The Brazilian ministry of mines and energy extended rules for thermal power plant units with no long-term contracts, called merchant plants, through 30 April 2023.
The original set of rules was published in 2021, during the most severe drought in the country in 91 years, in order to avoid power rationing or a shortage amid hydropower generation restrictions.
The rules define how to price thermal power that is not purchased by power distributors in auctions. They allow plants without long-term contracts to add fixed costs to the unitary variable costs (CVU) they report to regulator Aneel, which they will be paid when called on to generate power.
The move signals that government regulators understand they may need to call on plants for power dispatch that typically have higher prices since they purchase fuel on the spot market.
The power sector monitoring committee, headed by the ministry, decided to extend the rules even though water reservoirs for power plants have neared the long-term average this year. The rule is aimed at ensuring power reliability despite the "significant improvement" in hydropower water levels, the ministry said. Even with more stable reservoir levels, "the situation does not yet characterize one of operative normality," it said.
