteristic of the administrative management of any organization is that it has boundaries,

and it operates influencing and being influenced by factors external to the productive cell. It

should be noted also that administrative management involves several other parameters or

knowledge areas, as can be seen in figure 1 below:

Figure 1: elements influence the System of Electricity Production

Source: By the author, based on Mintzberg(1983)

By observing the figure shown, it can be concluded that an effective management model is hard

to be conceived, and even worst to be put on practice. There are several interconnected

subsystems with multiple interactions where the arrows (in low relief) represent those relations.

There are many aspects inherent to the production of electric energy that, independently of

country, can difficult its management, for example:

1. Electric energy cannot be stored after production. (Silva, 2005);

2. The non-storability interconnects, directly and at light speed, the generation, transmission,

distribution and consumption of electric energy;

ENERGY POLICY

SALES POLICY FINANCIAL MANAGEMENT

COSTS QUALITY

INTERNAL

INVESTIMENTS

ORGANIZATIONAL

POLICY CULTU

RE R&D

TRAINING

STRATEGIC PLANNING

Internal organization

OTHER

REGULATORY

POLICY

ENVIRONMENT

External organization

GLOBAL POLICY

GLOBAL

WARMING EXTERNAL

INVESTIMENTS GLOBALIZATIO

N

GLOBAL

ORGANS

NPOs

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XVI INTERNATIONAL CONFERENCE ON INDUSTRIAL ENGINEERING AND OPERATIONS MANAGEMENT

Challenges and Maturity of Production Engineering: competitiveness of enterprises, working conditions, environment. São Carlos, SP, Brazil, 12 to 15 October – 2010.

3

3. Financial management and accountability are different from traditional practices, presenting

null capital circulation time, since energy is simultaneously produced and consumed, that is,

there is no warehouse. (Gonçalves, 2002);

All these factors difficult the adoption of a management strategy that works efficiently and

sustainably while the care with the environmental cause gains momentum, given the growth of

ecological conscience broadcasted by the media and the proliferation of Non-Profit Organizations

that make this aspect impossible to ignore. Therefore the complexity of the energy sector makes

it vulnerable, including ultimately, to energy outage.

Brazil has an energy generation capacity much superior to that of many countries including

Sweden, Germany, France and others, but also an inexperienced and inactive regulatory agency,

what makes even worst the regulatory uncertainty of the sector.

2 The Brazilian Electricity Sector (SEB) and their Policies – A history

The Brazilian Electricity Sector (SEB) contains a past institutionalized. Brazil is a country of

continental size and, for this reason; its electrical management has presented further difficulties

for the government since its beginning.

Furthermore, Brazil has some very populated regions, but it also has some sparsely populated

regions with or without energetic autonomy, where consummation centers do not correspond with

productions centers. Thus, the management on the production, transmission and distribution of

energy has some difficulties, since the beginning.

In ancient times, (30s), the management could be public or private. For example, in the interior of

Pernambuco State, the citizen Delmiro Gouveia built a small hydropower for the production and

consumption of a textile industrial unit (it was his own property) and also for the part of the city

that currently takes your name. This was a pointer because it was the first use of hydraulic on the

Brazil Northeast, where this time, the generation of electricity mainly was thermal.

In resume, The Brazilian Electric Sector SEB began through private initiative. In 60s; the

Brazilian government captures all companies make them State Companies and in the 90s, SEB

returned to the private sector, following a neoliberal orientation (copying the model of the

English Electrical Sector).

Without many details, the diagram below shows an overview of what happened to the SEB of the

beginning of the century until the present day.

Figure 2: Chronology of SEB ideology - Source: Compiled by author.

From the 90s, there is a change in the strategic vision of management. The table below shows that

the Brazilian Government attempted to return to the private sector, the control of electrical

companies, leaving the State only as regulator of the market.

Until 1960

Private Management

1990 to 2009

“Regulated” Private Management 1960 to 1990

State Management

Economic liberalism 1980 a 2009

New-liberalism 1945 a 1980

Keynes ideas

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XVI INTERNATIONAL CONFERENCE ON INDUSTRIAL ENGINEERING AND OPERATIONS MANAGEMENT

Challenges and Maturity of Production Engineering: competitiveness of enterprises, working conditions, environment. São Carlos, SP, Brazil, 12 to 15 October – 2010.

4

1989

Only 26% of the funds received were for investment and 74% to pay the foreign debt. There is a maneuver in the accounts: Investments are considered expenses, then the government prohibits the SEB have expenses. In practice, the money received by the SEB was used for payment of interest on foreign debt.

1990 The Law no 8.031 created the National Program of No-nationalization – PND.

1992 The companies of the Eletrobrás Group were included in PND.

1993 On March, 4 the Law Eliseu Resende (8631/93) was adopted that changes the energy industry: Power and distribution companies will set their rates according to the costs of services.

1995

The president Fernando Henrique Cardoso endorses the Law of Public Concessions, opening to private initiative to operate services for power. In July, the private concessionaires represented only 1% of capacity; Escelsa was privatized.

1996

The government hires a consultant “Coopers & Lybrand” to propose a model of the electric system; In December, created ANEEL, to regulate and supervise the power, transmission, distribution and marketing of energy; The Light and CERJ was privatized.

1997

In August 18, it is recorded a peak in consumption. The system stayed with only 3.9% of reserves. It created the MAE (Wholesale Energy Market), which functions as a stock exchange, which involved power and sellers companies of energy. Nine companies were privatized: COELBA; CEDA (Centrais Elétricas Cachoeira Dourada); CEEE; CPFL; ENERSUL; CEMAT; ENERGIPE e a CONSERN.

1998

It created the National Operator of the Electric System, which would control the transmission of energy in the country. In February, the Light and CERJ are fined by ANEEL for failure in energy supply. Blackouts led protests and critical to the model of privatization. In March, the MP 1531 is reissued for the 16th time and increases the penalty for concessionaires’ poor service performance of 0.1% to 2%. On May 13, the Congress adopted the MP1531 where the free market started in 2007 (it not 2013 as proposed by Coopers & Lybrand). More five companies were privatized. COELCE, ELETROPAULO, CELPA, ELEKTRO e GERASUL.

1999 On March 1st, the Eletrobrás transfers to the ONS the operation and control of the Brazilian electric system; In July, the CESP - Paranapanema was privatized.

2000 FHC establishing the priority programs of thermoelectric to use natural gas. Enter into operation Angra 2. In February the CELPE was privatized.

2001 The SAELPA and CELB were privatized. Blackouts happen in Brazil southern and southeastern region- The rationing of electricity has been in the country.

2004 The Ministry of Mines and Energy transfer part of energy planning to Eletrobras (in the past, the responsibility of ANEEL).

Table 1: Timeline of SEB to 1985 to 2004 - Source: Silva (2005)

Another Brazil President was elected in 2003 and the new government (Lula) proposed a new

program for restructuring the electricity sector, but no change ideology the management, which

continues with regulatory vision.

Historically, the institutional arrangement of SEB – Brazilian Electric Sector – has aligned itself

to Brazilian economical moments and, according to Souza (2002) and Silva (2005), has passed

through four periods:

1960

to

1965

Institutional transition

and State intervention

There was a clear tendency for state intervention at the formulation

and execution levels of electrical energy politics, with noted

differences of opinion between the liberals and the interventionists.

1965

to

Institutionalization and

apogee The military government consolidated the interventionist politics,

with an institutional rearrangement, nationalized the department and

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XVI INTERNATIONAL CONFERENCE ON INDUSTRIAL ENGINEERING AND OPERATIONS MANAGEMENT

Challenges and Maturity of Production Engineering: competitiveness of enterprises, working conditions, environment. São Carlos, SP, Brazil, 12 to 15 October – 2010.

5

1980 invested hugely in public work

1980

to

1995

Preparation for a

change in the

institutional

arrangement

This period was marked by the worldwide implantation of new-

liberalism and deficient SEB management.

1995

to

2009

Institutional

reorganization

The de-capitalization erosion of SEB was accelerated and there was

external pressure for the adoption of the Washington Consensus, the

privatization of the companies began according to the English model.

3 The Brazilian Electrical Sector (SEB) and your Policies – An analisy

So, this paper analyzes SEB under two points of view: Between 1960 and 1990 the State

interventionist management and after 1990 the Institutional Model adapted from the English

model.

Between 1960 e 1990 - State Institutional Arrangement

Although the Ministry of Mines and Energy and Eletrobrás were created as government bodies to

centralize the actions between 1960 and 1961, as far back as the 30’s, according to Pontes (1999,

p.44), “the country had chosen a monopolist and centralized administrative institutional

arrangement at the most important areas of economy and (…) a clear option for the state

intervention in the economy.” Among the lieutenants of the 30’s, and later, the militaries of the

60’s, there had been an interest in the nation security, and an idea of nationalist consciousness

that was taken to an extreme. In this context, SEB administrative politicy, that was in place

through the beginning of the 90’s, is based on the keynesian principles, whose scheme is

presented below:

Figure 5: SEB state scheme from 1960 to 1990 - Source: Silva (2005)

During this scheme, many state companies were in charge of the power, transmission,

distribution and commercialization, but they all had a single coordinator, centered in the company

Eletrobrás. In this environment, there was no competition and the client was unable to choose

from whom he wanted to get his service.

The Brazilian State determined everything through laws, decrees and edicts, using either the

legislative power or the Ministry of Mines and Energy and furnished the electrical energy to the

consumers through companies that belonged to Eletrobrás holdings.

The big advantage of this management model is that it left the electrical energy department,

strategic as it was, under the single coordination of the State. But the imperfections in grid could

not thereby be more easily corrected.

State Electrical Sector

Consum

er Distribution Transmission

Power

Concessionaires

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XVI INTERNATIONAL CONFERENCE ON INDUSTRIAL ENGINEERING AND OPERATIONS MANAGEMENT

Challenges and Maturity of Production Engineering: competitiveness of enterprises, working conditions, environment. São Carlos, SP, Brazil, 12 to 15 October – 2010.

6

In addition to this, one can observe the following characteristics of the state arrangement:

a) Centralized Strategic Vision: The body was decentralized operating in various companies

(CHESF, Furnas, Eletronorte ELETROSUL and others in a regional and state level SAELPA,

CELPE, CEAL and others), but the central coordination of decisions remained in

ELETROBRÁS, ie human intellectual capital was a national decision. But since its creation in

1968, the Departamento Nacional de Águas e Energia Elétrica –DNAEE- the regulatory Agency

for water and electrical energy has been subordinate to Eletrobrás. The total accomplishment of

its functions could never be actualized since the company itself regulated and supervised the

holding companies.

b) Transmission, verticalization and system connection: The generation and transmission were

connected in same frequency (60Hz) and usually belonged to the same State company. Even

though there were losses in the energy transportation, there were no reasons for serious worries

since the system gained idleness capacity in the 80’s. Its central coordination, for example, made

it possible to supply the northern part of the country through the CHESF system in case of a

drought or the maintenance of the gates in Tucuruí.

c) Quality and productivity: There is not a program about it; the goal was to attend to demands

without accidents only. The training offered to the employees was always directed at the

accomplishment of tasks and specialization. The indices were only measured according to errors

in the system and work accidents. It had always been a characteristic of state companies to

develop austere O&M programs, with a high degree of bureaucracy.

d) Water management: The possibility of efficient water management was a direct consequence

of the system connection. Brazil has continental dimensions, for it is possible to have too much

rain in one region and another missing. Through a centralized administration is commanded to

stop producing a especial Power plant, to spend the gross energy (water) in another. So,

anywhere in the country where there were "excess" production, the energy was used (through

transmission lines) in another region, which had in short supply.

e) Workers: Apparently the companies were not worried about the diminishing the costs of

workers. The study of Barbosa (2003, p.55) shows that “employment at the electric department

during the period before the privatization does not present a linear dynamic”.

f) Politics of costs, prices and investments: The positive aspects of State interference were not

only technical, but the population was benefiting as the pricing policy. The resale of energy was

based only by cost: According to Gonçalves (2002, p.116), “The amount collected should only be

capable of covering all costs of operation and maintenance, plus the depreciation of the

equipment and the corresponding amount for the remuneration of the invested capital”. The goal

was not obtaining profit, but getting only a sufficient sum to keep functioning. This has also

favored a social distribution of energy between the concessionaires, because the richest

companies helped the management of the poorest regions of the country.

g) Social aspects and physical security of the population: SEB adopted a vision of the welfare

state, concerned with social issues. The tariffs were smaller in comparison to current ones.

Additionally, the energy supplied in some given locations were compromised with respect to

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XVI INTERNATIONAL CONFERENCE ON INDUSTRIAL ENGINEERING AND OPERATIONS MANAGEMENT

Challenges and Maturity of Production Engineering: competitiveness of enterprises, working conditions, environment. São Carlos, SP, Brazil, 12 to 15 October – 2010.

7

physical security. As an example, the illumination of shantytowns like Rocinha (Rio de Janeiro)

could not only take financial interests into account (MOREIRA, 2004).

h) Restrictions to the state institutional arrangement: While there are advantages to Brazil to

adopt the State arrangement for the electricity sector, there was a detritions administration, which

later ended the ability of investment by the state. At this point in history, no matter whether there

was a natural depletion of the model or if there was outside interference with this purpose or if

there were the two things combined, but by Abreu (1999), Cisneiros (1995), Gonçalves(2002),

among others, it has been proven that SEB lost its ability to self-finance. It was the end of the

State Institutional arrangement.

After 1995- Institutional Model adapted from the English model

In Latin America, "Chile and Argentina were the first to restructure their electric companies, to

be followed by Peru, Bolivia, Colombia, Venezuela and Brazil."

Brazil adopted the same English institutional arrangement from Thatcher’s era. Parts of the

company were transferred back to the private sector, but the government was not careful enough

to make the adaptations on the micro-actions level.

In England, the Central Electricity Generating Board - CEGB was created in 1957, as well as

twelve regional companies (RECs) responsible for the distribution and furnishing of the electrical

energy produced by companies that eventually became private in 1983, according to Rosa (1995).

In Brazil’s case, all distribution companies became private (KLINGELHOEFER, 1995), with the

exception of those that were not largely profitable, as well as Itaipu Binacional (for politic

reasons) and the nuclear ones (for national security reasons) (ROSA, 1995).

In this institutional arrangement, legally, the system should operate at high productivity rates,

without exploitation of the labor force and not exorbitant profits stemming because the high

productivity. In this case, the regulatory state agency (ANEEL) must regulate the entire sector.

In Brazil, this system does not work well, since there is no real competition, and private capital

seeks to maximize profit through resale of energy. In this case, the regulation via decree or

ordinance has action at the level of strategic planning, but cannot effectively reach the end of the

supply chain.

In fact, which State or city has only a distribution concessionaire, than the consumer (ie the

Brazilian) can buy electricity only by specific company; there is not competition. The consumer

is captive. He does not alternative.

The “English” institutional arrangement applies of Brazil presents some of the following

characteristics:

a) No-Centralized Strategic Vision: The Law 8.987/95 open the marketing for private investment,

but in fact, the concessionaires (together in trust) do not want occurred. For example, until 1997

only two projects were register in BNDES (Bank of investment). All concessionaires were

prepared to be privatized, but nuclear power plants and Itaipu were not politically motivated.

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Challenges and Maturity of Production Engineering: competitiveness of enterprises, working conditions, environment. São Carlos, SP, Brazil, 12 to 15 October – 2010.

8

The Regulatory Agency in England (Office of Electricity Regulation - OFFER) was created to

supervise prices and stimulate competition, than in Brazil created the Agência Nacional de

Energia Elétrica –ANEEL because same order.

The government creates and supports ANEEL, but about the political strength to act, Santos

(2003, p.33) shows that regulatory agency in Brazil, do not have legitimacy and not have

capacity, than they become "weak and discredited".

b) Transmission and no-verticalization: The Sistema Nacional de Transmissão de Energia

Elétrica - SINTREL was created and additionally, a transportation tariff was included in Brazilian

consumers’ bill.

c) Quality and productivity: According to Klingelhoefer (1995) there was a high elevation of

productivity indices in England, but also a generalized complaint regarding the service quality,

including blackouts. The same could be seen in Brazil.

In Brazil, it was stipulated that variations of up to 10% in the voltage or frequency are acceptable.

The only other two quality indicators are: Equivalent Duration of Interruption per Consumer Unit

(DEC) and the Frequency of the consumer unit (FEC) (Ganin, 2003), which show how

concessionaires provide energy.

To get an idea what that means, technically energy must be received in homes at a frequency of

60 Hz and voltage of 220V (phase-neutral), but the system can display a 54Hz frequency and

voltage 242V (harming the life of the equipment electrical), officially will be a energy quality,

provided there is no disruption in supply and if there, will not take much to restore

d) Water management. This is a problem of English model in Brazil. Since 71% of the energy

produced in Brazil has hydro power plant, water is the primary resource, and according to the

constitution, belongs to the State. Even if the government could no-verticalize all of the electrical

energy production chain, the private power plant would still be directly connected to the State.

Different about thinking 20 years ago, water is limited, has hidden costs and your used only in

Power plant is not permit.

e) Workers: “In England, 50% of the workers were dismissed”. (Klingelhoefer, 1995) In Brazil,

SEB reduced a large portion of the labor force. There were several programs layoffs across the

sector. 70% of employees ITAIPU were dismissed in 1994, 50% of employees CHESF were

dismissed between 1995 and 2000 and there is evidence that "there is not preparation for change

of employment." (Silva, 2005). The demand and supply of energy grow, but increases the number

of outsourcing and sub-employment within the sector.

From 2000 until 2008, there was a stabilization in the number of employees in the SEB.

f) Tariffs and investments: In England, there was no increase in investments and the domestic

tariff never been so much increased as they had after the privatization. In Brazil, with rare

exceptions, there were no investments in the generation and transmission areas.

With rare exceptions, such as in Hydro power plan Machadinho and Ita in Rio Grande do Sul,

some thermo power plants in Araxa in CERJ, and the continuation of Hydro power plans

Primavera and Corumbá owned by Furnas.

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Challenges and Maturity of Production Engineering: competitiveness of enterprises, working conditions, environment. São Carlos, SP, Brazil, 12 to 15 October – 2010.

9

An interesting case occurred in the distribution sector. In Minas Gerais and Paraiba the largest

investment was not in transformers or capacitors that improve the quality of energy supplied, but

on cable multiplex. This act brings no improvement in energy quality, but only prevents the

electric cat. So, the private investment by the distributor was seeking care for financial income,

with ever improving quality of power supply.

g) Social aspects and physical security of the population: was finished the vision of a welfare

state concerned with social issues. Now, it is no longer accepted governmental actions (State is

minimal). In fact, ANEEL is present in Brazil to regulate energy use with social or physical

security goals, but it does not get a good performance for it.

h) Restrictions to the “English” institutional arrangement in Brazil: The institutional arrangement

planned by SEB included the separation of power generation, transmission, distribution and

commercialization and all the companies would be selling, but there is not happening. Every

system is based on competition, but the public consumer is captive, and there is no possibility to

choose your supplier.

Even with all the effort and expectations from the Brazilian government the implantation of the

English arrangement did not proceed exactly as planning. There was no privatization of the all

supply chain and no-verticalization either:

• Distribution was not all privatized. Some companies were not profitable and the private

market not bought them. In addition, there were reactions from the people, jurists, politicians and

others against the privatization of some companies, such as COPEL, in Paraná State and CEMIG

in Minas Gerais State;

• In the transmission, SINTREL was created and there was an internal reluctance about the

transmission sector selling, for it, it was more studies for privatization;

• Power, with the exception of ELETROSUL, was not sold.

The current government of President Luiz Inacio Lula da Silva, (to date), chooses not to be more

privatization. In this sense, the government considered an adaptation to the English institutional

arrangement put (through the Ministry of Mines and Energy) the "New Restructuring Electricity

Sector", not changing the ideology deployed. In fact:

(1) Approves the privatization has occurred;

(2) Provides a hope that there is no more privatization plans

(3) Resumption of growth in companies that were not sold and;

(4) It does not leave with ANEEL planning SEB and returns again it to

ELETROBRÁS.

From all this, we can affirm that the institutional arrangement of the Brazilian Electric Sector had

a private market essence protected by State, ie, a bad copy of English model.

The power generation delivers energy to a pool of sales (MAE), where some trading companies

are responsible for selling energy, another agent of the electricity sector (concessionaires,

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XVI INTERNATIONAL CONFERENCE ON INDUSTRIAL ENGINEERING AND OPERATIONS MANAGEMENT

Challenges and Maturity of Production Engineering: competitiveness of enterprises, working conditions, environment. São Carlos, SP, Brazil, 12 to 15 October – 2010.

10

cooperative of energy consumers or big consumer independent) by the auction price. In this case,

the regulatory agency (ANEEL) does not regulate the sale.

Aside big consumer independent (who buys for personal use), concessionaire or cooperative

resells the eletricity to the captive consumer for a price top limit set by ANEEL. All costs are

passed on to the final consumer.

Thus, the captive consumers pay the amount of energy purchased for the concessionaire or

cooperative + governmental tax + a technical service, all together to the company determined and

regulated by the government.

In this model of management there is no real incentive to generation through sustainable sources.

There is a small fund, via PROINFA to encourage so-called clean energy.

4. Final Considerations

Since the implementation of the “half” English arrangement for SEB in 2005, the government has

studied an adaptation of the current system through the Ministry of Mines and Energy. The result,

called “New Re-organization of Brazilian Electric Department”, follows the ideology, with some

slight modifications:

(a) It confirms officially the privatizations that have already occurred.

(b) It removes the chance of further privatizations, when plans to invest again on the

improvement of companies that have not yet been sold are actualized.

(c) It gives the planning back to Eletrobrás.

It is possible to affirm that SEB’s current institutional arrangement is a badly implemented copy

of the one used in England. Brazil has lived through two visions of management: one State

institutional arrangement that was present from 1960 to 1990, and the current one, which has

almost market vision. But which is the best model for Brazil?

Hope (2003) affirms that there is no best model or institutional arrangement in a absolute way,

but only models and arrangements that can be well implemented or not, and work properly or not.

Further studies are necessary in Brazil, searching for a more flexible institutional arrangement

than the state offers: an institutional arrangement that allows for the entrance of private resources,

and contemplates social aspects, forgotten by the private arrangement.

Some countries (Spain, Chile, Argentina, etc.) have also changed the institutional arrangement of

their electric departments. Others (France and Germany) have maintained their state institutional

arrangement and are models of competency.

In the Swedish case, for example, according to Swedish Energy Agency(2007), there are two

companies that own 80% of the generation: Vattenfall with 50%, and Sydkraft with 30%.

Distribution (municipal majority) is under the charge of 150 different companies. Consumers can

change their distributors, and the transmission network includes the whole national network

operated by the state company Kraftnatt. As far as competition, Sweden exports energy to all

Scandinavian countries and considers Sweden itself as only a region.

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It is important to stress that, even surrounded by a big number of companies making up the

energy market, the Swedish Energy Agency is the regulatory body responsible for investigating

the formation of little distribution cartels.

It is important to remember that a state institutional arrangement offers interesting particularities

for a state-nation. The single management, even with the operational part de-centralized, favors a

global vision, connecting the different existing systems.

In Brazil there are no major problems regarding water management, but there is the necessity to

use this natural resource perfectly. The water and electrical energy management must be under

the same coordination. Private companies controlling water supplying are not acceptable.

Besides, SEB’s state management works better for the necessary social aspects of energy.

Thus it was possible to see that Brazil tried to copy the model of management of the electricity

sector in England, only not made the necessary adjustments so that the current management

model, nor is the full English, or another planned. It is a hybrid model with features liberal, but

with State intervention via ANEEL (Regulatory Agency without posture of impartiality).

The Brazil works on optical monopoly, regionalization track and regulation of the producer and

"protection" of the captive, who has no choice. We can conclude that public policy energy used

in Brazil, do not favor the inclusion of the use of clean sources of energy production.

What should we learn? What if the model used is guided by the neo-liberalism, one must adopt

systems of real competition, giving consumers the chance to choose. In Brazil who chooses the

energy traders are dealers who resell to 190 million captive consumers.

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