MP 577: Brazilian Government Regulates The Procedure For Intervention By ANEEL In The Management Of Concessionaires Of Electricity

Author:Mr Alexandre Chequer and Débora H Yanasse
Profession:Tauil & Chequer

Keywords: Brazilian government, ANEEL, MP 577

As a response to the current situation of Centrais Elétricas do Pará S.A. – CELPA, an electricity distribution concessionaire within Rede Group that filed for court-assisted reorganization last February 28, the Brazilian government passed Provisional Measure No. 577, published on August 30, 2012 ("MP 577"), which establishes specific rules for intervention by the concession-granting authority, acting through the Brazilian Electric Energy Agency ("ANEEL"), in the management of concessionaires of electricity as a public service. The purpose of the measure is to ensure a proper provision of services and full compliance with the applicable contractual, regulatory and legal provisions. On the day following publication of MP 577, ANEEL published eight resolutions that will lead to intervention in the other eight distributors within Rede Group that are also facing difficult economic and financial conditions.

Administrative intervention in relation to concessions was regulated by Law No. 8,987, dated February 13, 1995 ("Brazilian Concessions Law"), but MP 577 sets forth stricter rules solely applicable to concessions of electricity as a public service, because such service is "an essential service, indispensable to the basic and immediate needs of each citizen", according to the Explanatory Memorandum of MP 577. These new rules were based on the rules established by Law No. 6,024, dated March 13, 1974, regarding intervention in financial institutions by the Brazilian Central Bank ("Law 6,024/74").

One of the innovations in relation to the Brazilian Concessions Law is the extension of the period for completion of the mandatory administrative procedure (that seeks to establish the causes for intervention and determine liabilities) from 180 days to one year. Accordingly, MP 577 provides that an intervention may last up to one year and may be extended at ANEEL's discretion.

MP 577 establishes that the terms of office for officers and members of the supervisory board should be suspended during the intervention. This seeks to ensure that the intervenor appointed by ANEEL has full authority to manage the concessionaire. Section 11 of MP 577, which refers to officers' liabilities, contains language inspired by sections 39 and 40 of Law 6,024/74, without, however, resolving the controversy relating to the interpretation of such sections with respect to the standard of liability imposed on officers of financial...

To continue reading