Context analysis for a new regulatory model for electric utilities in Brazil

This article examines what would have to change in the Brazilian regulatory framework in order to make utilities profit from energy efficiency and the integration of resources, instead of doing so from traditional consumption growth, as it happens at present. We argue that the Brazilian integrated electric sector resembles a common-pool resources problem, and as such it should incorporate, in addition to the centralized operation for power dispatch already in place, demand side management, behavioral strategies, and smart grids, attained through a new business and regulatory model for utilities. The paper proposes several measures to attain a more sustainable and productive electricity distribution industry: decoupling revenues from volumetric sales through a fixed maximum load fee, which would completely offset current disincentives for energy efficiency; the creation of a market for negawatts (saved megawatts) using the current Brazilian mechanism of public auctions for the acquisition of wholesale energy; and the integration of technologies, especially through the growth of unregulated products and services. Through these measures, we believe that Brazil could improve both energy security and overall sustainability of its power sector in the long run.