1. LATIN ENERGY 2005 Regulatory Process JERSON KELMAN December 8th, 2005
Head of ANEEL
December 8th, 2005
Rio de Janeiro – RJ

2. Which institution is in charge?
Policy
Congress
National Council of Energy Policy – CNPE
Long Term Planning (supply and demand balance)
Ministry of Mines and Energy – MME
Energy Research Company – EPE
Regulation
Brazilian Electricity Regulatory Agency – ANEEL

3. Which institution is in charge?
System Operation
National Operator of the Power System – ONS
Monitoring and coordination
Electric Sector Monitoring Committee – CMSE
Accounting and clearing
Chamber of Commercialization of Electric Power – CCEE

4. ANEEL Independent decision-making by the Board in public meetings
Administrative autonomy
Board members are approved by the Senate and have mandates
Responsibilities:
Legislative: regulation (rules)
Judiciary: settling disputes
Executive: auditing, authorizations & auctions

5. ANEEL’s equilibrium ANEEL Consumers Agents Government
Reasonable tariffs
Quality of service
Guarantee of rights
ANEEL
Agents
Government 
Adequate remuneration
Contracts honored
Predictable and clear rules
Strategic interests
Development model Universal service

6. Extraordinary revision
Distribution tariffs
Annual Readjustment & Periodic Revision
Signature
of the contract
Annual readjustment
of the tariffs
Periodic revision
of the tariffs
1999
2000
2001
2002
2003
2004
Extraordinary revision
of the tariffs

7. Distribution tariffs Service Revenue captive consumers Who pays?
Free consumers A2 A3 A4 B1 B2 B3 B4 A2 A3 A4
Distribution network charge TE
Distribution network charge
Distribution network charge (infrastructure)
Distribution network charge
(taxes)
Distribution network charge (infrastructure)
Distribution network charge
(taxes)

8. Distribution tariffs Energy Purchase + + Transmission Cost
Composition
RS = Pass-through Costs Controllable Costs
Energy Purchase +
Transmission Cost
Public Charges
O&M +
Investors’ Payment
Assets Depreciation

9. Investors´ Payment ($) Reintegration of depreciation
Distribution tariffs
Controllable Costs x x
Net Asset-base
value
Rate of
return
Gross
Asset-base
Value
Depreciation
Rate
Reference
Firm
Investors´ Payment ($)
Reintegration of depreciation
Expenses ($)
O&M Costs ($) + +
Controllable Costs

10. Asset base value Gross 0% 20% 40% 60% 80% 100% 120% 140% % Gross/IPCA
Medium IPCA = %
% Gross/IGPM
Medium IGPM = 79.86%
Brazilian Index: IGP-M = General Market Price Index
IPCA = Broad Consumer Price Index

11. Asset base value Net 0% 20% 40% 60% 80% 100% 120% 140%
%Net/IPCA s/ ADM
Medium IPCA = 89.13%
%Net/IGPM s/ ADM
Medium IGPM = 68.07%
Brazilian Index: IGP-M = General Market Price Index
IPCA = Broad Consumer Price Index

12. Anatomy of the Electricity Rates
Electricity Rates Composition
Generation
31,77%
Transmission
7,80%
Distribution
26,43%
Public Charges & Taxes
34,00%

13. Distribution tariffs
Domestic consumers
November 29, 2005
R$/MWh

14. Risks of investments in infrastructure
Legal, institutional and macroeconomic stability
Environmental Licensing
Regulatory stability (ANEEL)

15. ANNEL’s challenges Achieve administrative autonomy
Maintain technically capable staff (presently underpaid)
Improve regulation methodology based on the first cycle of tariff reviews
Establish a better connection between quality of service and cost
(consumer’s desire X ability to pay)

16. Thank you ! www.aneel.gov.br Phone: (+55) 61 2192-8603
Fax: (+55)