The electricity transmission business segment includes the deployment, operation, and maintenance of transmission line facilities that constitute the link between electricity generation and distribution. Currently, the transmission system consists of over 171,000 kilometers of transmission lines.
The Basic Grid of the National Interconnected System (SIN) consists of all substations and transmission lines at voltages equal to or greater than 230kv. Its planning is the responsibility of institutional agents – MME, ONS, and EPE – who guide the need for tendering processes in which market agents compete for the right to deploy and operate new transmission lines through concessions with 30-year terms.
The winning bidder of the tendering process is determined by the criterion of the highest discount on the Annual Allowed Revenue (RAP) for service provision. The RAP value is obtained as a result of the transmission auction and is paid to the transmission companies upon the commercial operation of their facilities. Existing concessions can be divided into 3 categories:
Category I – Concessions predating 1998. The RAP is adjusted annually by the IGP-M, and their contracts expire in 2015. Some concessions are subject to tariff review.
Category II – Greenfield projects, auctioned between 1999 and November 2006. The RAP is adjusted annually by the IGP-M or IPCA. They undergo a 50% reduction in RAP from the 16th year of operation. Concessions expire 30 years after contract signing.
Category III – Greenfield projects auctioned from November 2006 onwards. The RAP is adjusted annually by the IPCA. They are subject to tariff review in the 5th, 10th, and 15th years of the concession. The review only incorporates changes in the cost of capital to reflect changes in the TJLP, the main BNDES financing index. Concessions expire 30 years after contract signing.
Electricity transmission companies have their service quality assessed through indicators associated with the availability of the transmission system. The transmission unavailability index determines the Variable Component (PV) to be deducted from the transmission company’s RAP due to inadequate provision of the public transmission service. An Additional to the RAP may also occur, the value of which is determined in case of excellent operational performance or due to contract renegotiation due to additional investments in the granted system (system reinforcement).
Due to being a country of continental dimensions, transmission lines in Brazil interconnect long distances, as most generating facilities, mostly hydroelectric plants, are usually distant from major energy consumption centers.
The interconnected electrical system provides for energy exchange between different regions when any of these regions faces a reduction in hydroelectric power generation due to seasonality in the rainfall regime. Since rainy seasons occur at different times in the South, Southeast, North, and Northeast regions of Brazil, high-voltage transmission lines (500 kV or 750 kV) enable areas with insufficient energy production to be supplied by generating facilities from other regions.
The SIN is almost entirely interconnected, accounting for 98% of electricity market supply. With the new UHEs Belo Monte, Jirau, and Santo Antonio – in addition to other hydroelectric projects in the North region, the country will require significant investments in transmission to connect these regions to the National Interconnected System. The expansion of the National Interconnected System – SIN to the Northern region represents investment opportunities in new transmission systems and will allow the exploitation of hydroelectric potential for large, medium, and small projects, consolidating the Northern region as the new Brazilian energy frontier.