1. Modes of Regulation: Where Does Brazil Fit? Fundacao Getulio Vargas Regulatory Seminar Rio de Janeiro, RJ, Brazil July 31, 2014 Ashley C. Brown Executive Director, Harvard Electricity Policy Group Harvard Kennedy School Harvard University Of Counsel, Greenberg Traurig LLP

2. Definition Independent: Empowered to Make Decisions On Its Own

3. Independent Regulatory Modes a. Active b. Inter-Active c. Passive

4. Characteristics of Active Regulator Exercise Full Authority Policy Oriented/Central to Formation of Sector Policy Government Input/No Control Pro-Active

5. Characteristics of Inter-Active Regulator Discreet Exercise of Authority Plays Non-Central Role to Formation of Sector Policy Close Coordination with Government Moderately Pro-Active

6. Characteristics of Passive Regulator Minimal Exercise of Authority Little Policy Role/Case by Case Decision Follows Government Reactive

7. Where Does Brazil Fit? Varies by Sector and Agency Varies by Subject Matter

8. Institutional Constraints Short Institutional History Diffused Authority (TCU, CAPE, Fazenda) Direct Government Intervention and Interests (SOE’s) Reliance on Planning, not Market Many Interest Groups Not Organized to Intervene in Regulatory Processes Resources

9. Institutional Strengths Fixed Terms Respected (e.g. AGERGS, ANEEL, Apagao) Absence of Scandals/Corruption Legal Foundations Public Participation/Transparency

10. Case by Case Examples Active: ANEEL: Distribution Pricing Methodology Passive: CADE: Petrobras Behavior in Thermal Auction Interactive: Advisory Role in Electric Sector Model Formulation Preempted: Formation of CCC during Apagao