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3. The Brazilian Electricity Regulatory Agency (ANEEL) established new procedures for the monitoring and assessment of efficient electrical energy distribution, applicable to distribution concession contracts. They refer to service provision quality and financial stability criteria to be met by concessionaries, as well as underperformance leading to contract termination.

The Brazilian Electricity Regulatory Agency (ANEEL) established new procedures for the monitoring and assessment of efficient electrical energy distribution, applicable to distribution concession contracts. They refer to service provision quality and financial stability criteria to be met by concessionaries, as well as underperformance leading to contract termination.

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Normative Resolution n. 896/2020 from the Brazilian Electricity Regulatory Agency (ANEEL) enacted efficiency criteria for electrical energy distribution concession contracts, including indicators for service provision continuity and financial management.

All distribution concessionaries must comply to the following criteria, which are further detailed in the normative resolution:

• Service provision continuity (Article 3), measured by the following indicators: Equivalent Duration of Interruption of Internal Origin per Consumer Unit (DEC, in the Portuguese acronym) and Equivalent Frequency of Interruption of Internal Origin per Consumer Unit (FEC, in the Portuguese acronym);
• Financial management (Article 4), measured by the difference between the Regulatory Reintegration Quota (QRR, in the Portuguese acronym) and the Financial Result, providing a sustainable level of indebtedness.

Concessionaries must submit to ANEEL an official document demonstrating the service provision indicators every five years (referring to the previous five-year period) and ANEEL will also monitor them through the service provision data available. Financial management criteria are monitored by ANEEL every year.

Underperforming distribution concessionaries incur in scaling corrective measures, categorized from one to five consecutive years of non-compliance. Depending on the criteria violated, corrective measures scale from a mandatory Results Plan, to the prohibition of new contracts and the limitation of dividend payments at 25% (details in the normative resolution).

Failing the service provision indicators for three consecutive years or the financial management indicators for two consecutive years (article 9) characterizes contractual default and will imply in administrative process by ANEEL that can lead to contract termination.

Each established concessionary contract follows a specific schedule, detailed here (in Portuguese).