Economy &Energy
Year III - No 17 November-December 1999

ollaoro.gif (978 bytes)Main Page
ollaoro.gif (978 bytes)Emission of  Thermo-electric
Power Plants

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Is The Consumer Earning Market Power in Electric Sector?
ollaoro.gif (978 bytes)Petroleum  And Natural Gas In Espirito Santo
ollaoro.gif (978 bytes)e&e links


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Brazilian Energy Balance 1999

  
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Is The Consumer Earning
Market Power in Electric Sector?

 

Zilmar José de Souza
zilmar@mrsoft.com.br

   Since 1995 there has been the free consumer figure, in other words, those that can choose their electricity supplier, escaping from the monopoly exercised by the local utility. However, so that one free  consumer from São Paulo could buy electricity from one  utility from Minas Gerais, should pay the transport costs of that electricity and the connection at the utilities grid from São Paulo. In practice, the free consumer couldn’t exercise its option power, because there wasn’t a regularization of payment of these costs. After four years, it seems that the complaints from electric sector agents, mainly from part of consumers considered free, had the desired result. The Electricity National Agency (Aneel) published, in 10/01/99, the Resolution 281, establishing the general conditions of access contracts, including the use and connection at the electricity transmission and distribution systems.

It’s about one regulatory mark that will be able to develop the competition in the national electric sector. In countries where similar scenery was implanted it enlarged the market power of free consumers. In England, which electric sector reorganization is considered one model to be followed, the free consumer figure was created in 1990 by those that possessed superior demand than one MW. In April 1994, the free consumers started to be those possessor of one superior demand than 0,1 MW and it was predicted that in April 1998 the end of captive consumer figure (postponed until October 1999). These facts have permitted sensible alterations in market share among the sector agents, because, in 1996, approximately 30% of English consumers considered of average importance were served by companies operating out of their concession area.

Due to this, it’s encouraging for entrepreneurs the freedom of choosing the best electricity supplier, considering the importance of this component about their production costs. However, it’s important to have the preoccupation with market power of generators and utilities, so that tacit agreements don’t occur and avoid the development of competition in this sector. One of the most important characteristics – but rather the main – in order to consider the competitiveness level of one determined sector is its concentration degree. There are various parameters one of the most used is the concentration Reason (CR). This parameter is calculated by the division between the sales total of the most representative firms and the sales total of sector.

In 1998, the Concentration Reason for generator and distribution segments of electricity, considering the four biggest companies for southeast inter-united system segment, were, respectively, 99% and 67%. It’s means that the four biggest generators were responsible for 99% from electricity sales in southeast system; while in the distribution segment, the four biggest utilities bit one market share of 67%. They are high values, identifying one sector where the market power is extremely concentrated, above all in the generator segment of electricity. Due to this, the preoccupation with the manipulation of these market has to compose in a permanent way the agenda not only from regulator agencies, as the Aneel and the CADE, but also from the remaining society actors: consumers, universities, press etc., under the risk of total endeavor in the insertion of competition in this sector to end figuring only in paper.

 

Economist graduated by FEARP/USP, pos-graduating by ESALQ/USP. 

Is The Consumer Earning Market Power in Electric Sector? - Zilmar José de Souza - Since 1995 there has been the free consumer figure, in other words, that who can choose its electricity supplier, escaping from the monopoly practiced by the local concessionaires In practice, the free consumer couldn’t exercise its power option because there wasn’t a regulation that was now established by the Electricity National Agency (Aneel) through the Resolution 281, published on 10/01/99. The perspective of this new situation is analyzed.