Energy Market Glossary

Reserve Energy Trading Agent

Free Contracting Market – such consumers include individuals opting to leave the monopolistic distribution model to find their own energy supplier, and are divided into two categories: (i) Free Consumers; (ii) Special Consumers.

(i) Free Consumers – those with consumption equal to or exceeding 3,000 KW, in accordance with art. 15, §2º, of law nº 9.074, of 7 July, 1995, able to opt for the purchase of energy from “any concessionaire, licensee or other authorized party of the interconnected electrical system”, be they incentivized or not. The concept of the Free Consumer, however, applies only to large-scale industrial consumers, given the elevated legal demands.

(ii) Special Consumers – included in this category are “consumers or groups of consumers united by a common interest by fact or right, with consumption equal to or exceeding 500 kW” (art. 26, §5º, of law 9.427/96, as amended). This class of consumers can only freely acquire incentivized electrical energy, according to the terms of the Normative Resolution nº 247/06 of ANEEL

Regulated Contracting Market

Financial institution responsible for receipt and custody of financial guarantees.

Financial institution contracted by the CCEE to handle financial liquidation of short-term operations.

A producer, seller or importer of energy, possessing the necessary license.

The act of transferring to an agent, in accordance with Trade Regulations, part of the financial surplus resulting from the sale at different prices between submarkets.

Brazilian Electricity Regulatory Agency

Representation of a determined physical asset to which quantities of energy are attributed.  These can include Networks, Plants, Generators and Charges.

Seeking to promote investment in energy generation among different corporate consumers, power sector legislation incentivizes consumers to produce electricity for their own consumption through a variety of instruments, freeing the existing system to attend to other demands.  Such incentives include tax exemptions, namely: The Energy Development Fund and Proinfa (Alternative Energy Usage Incentivization Program), both established by Law nº 10.438, 26 April, 2002; and the Fuel Consumption Fund (CCC, in Brazil), established by Law nº 8.631, 4 March, 1993.

(i) Electrical Energy Autoproducer (APE, in Brazil) – as a “private individual or legal entity or consortium of companies that receive(s) a concession or authorization to produce energy exclusively for their own use”, according to Decree nº 2.003, 10 September, 1996.  The APE is an agent that, within the same legal entity, generates electric energy for their own consumption, though they may sell surplus energy if expressly authorized by ANEEL.

(ii) Independent Power Producer (PIE, in Brazil) – “a legal entity or consortium of companies that receive(s) a concession or authorization to produce energy entirely or in part for sale on the market, assuming associated risk”.  Thus, the PIE is a segment agent investing in energy generation with intent to sell the energy, though they may not sell all the energy produced.  The expression “entirely or in part” is key, as the PIE may opt to consume all of their power generated or, if advantageous, to sell it.

(iii) Equalized Autoproduction - when a determined autoproducer forms, in its role as shareholder, a Special-Purpose Entity to explore the undertaking of energy generation, with the aim of consuming part of the electrical energy generated.

A private individual or legal entity or consortium of companies that receive(s) a concession or authorization to produce energy entirely or in part for sale on the market, assuming associated risk.

Factory Connection

Plant Connection

BRAMS (Brazilian developments on the Regional Atmospheric Modelling System) is a joint project of ATMET, IME/USP, IAG/USP and CPTEC/INPE, funded by FINEP (Brazilian Funding Agency), aimed to produce a new version of RAMS tailored to the tropics. The main objective is to provide a single model to Brazilian Regional Weather Centers. The BRAMS/RAMS model is a multipurpose, numerical prediction model designed to simulate atmospheric circulations spanning in scale from hemispheric scales down to large eddy simulations (LES) of the planetary boundary layer.

Automatic Generation Control. An amount that the plant should be reimbursed for costs incurred in the operation and maintenance of supervision, control and communication equipment necessary for the plant’s participation in CAG.

Risk Aversion Curve. A mechanism establishing the minimal level of a hydroelectric plant’s reservoir water storage necessary for the safe production of energy for the interconnected system. To ensure that the market has full continuity of service and recuperation capacity of the reservoirs, the reservoir water storage in each region needs to be maintained above the Risk Aversion Curve over a two year period.

An external entity designated by CCEE agents to structure, organize and administrate an alternative Conflict Resolution process, which, under strict adherence to applicable laws, shall resolve conflicts through arbitration, under the terms of the CCEE and its bylaws.

A device or consumer receiving power from an electrical system. Not to be confused with demand; the amount of power that a charge receives or requires.

Center of Gravity – where energy is delivered to a transmission system, and where ANEEL dictates that a generator may derive the quantity of energy to be marketed (based on a physical guarantee), after losses incurred and the generator’s personal energy consumption have occurred.

The CCEE (Electrical Energy Trading Board), established by Law nº 10.848/04 and created by Decree nº 5.177/04, absorbed the functions and organizational and operational structures of the MAE (Wholesale Electricity Market).

Established criteria and directives for energy operation policy and handling of thermoelectric generation in the Monthly Programs Operation realized by the ONS, as well as for electrical energy market price definition.  One of these directives is the Biannual Safety Curve, known as the “Risk Aversion Curve”.

Fossil Fuel Consumption Account. The tax is levied to cover the costs of thermal generation for isolated systems in the northern region. It totaled BR $5.1 billion in 2011. The increase in this tax owes to important changes to its rules, increased energy consumption in isolated systems and contract adjustments between distributors and independent producers working in the region.

The rule changes were defined in Provisional Measure 466/2009, later ratified in Law 12.111/2010.  The law broadened the number of items to be covered by the CCC, including, in addition to the cost of fuel used in its thermal plants, compensation for taxes on diesel used in the plants lost by the ICMS of state governments recently incorporated into the Integrated National System (SIN), the cost of generation contracts (when third parties had been contracted) and other private generation costs of distribution companies.

It is worth observing that the tax should decrease, as the isolated systems in the northern region are incorporated into the SIN. At the end

Free Market Energy Purchase Contract. These are energy purchase and sale contracts, negotiated freely between two parties and signed by agents, without the participation of ANEEL or the CCEE. These contracts are registered in the CCEE, with the information registered consisting of the amount contracted and the time periods involved. It is not necessary to register the price at which the energy was purchased. The contracts are registered by the Sales Agents and validated by the Purchase Agents, for use in the Accounting and Financial Liquidation process. The CCEAL was adopted through ANEEL’s Normative Resolution nº 323/08.

Regulated Market Energy Trading Contract. These are signed between sales agents and distributors participating in auctions and electrical energy sales.

Special Conventional Energy Trading Contract. These are bilateral contracts signed between agents selling special conventional energy and Free Consumers, Specialist Consumers and other buyers

Special Incentivized Energy Trading Contract. These are bilateral contracts between special incentivized energy sales agents and free and special consumers, as well as any other buyers.

Energy Development Fund. CDE, created by Law nº 10.438/02, has the objective of promoting energy development of states and the competitiveness of energy produced from wind power, small hydroelectric generators, biomass, natural gas and domestic mineral coal, and to promote the universalization of electric energy services throughout the whole of the country.

A virtual point in the system in which total basic network losses are split 50% for generators and 50% for charges. It is at this point that purchases and sales occur in the CCEE

Reserve Energy Contract. Energy acquired through this type of auction cannot be used as a proxy for the resale of energy, in addition to being directly accounted for in the short term market by the CCEE.

Hydroelectric Generation Center

Hydrological models of Rainfall Flow Rate were developed with the objective of synthesizing rainfall in determined locations, for purposes including, among others, forecasting flows or flow synthesis in areas lacking information.

This is a financial term, adapted for the trading of energy, seeking to reflect operations such as service provision compensation and liquidation of energy operations. As the energy market has different types of energy and benefits, VE works with its clients’ existing energy contracts, seeking the best cost x benefit, through the purchase and sale of surpluses and energy compensation.

Marginal Cost of Expansion (long term marginal cost). Cost per unit of energy produced during service to a charge increase in the system, through the expansion of system capacity.

Operating Margin Cost. The cost to produce the next MWh needed by the electrical system.

Electrical Sector Monitoring Committee.  The CMSE is a body created in the scope of the MME, under its direct coordination, with the function of monitoring and evaluating the continuity and security of the electric supply through the Brazilian territory.

National Energy Policy Council.  The CNPE is an interministerial advisory body reporting to the President, whose main assignments are the formulation of energy policies and guidelines, assuring the supply of electrical supply to remote areas of the country, periodic review of power matrixes applied to various regions of the country, establishing guidelines for specific programs, such as the use of natural gas, alcohol, biomass, coal and thermonuclear energy, as well as establishing guidelines for the import and export of oil and natural gas.

Generation Operations Center

To be classified within the “Qualified Cogeneration” modality, the plant must meet the following requisites: (i) be pursuant to all ANEEL regulations, in accordance with Resolution nº 390, 15 December, 2009 and specific legislation; (ii) possess installed electrical potential equal to or exceeding 1MW and less than or equal to 50MW; (iii) meet minimum energy efficiency requisites, as established by ANEEL Resolution nº 235/06.

The MRE compensates generation agents supplying energy to the system in excess of the amount of the guaranteed power output.  This is done through the payment of their variable operational costs (with the exception of fuel) and financial compensation for water consumption. These costs will be added up between all agents that have donated energy to the MRE, and the average value per MWh will be paid by all MRE energy recipients. The fee paid by all MRE generation agents who are net recipients of guaranteed power output and secondary energy from the MRE is known as the Energy Optimization Tax (TEO, in Brazil).

Reserve Energy Account (CER). The CONER balance is composed of revenue from the MCP from power generation, by the Reserve Energy Trust (EER, in Brazil), from charges arising from any EER payment defaults and projected CER penalties.

A plant that, due to transmission restrictions, has its generation issued by the ONS, at lower prices than those determined in the standard price definition.

A plant that, due to transmission restrictions, has its generation issued by the ONS, at higher prices than those determined in the standard price definition.

An administrative instrument, delegated by the administration of ANEEL, to support the activities of organizational units in the in the instruction of regulatory processes and the implementation of their specific aspects. In a public consultation, any individual person or legal entity is allowed to participate or contribute.

A consumer that can only purchase electrical power from a concessionaire or licensee holding a concession from an electrical energy distribution service for the locality in which they it is installed, subject to supply fees and conditions established by the National Electric Energy Agency ANEEL.

A consumer exercising their options to purchase electrical power, as defined in art. 15 and 16 of Law nº 9.074/95 (defined in Decree nº 5.163/04).

A legal instrument formalizing the purchase and sale of electrical power between CCEE agents, with the purpose of establishing prices, dates and supply amounts within a determined period. These contracts are negotiated freely between two market agents without CCEE interference, and are divided into two subcategories according to the contract’s duration: Long Term and Short Term.

A multilateral contract between CCEE agents and the CCEE that establishes within its clauses the conditions that govern arbitration within the CCEE.

Reserve Energy Use Contract. It is the responsibility of the CCEE to collect this resource, as well as the conclusion of the Reserve Energy Use Contract (CONUER), in conjunction with consumers. Its model is established by the ANEEL and functions as a contract to be signed by all agents fitting this profile.

Center for Weather Forecasting and Climate Studies.

Transmission System Usage Contract. A contract signed by all network users (generators, distribution companies and free consumers) and the ONS, guaranteeing the right to use the network in exchange for payment of regulated fees.

Estimated cost of a possible stoppage in service to an electrical system charge.

Variable Cost per Unit is a variable cost for each MWh generated by a plant, expressed in BR$/MWh, informed by the generation agent, necessary to cover all of the plant’s operational costs, excluding those already covered by fixed revenue.

Optimization model for short term periods (up to 12 months), which represents the first month on a week to week basis and projected flow, the randomness of flow for the remaining period through a “tree of possibilities” diagram (flow scenarios) and the individualized generator (hydraulic plant and thermal subsystems). Its objective is to determine the generation output from hydraulic and thermal plants, minimizing the expected operational cost in its planning horizon (monthly with operations on a weekly basis), given the scope of available information (charge, flows, availability, transmission limits between subsystems, NEWAVE future cost functions, etc.).

An integrated electro energetic operation’s set of instructions, actions and control. The ONS, using centralized dispatch, reliably and economically performs generation scheduling for each plant within its system and for other effective electrical energy supply sources, meeting system load requirements. It handles control of the operation of high voltage transmission lines, substations and equipment, operation of the interconnected system and scheduling of electrical energy transactions with other interconnection systems.

A formal, justified objection brought by a CCEE agent when, after a mediation period, they question any data considered in the calculation of a determined invoice.

Stored Energy. Value of the energy volume stored in a reservoir by the productivity of downstream hydroelectric plants.

Reserve Energy Tax. This tax should be charged on all reserve energy contracting costs, including administrative, financial and tax-related. The tax paid by distributors is passed on in captive market fees, through concessionaire fee adjustments.

Law 9.427 of 26/12/1996 - for hydroelectric enterprises with power less than or equal to 1,000 kW and those based on solar, wind, biomass and qualified cogeneration sources, in accordance with ANEEL regulations, whose power injected into transmission or distribution systems is less than or equal to 30,000 kw, ANEEL will stipulate a reduction of no less than 50% applied to electrical transmission or distribution system usage fees, focused on the production and consumption of energy marketed by usage.

ANEEL Normative Resolution - nº77, 18 August 2004 - Art. 2º Stipulates a 50% reduction be applied to fees for the use of transmission and distribution systems (grid fees), focused on the production and consumption of energy marketed by enterprises referred to in art 1º of this resolution (small hydroelectric generators, biomass, etc. as cited above).

Law 9.427 of 26/12/1996 - for hydroelectric enterprises with power less than or equal to 1,000 kW and those based on solar, wind, biomass and qualified cogeneration sources, in accordance with ANEEL regulations, whose power injected into transmission or distribution systems is less than or equal to 30,000 kW, ANEEL stipulates a reduction of no less than 50% be applied to electrical transmission and distribution system usage fees, focused on the production and consumption of energy marketed by usage.

Term used to define the guaranteed power output of hydroelectric plants. In energy trading, Assured Energy represents the energy that MRE-member hydroelectric plants can commit in sales contracts.

Energy produced through alternative means (PCHs, wind, biomass, solar, etc.), whose production costs tend to be higher, owing to which a discount of 50 to 100% of TUSD or TUST is given, with the aim of promoting competition with other energy sources.

Affluent Natural Energy is an equivalent quantity of energy that can be generated through affluence.

Affluent Natural Energy is an equivalent quantity of electrical energy that can be generated through subsystem (regions of the country) affluence.

If the total electrical energy production exceeds the guaranteed power output of the MRE (Energy Relocation Mechanism), plants will have the right to receive part of the resulting surplus, in addition to the guaranteed power output. This surplus is called “Secondary Energy” and is allocated to all MRE-member plants, proportionate to their established guaranteed power output.

Wind power.

The Energy Research Company, created by Law nº. 10.847, 15 March 2004, with the goal of assisting in studies and research to subsidize electrical sector planning, including areas such as electrical energy, oil and natural gas and their derivatives; mineral coal, renewable energy sources and energy efficiency, among others.

System Services Fees.  Covers thermal generation costs associated with transmission bottlenecks and energy security (preservation of minimum necessary levels in hydroelectric reservoirs). In 2011, the ESS took in BR$ 1.4 billion. The majority of this is due to electrical restrictions in the exact region that was recently incorporated into the SIN, which includes systems in the states of Acre and Rondônia (the existing transmission line is still not reliably operational, making it necessary to maintain thermal dispatches in the region). ABRACE considers it important to establish greater transparency in the decision-making process that determines electrical system operations (it is lacking the systematic definition that would permit greater predictability of consumer costs).

The ratio of a plant’s average production to installed capacity in a given period of time.

The ratio of average demand to maximum demand in a specific period of time.

The ratio of active power to the apparent power of the circuit. The power factor shows the degree of usage efficiency of electrical systems. A high power factor (close to 1.0) indicates efficient energy use, while low power factors indicate inefficiency.

Value of a hydrothermal system’s calculated operational costs, based on projected future thermal generation costs and deficits.

The maximum quantity of power that hydroelectric and thermoelectric plants and energy importers are authorized to sell at market, as established by Law nº 10.848/04 and regulated by art. 2º of Decree nº 5.163/04.

Electrical energy production originating from a concessionaire, licensee or other authorized entity, connected directly to the buyer’s power distribution system, excluding hydroelectric plants with installed power exceeding 30 MW and thermoelectric plants, including cogenerators, with energy efficiency below 75%.

Generation and charge elements connected directly to the distribution system, not being considered participants in the basic network.

That which is produced by a plant that is not subject to any type of restriction to meet the dispatch order at that moment.

Net energy generation subtracting electrical energy consumed by the generating station during production.

The amount, in average MWs, corresponding to a plant’s declared thermoelectric generation, needed to calculate the Guaranteed Power Output and electro-energetic planning of the SIN. Constituting a restriction necessitating the plant’s minimum generation, to be considered by the ONS in the optimization of resources for the SIN (later shared in the EPE’s technical report). The condition of a plant that necessitates reversion to minimum output.

These are shared transmission or sub transmission installations that are not integrated into the basic network, classified in Brazil as DITs, Additional Transmission Installations, in accordance with the criteria of ANEEL Normative Resolution n° 067/04. Considered to be Additional Transmission Installations are: a) transmission lines, busbars power transformers and substation equipment of any voltage, when used in generation centers, whether for exclusive or shared use, or for exclusive use by free consumers; b) international interconnection systems and associated equipment, of any voltage, when used exclusively for importation and/or exportation of electrical energy; and c) transmission lines, busbars, power transformers and substation equipment, of voltage lower than 230 kV, be they located or not in substations integrated into the Basic Network.

Position in relation to the direction of a river’s current.

Kilowatt (kW) is a unit of power corresponding to 10³ watts (1 kW = 1000 W)

Reserve Energy is purchased through Reserve Energy Auctions (LER, in Brazil), which, in accordance with Law nº 10.848/04, must be sanctioned, directly or indirectly, by ANEEL, in accordance with Ministry of Mining and Energy guidelines.  Reserve Energy can be purchased by quantity or by availability, and the period covered in contracts may not exceed 35 years. The total amount of Reserve Energy purchased in an LER is defined by the MME, in accordance with data published by the EPE. The entry into commercial operation of generating units may be staggered, beginning in the years following the first year of delivery of purchased energy.

Price differences between submarkets results from restrictions (capacity limits) on the transmission lines that connect them. A plant’s dispatch model aims to achieve the lowest possible service cost in the market (consumption). In this way, the model can decide to supply energy to submarket A with cheaper energy located in submarket B, which possesses available generation. If the exchange between these submarkets does not reach this limit, it means that, in importer submarket A, the exchange is a source of marginal generation, or rather, it can cover the remaining consumption, after the use of cheaper local generation sources. In this case, the prices in both submarkets are the same.

A set of values settled after accounting, enabling the performance of resource transfers that will liquidate the energy purchase and sale operations within the CCEE.

An amount of electrical energy representing the smallest portion of a Product related to an auction.

Short Term Market

Surplus and Deficit Compensation Mechanism. Decree nº 5.163/04 provides that Regulated Environment Energy Trading Contracts (CCEARs), resulting from electric energy auctions from existing projects, may be subject to compensation and/or reductions in the amounts purchased in the event that Free Consumers leave the market, there are alterations to Free Energy Market Purchase Contracts signed before the publication of Decree nº 5.163/04, or if there are market deviations, in this order of priority. Application of the Surplus and Deficit Compensation Mechanism should precede such adjustments. This mechanism seeks to promote the transfer of purchased energy between distributors who have declared surpluses with the CCEE (assignor), and distributors who have declared deficits with the CCEAR (assignees), with the objective of reaching 100% of contracted load, as provided in Decree 5.163/04. The surplus/deficit declarations by Distribution Concessionaires are voluntary and the MCSD is exclusively applied to CCEARS selling energy by quantity to existing enterprises, predating the application of the mechanism.

Transition from the Captive Market to the Free Market.

Long Term Average. The average of natural affluent energy calculated based on history. The MLT is linked to the amount of rain feeding the flow of rivers on which the hydroelectric reservoirs rely. There is an MLT for each subsystem (North, South, Northeast and Southeast/Midwest).

Ministry of Mining and Energy

Plants are dispatched according to the following modalities: Type I: centralized scheduling and dispatch. Type II: centralized scheduling and non-centralized dispatch. Type III: non-centralized scheduling and dispatch coordinated by the ONS. Non-hydroelectric plants classified by the ONS as Types I or II will be distinguished, within the CCEE, according to the Variable Cost per Unit (CVU), as described below: Type IA and IIA: non-hydraulic plants classified by the ONS as Type I or II with a non-zero CVU. Type IB and IIB: non-hydroelectric plants classified by the ONS as Type I or II whose CVU is zero.

The ETA Model was developed at the University of Belgrade’s Hydrometeorological Institute in the former Yugoslavia and later employed by the National Center for Environmental Prediction (NCEP). In Brazil, the ETA Model was put into practice at the Center for Weather Forecasting and Climate Studies (CEPTEC) in 1996 (Chou, 1996). Originally, ETA forecasts covered 48-hour periods and were generated twice a day, at 12am and 12pm UTC. In South America, the ETA Model has been used to study different meteorological phenomena, such as: low level jets (Saulo et al., 2000), air mass interactions (Seluchi & Chou, 2003) and zonda wind (Seluchi et al., 2003). For three-day periods, the model has provided more accurate precipitation forecasts than CPTEC models (Chou & Silva, 1999; Chou et al. 2004). For seasonal meteorological forecasts of up to 120 days, the model has been less accurate than its three-day forecasts, as the model’s forecast errors increase with the duration of the study. However, forecasts of up to 120 days are still useful, mainly when used to average seasonal forecasts (Chou et al., 2005). As an example of its application, see forecasts for points located in seven cities in the Northeast region (Chou et al., 2007).

The ETA is a state-of-the-art model for research or operational meteorological use. The model represents the state of the atmosphere as grid points, configured with 40km horizontally and 38 levels vertically. One of the model’s principal advantages is the coordinated vertical and the numerical stability (Mesinger et al., 1990). The model’s prognostic variables are: air temperature, humidity, surface pressure, horizontal wind, turbulent kinetic energy and water or ice levels in the clouds forecast in six-hour intervals. The initial condition for the ETA is supplied by the NCEP and the conditions of the lateral contour, updated every six hours, are forecast by the global CPTEC model.

Division of energy volume into hourly amounts.

Division of monthly energy amounts by the number of hours of respective months.

An economic theory that denominates natural monopolies in sectors in which a single company supplies the market at a lower cost than any other situation, owing to the use of economies of scale.

Criteria for the definition of duties that are viable for the consumer and capable of assuring satisfactory returns on investment, realized by electric sector agents, in addition to enabling economic expansion, quality of life and societal development.

Megawatt. A unit of measurement equal to 10⁶ watts.

Optimization model for medium-term planning (up to 5 years), with monthly approximations and representation of equivalent systems. Its objective is to determine a hydroelectric and thermal generation strategy for each stage, minimizing the expected operational costs for each planning period. One of the main results of this model is the future cost functions, which translate into the models of other stages (shorter term) the impact of the use of water stored in the reservoirs. In this model, the load is represented in levels, limits of interconnection between subsystems is considered.

Historical monthly averages from a 30-year period from a series of meteorological quantities, calculated by INEMET (National Meteorology Institute).

Market agent able to offer a load reduction in real time.

A reservoir or reservoir system control considering the stored and liberated (by turbines and discharge devices) water volumes.

National Power System Operator, a legal, private-law entity provided by Law 9.648, 27 May 1998, authorized to exercise electric power generation and transmission coordination and control activities within Brazil’s interconnected systems. The ONS is a civil association, whose members are electrical energy generation, transmission, distribution, importation and exportation companies, and free consumers.

Plant output realized by the ONS is defined by low cost generation, seeking to optimize electro-energetic resources to meet load requirements, while considering the technical and economic conditions of the SIN.

Satisfying the system load, at lowest possible cost, as well as satisfying all operational restrictions imposed.

Land or maritime space where multiple wind turbines are concentrated, turning wind energy into electrical energy.

A period comprising a determined number of hours, characterized by similar values to the electrical system load. The ONS defined 3 Load Benchmarks (light, medium and heavy) to calculate PLD, which is the agent responsible for coordination and control of the SIN.

Small Hydroelectric Generator. Hydroelectric enterprises with power exceeding 1,000 kW and equal to or less than 30,000kW, with a total reservoir area equal to or less than 3.0 km2.

Trading Procedures. A set of norms proposed by the CCEE and approved by ANEEL, defining conditions, requirements, events and periods relating to the trading of electrical energy in the scope of the CCEE.

Sanctions defined or approved by ANEEL, applicable in the event of neglect or breach of the Trading Convention Rules and Trading Procedures.

In accordance with generation measurement data and energy delivered to distribution networks. The difference between these results in Basic Network Losses, whose costs are assessed at 50% for generation and 50% for consumption.

Distribution Network Losses: those occurring within the distribution system, divided into two categories, according to their cause:

Technical Losses: inherent to the transport of electrical energy within the network, related to the transformation of electrical energy into thermal energy in conductors (joule effect), losses in the transformer core, dielectric losses, etc. They can be understood as energy consumption by the equipment used in energy distribution.

Non-Technical Losses: the difference between total losses and technical losses, taking into account all of the other losses associated with electrical energy distribution, such as energy theft, measurement errors, billing process errors, consumer units without measurement equipment, etc. This type of loss is directly associated with commercial distribution management

Losses resulting from the dissipation of initial energy, in the form of heat, when a liquid flows from one point to another in a channel. This is caused by flow or viscosity resistance, as well as sudden changes in flow resulting from alterations in the dimensions of the conduits, curves, valves, all types of connections, water intake protection grates from the plants, etc. Source: http://www.aneel.gov.br/area.cfm?idArea=801

Characteristics of agents, be they energy generators (generator profile), or energy consumers (consumer profile).

The longest possible period of time that it takes for reservoirs, beginning at full capacity and continuing without being fully refilled, to be depleted, with the system operating at its normal capacity.

The period of 7 (seven) consecutive months, comprising the supply period from May to November.

The period of 5 (five) consecutive months, comprising the supply period from December to April of the following year.

The maximum instantaneous demand required in a time interval (day, month, year, etc.).

Balance Liquidation Value, determined on a weekly basis for each domestic submarket.

Obtained by averaging the monthly BLV over a twelve-month period.

Establishes short-term electro-energetic guidelines, in order to optimize the use of SIN generation and transmission resources, according to the procedures and criteria set forth in the Network Procedures, authorized by ANEEL.

Short-Term Operating Procedures. The model published by the ONS and submitted to public hearings from 19 November to 19 December of 2008, seeking to protect the SIN from violation hydroelectric reservoir storage levels (target level) previously established by the Electrical Sector Monitoring Committee (CMSE) for the end of the dry period, which occurs from April to November.

It is within the final discretion of the Republic to concede, permit and authorize the expansion of electrical energy supply and services, within the purview established by art. 21, subsection XII, item “b”, of the Federal Constitution. In accordance with the provisions of subsection II of art. 3.

The rate at which energy is transferred in a unit of time. Electrical power is generally measured in watts. It is also used to indicate the capacity of an installation or electric plant

Energy in a unit of time, expressed in watts (W) or its multiples.

The maximum power in continual operation, for which the installation was designed. Normally indicated in specifications provided by the manufacturer and on the identification plate affixed to machinery.

Reactive electrical energy in a unit of time, expressed in volt-ampere reactive (var) or its multiples

Companies with a purchased demand of 500 or more kW

Companies with a purchase demand of 3000 or more kW

Power Purchase Agreement. Energy purchase and sale contract for a determined period with pre-established price and volume conditions, agreed upon between producers and sellers / distributors and final consumers.

A price calculation forecasting generators’ load, affluence and availability.

A price calculation with verified values: generator load and availability.

Greater value than the BLV allowed by ANEEL. It is defined as being the lesser value between the most expensive structural thermoelectric price in the PMO (Monthly Operations Program) of January of the year in question and the price limit of the previous year, corrected for the accumulated IGP-DI (General Price Index- Internal Availability) between November of the previous year and November of the year in question. The price limit calculation system is regulated by ANEEL Resolution nº 682/03.

Calculation of the monthly BLV average by submarket, using weekly prices by charge level – light, medium and heavy.

Lowest BLV allowed by ANEEL. It is updated annually, in the first business week of January, by the variable cost of the Itaipu Binacional plant, appraised using the geometric average exchange rate of the US dollar for the previous year. The Minimum Price calculation system is regulated by ANEEL Resolution. nº 377/03.

A set of operations involving the measurement and registry of all electric energy purchase and sale contracts, including CCEARs, accounting object amounts and Financial Liquidation, including financial transfer management between CCEE agents and the programs and methods used.

Alternative Energy Usage Incentivization Program. Created by Law nº 10.438/02, altered by Law nº 10.762/03, its objective is the diversification of Brazilian energy matrixes through the supplying of 3,300 MW of capacity of the SIN through wind power, biomass and small hydroelectric generators (PCHs). Initially estimated to obtain 1,100 MW from each source.

A consultant supplying price curves and other segment studies to companies.

A declared quantity of energy for purchase not supplied in the Regulated Contracting Market.

A period in which a reduction in electric energy consumption is imposed as a result of the Emergency Electric Energy Consumption Reduction Program (PERCEE), applied by Temporary Measure nº 2.1985/01. Rationing was put into effect from June 1 2001 to February 28 2002 for SIN consumers in the Southeast, Midwest and Northeast regions, and from July 1 2001 to December 31 2001 for SIN consumers in the states of Pará and Tocantins.

The transfer of energy between generators, at cost price, with the objective of sharing hydrological risk.

A set of actions seeking to reestablish system topology and electrical energy delivery, interrupted by unforeseen equipment or transmission line shutdown.

Performed when data and values related to an already finished accounting and monthly liquidation process, even if audited, are altered as a result of a judicial decision revoking an injunction or arbitration of a CCEE administrative decision or of a legal finding.

Interconnected electric system composed of transmission lines, busbars, power transformers and equipment with voltage equal to or exceeding 230 kW, or installations with lower voltage, when specifically designated by ANEEL.

A determined geographic region where an electric system can be considered a single submarket, meaning that it is not necessary to consider transmission losses in price calculations.

A set of operational and trade rules and their algebraic formulations defined by ANEEL, applicable to electric energy trading under the purview of the CCEE.

Grades issued by risk classification agencies regarding credit quality.

Available power maintained in plants belonging to the Automatic Generation Control (CAG) of the S/SE/CO systems in the daily energy scheduling phase, with the aim of attending, in real time, to system load increases, non-scheduled generator unit output and other electrical system contingencies.

Physical and operational limitations on electrical energy transference through the transmission system within a determined submarket.

Refers to transmission restrictions (bottlenecks) between two submarkets.

Global Reversion Reserve. The fee, totaling roughly BR$ 2 billion per year, was to have been deactivated last December, but has been extended for another 25 years by Provisional Measure 517/2010. Created in 1957 to cover reversion costs of generation concessions, it has never been used for its original purpose.

Uncertainty in a company’s cash flow relating to unforeseen fluctuations in the prices of input or final product. In the CCEE, purchase or sale volume variations can generate risk as a function of exposure to the Short-Term Market.

Uncertainty regarding a hydroelectric plant or system’s production conditions, owing to affluence variations.

The scheduled shutdown of a generator unit, transmission line or other electrical installation for inspection or maintenance, according to a specific schedule.

Division of energy volumes, purchased or assured, in monthly amounts.

Energy Data Collection System, consisting of a system administered by the CCEE for the collection and processing of generation and consumption data from all measurement points in the SIN. The SCDE is accessible online, with the generation and consumption data collected via telemetry for later use by the SCL and processing of Accounting and Financial Liquidation, in accordance with the Trading Rules and Procedures.

The SCL is a system that performs all of the calculations for Trade Regulations, allowing the CCEE to make a monthly accounting of the differences between the amount of energy produced or consumed and the amount purchased.

Brazilian Electric Sector

Special Protection System

Introduced to compensate services provided by an agent that benefitted the SIN as a whole. Among these: frequency control; reserve power; standby reserves; reactive support; and “black start”.

National Interconnected System. With unequalled size and characteristics, Brazil’s electric energy production and transmission system employs hydrothermal energy on a large-scale, with a predominance of hydroelectric plants and multiple owners. The SIN is composed of companies in the South, Southeast, Midwest, Northeast and part of the North region. Just 1.7% of the energy required in the company is obtained outside of the SIN, in small isolated systems located mainly in the Amazon region.

Covers the pricing, supply, measurement data, registries, accounting, management, penalties and pre-invoice.

Electric Sector Market Planning Information System.

Systems that are not integrated into the SIN, small systems mainly located in the Amazon region.

For each measurement point that is not installed or inadequately installed, a penalty for a value set by the Trading Procedure is enforced, multiplied by a Penalty Factor, variable in accordance with the voltage level to which the measurement point is connected.

Subdivisions of the interconnected system corresponding to the market areas for which the CCEE will establish differentiated prices and whose boundaries are defined according to the presence and duration of relevant transmission restrictions.

This fee is paid by hydroelectric generators to the municipalities and states where their plants are located. Though it may not be charged directly to consumers, it is included in the price of energy insofar as it is an expense for hydroelectric generators. If it did not exist, generators would be able to sell their energy to consumers at lower prices.

Variable costs, associated with operations (excluding fuel costs) and financial compensation for water use, relating to energy production that is reallocated within the MRE, are reimbursed through an energy optimization tax (TEO) associated with each participating plant.

Distribution System Use Tax. Refers to the payment for use of the electric energy distribution system of a distribution agent (transmission lines with voltage lower than 230, kW, transformer stations and distribution networks).

Transmission System Usage Fee. Refers to the payment for transportation of large quantities of electric energy over long distances that, in the case of Brazil, is done using a network of transmission lines and substations of voltage equal to or greater than 230 kV, known as the Basic Network. Any agent in the electric sector, producing or consuming electric energy has the right to use the Basic Network, assuming satisfaction of certain technical and legal requirements.

Hydroelectric plant. An installation in which the potential energy of gravity is transformed first into mechanical energy and then into electric energy. It may or may not have an accumulation reservoir, depending on the quantity of available water throughout the year. If it does not have a reservoir, or its reservoir is not used for accumulation or flow regularization, it is called a run-of-river plant.

Seeking to promote the generalized supply of electric energy, progressively reaching consumers that had not been served due to distance from existing networks or difficulty paying normal supply fees.

Installation in which heat energy coming from the burning of fuels, be they fossil fuels, coal, combustible oil or natural gas, or another source, such as biomass, is transformed into electric energy.

To obtain averages, if calculated values over 60 months are not available, the missing values should be complemented using reference values, considered in the calculation of the respective physical guarantee. In the calculation of equivalent fees of the Forced Downtimes (TEIF) and Scheduled Downtime (TEIP), the ONS should disregard the downtime, in accordance with criteria established in ANEEL Normative Resolution nº 160/05, so long as they are adequately justified by the generation agent.

Flow is the volume of a determined fluid that passes through a determined section of a free or forced conduit, for a unit of time. Or rather, flow is the speed with which the volume drains. [1] Flow corresponds to the drainage rate, meaning the quantity of material transported through a pipe, per unit of time.

Abbreviation of “Votorantim Energy”

The maximum value of pass-through costs to captive consumers. Because it is a fixed cost, it serves as a long-term energy price indicator. In May of 2002, the government defined a single VN for all energy sources.

Pass-through cost: Pass-through costs are fees paid to other companies who operate and maintain the electricity network. For domestic customers these are all combined into a single standing charge. These charges are approved each year by the Utility Regulator and are charged by all energy suppliers – but the amounts may vary.

Reference Value. Decree nº 5.163/04 defines that, for the years 2005 to 2007, the VR will be the maximum acquisition price of energy from existing enterprises, in auctions held in 2004 and 2005, for the beginning of delivery in the years referenced. For the years 2008 and 2009, the VR will be the average energy acquisition value from new generation projects, in auctions held in 2005 and 2006, for the beginning of delivery in those years. It is the value of the energy produced by thermoelectric plants for natural gas and alternative energy sources (biomass, wind, small hydroelectric generators), with costs higher than the established single VN. As the pass-through cost limit for consumers is still the VN, the difference between the two shall be covered with CDE resources, in the case of the generation of alternative sources, and by Cide, in the case of energy produced by thermoelectric plants and natural gas.

South Atlantic Convergence Zone. Characterized by the semi-stationarity of a cold front, meaning that a SACZ cannot exist without a cold front, as it is necessary for the establishment of a humidity channel. Furthermore, the rains provoked by an SACZ are classified as “summer rains”, as the South Atlantic Convergence Zone is part of the South American monsoon system.

Moisture Convergence Zone. The ZCOU is similar to the SACZ in various aspects, such as the fact that both are moisture convergence zones characterized by cloud coverage and intense rains, but there are differences in the classic drainage pattern, mainly in medium and low levels, which disfavor the persistence and organization of cloud coverage/precipitation, differentiating the ZCOU from the SACZ.