Publications

Category: Real estate

In the judgment of Extraordinary Appeal No. 695,911, published on April 19, the Supreme Federal Court (STF) ruled that the collection of associative fees in closed allotments prior to Federal Law No. 13,465/17, which changed the content of Law No. 6,766/79 (Urban Land Subdivision Law), when the owner of the lot has not adhered to the constitution of the association responsible for the administration of the allotment.

With the provisions of the federal law of 2017, the collection becomes legitimate if the owner is associated or if, when purchasing the lot, he became aware of the obligation to pay the associative fee by express mention to this collection registered in the Real Estate Registry Office.

In the process that gave rise to the trial, the owner of a lot located in the municipality of Mairinque, in São Paulo, opposed to the collection of associative fees on the understanding that the services charged were not used by her and based on the principle of free association and the prevention of illicit enrichment. In the first and second instances, it was confirmed the legitimacy of the collection of associative fees, which required the judgment of the extraordinary appeal by the Supreme Court.

Allotments are forms of land parcelling consisting in the subdivision of a large plot of land into lots intended for building. The roads opened for circulation between the lots, when the allotment is instituted, become part of the municipal property, in accordance with the Urban Land Subdivision Law. The closed allotment, in turn, had its first regulation with the federal law of 2017, which inserted the modality of allotment with controlled access in paragraph 8 of Article 2 of the Urban Land Subdivision Law.

Due to this control, complementary services to public services are necessary within a closed allotment, such as garbage collection, signage and security services, which must be hired and organized through the association of residents. Therefore, closed allotments have always had a similar operation to the condominium structure, in which the general costs with the maintenance of common areas are prorated between the owners by charging a fee.

Given the lack of a legal provision on the mandatory payment of associative fees until then, the general position contrary to this obligation is based on the objective interpretation of Article 5, item XX, of the Federal Constitution, according to which a person cannot be obliged to associate. Some precedents of jurisprudence understood the impossibility of collecting the fee. The Superior Court of Justice (STJ) even confirmed a thesis that residents' associations could not charge fees from those who are not associated, considering the lack of manifestation of the owner's willingness to contract the obligation to pay.^[1] On the other hand, there was also a discussion that the services of the association were presumable to any acquirer of an allotment lot, even without the formal expression of consent with the collection of the fees.

With the promulgation of federal law of 17, three relevant aspects to discussion were recognized: the new modality of allotment with controlled access (the so-called closed allotment), the activities carried out by associations of lot owners as similar to the activity of real estate management and the possibility of apportionment of expenses of these associations between the owners of the lots.

As a result, the Supreme Court understood that, in order for the collection of associative fee to be valid, it is necessary, at least, that the owner of the lot participated in the constitutive act of the residents’ association, agreeing to the apportionment of the common expenses of the allotment, even before the federal law of 2017, or that the obligation to pay the associative fee is registered in the so-called "mother title record" of the allotment in the Real Estate Registry Office. This guarantees publicity to the act for knowledge of all those acquiring lots after the constitution of the association.

Considering the municipal competence to regulate the planning and use of urban land, the Supreme Court also understood that, if there is a municipal law prior to the federal law of 2017 that regulates the apportionment of allotment expenses for a given municipality, the collection of fees will also be considered valid. Outside the indicated hypotheses, the collection is unconstitutional.

Recently, in a trial held on June 22 of this year, STJ understood that the associative fees due by the lot owner does not have a propter rem nature and, therefore, are not linked to the real estate property, even if the existence of such fees is mentioned in the standard contract for the purchase and sale of the lots. This implies that future acquirers of lots will not be responsible for paying off outstanding debts of associative fees, being obliged to pay the fees incurred only from their acquisition.

^[1] Theme 882 of the STJ in the case of repetitive resources - REsp no. 1,280,871/SP and REsp no. 1,439,163/SP.

Category: Litigation

The Public Civil Actions Law (Law No. 7,347/85) precedes the Federal Constitution of 1988 (CF/88) and seeks to ensure to citizens, since it was approved, better instruments of access to the Judiciary. In addition, collective actions guarantee wide-ranging efficacy (erga omnes effects), make it possible to concentrate claims, speed up the judicial process, and provide (procedural, financial, and personal) savings to the Judiciary. It is an effective instrument to settle claims.

In procedural advances and advances in scope, CF/88 promoted expansion of the subject matter of public civil actions to also include protection of individual and collective rights by representative entities, and further expansion through Law No. 11,448/07, which established the current wording of article 5 of the Public Civil Actions Law. According to the article, the following have standing to bring an action: the Public Prosecutor's Office; the Public Defender's Office; the Federal Government, the States, the Federal District, and the Municipalities; municipalities, agencies, public companies, foundations, and government-controlled companies; and associations, provided that certain particularities are observed (paragraphs a and b).

It was also after the Consumer Protection Code that the scope and subject matter of public civil actions were expanded, with confirmation of the possibility of filing a collective action for the protection of "homogeneous individual interests or rights, understood as those arising from a common origin" (article 81, III, of the Consumer Protection Code). It is this point that we will examine next.

Collective protection for the defense of "homogeneous individual interests or rights" requires the existence of an original fact that qualifies it as a "homogeneous individual" interest. There is an initial element of identity of the fact that extends to all those affected by that very same element: the collapse of a building, the rupture of a dam, the failure to provide sewage to a region. It is the life event that will indicate who are affected by the judgment that will be handed down in the collective action, as highlighted by the STJ case law and the best legal scholarship:

"The common origin, which establishes the homogeneous individual interest, refers to a specific fact or peculiar right that is universal to the countless individual legal relations, from which there will be a procedural connection between the interests, characterized by the identity of the proximate or remote cause of action” (STJ, REsp 1599142/SP, opinion drafted by Justice Nancy Andrighi, 3rd Panel, decided on September 25, 2018)

“The Brazilian legislator wished to value the common genesis existing among homogeneous individual rights (claims originating from the same fact of the supplier's liability), inspiring itself in the class action of the law of the United States in order to provide the consumer with accessible, swift, uniform, and efficient judicial relief" (STJ, REsp 1281023/GO, opinion drafted by Justice Humberto Martins, 2nd Panel., decided on October 16, 2014)

"The common origin, insofar as they arise as a consequence of the same fact or act, and the homogeneity that characterizes them imply the loss of their atomic and structurally isolated condition and their transformation into interests worthy of supra-individual procedural treatment."^[1]

"Finally, homogeneous individual rights are those of a common origin (article 81, sole paragraph, III, Consumer Protection Code). Despite the criticism made against the legal definition, there is no doubt that the owners of homogeneous individual rights can legitimately act in court, in atomized lawsuits, in their own name, defending their own interests. However, the treatment as a category of transindividual right derives from a legislative option, for the sake of harmony of judgments and, above all, procedural economy. A homogeneous individual right is the one that affects more than one subject due to a common genesis, whose object is divisible. Normally, it is the collectivity of consumers harmed by the acquisition of the same defective product that holds the ownership of the homogeneous individual right."^[2] 

The main characteristic of the judgment handed down in a public civil action for the protection of homogeneous rights is that it is generic (article 95 of the Consumer Protection Code).^[3]In other words, it grants the real beneficiaries of the judicial relief the option to liquidate and execute the judgment in an autonomous individual action (article 97 of the Consumer Protection Code).^{[4] [5]}

In individual actions for liquidation of the collective judgment, the alleged beneficiary presents the elements, evidence, and theories to prove compliance with the generic terms of the judgment and his right to enforce the judicial instrument. The process of individual liquidation of a collective judgment, therefore, is not a simple procedural phase in which a mere arithmetic calculation is performed for direct execution of the obligation determined in the generic judgment provided for in article 95 of the Consumer Protection Code. Quite to the contrary.

Under the rule of law, the defendant is guaranteed the full exercise of its constitutional right to a full defense, an adversarial proceeding, and due process of law in the ordinary liquidation action. The defendant shall have the opportunity to present an objection and produce the evidence provided for by law that guarantees it the unavoidable exercise of an adversarial process, under the exact terms of articles 509, II, and 511 of the Code of Civil Procedure (CPC):

Article 509. When the judgment orders payment of an illiquid amount, its liquidation shall be carried out, at the request of the judgment creditor or debtor: (...)

II - by the common procedure, when there is a need to allege and prove a new fact.

(...)

Article 511. In liquidation by the common procedure, the judge shall order the respondent, through the person of its attorney or of the law firm to which it is bound, to file an answer, if it so wishes, within fifteen (15) days, observing, as applicable, the provisions of Book I of the Special Part of this Code

This is a true trial proceeding, with broad and exhaustive review,^[6] in which all facts, allegations, and documents that may effectively legitimize and justify the plaintiff's own claim (i.e., new facts) must be verified and analyzed. The suitability of the claim to the objective limits of the collective judicial relief and all obstacles, objections, impugnations, and defenses raised by the defendant will also be analyzed on this occasion.

This is what the STJ and doctrinal teachings guarantee, highlighting the need for ample review during the individual liquidation of the collective judgment to verify the claim by the party allegedly having standing, under penalty of violation of the constitutional guarantees of the defendant:

            “MOTION TO RESOLVE DIVERGENCE. INDIVIDUAL EXECUTION OF COLLECTIVE JUDGMENT. INFLATION ADJUSTMENTS. NEED FOR PRIOR LIQUIDATION. 1. A judgment resulting from a collective decision is certain and precise, considering that certainty is an essential condition for judgments and the judgment clearly establishes the rights and obligations that enable its execution, however, it is not vested with the liquidity required for spontaneous compliance with the decision, and the recipients (cui debeatur) and extent of the compensation (quantum debeatur) must still be ascertained in liquidation. It is only at this moment, therefore, that individualization of the portion that will fall to the judgment creditor according to the judgment issued in the collective action will take place. 2. The execution of a generic judgment that orders payment of adjustments to savings accounts must be preceded by a liquidation phase through the common procedure, which will complete the partial review of the collective action by proving new facts determinant of the potential beneficiary in the relationship of substantive law, as well as the amount of the payment owed, ensuring the opportunity for the debtor to defend himself fully and in an adversarial process.” (STJ, Emb Div no REsp No. 1.705.018/DF, opinion drafted by Justice Luis Felipe Salomão, 2nd Section, decided on December 9, 2020)”^[7]

"Nelson Nery and Rosa Nery state that liquidation is an action for review of a constitutive and integrative nature. Luiz Rodrigues Wambier also understands that the liquidation is a new action, although filed in the same case. According to Araken de Assis, there is successive accumulation of claims in simultaneo processu, with regard to the original ruling of the case. Considering the purpose of the liquidation, one can state that it has the nature of an action, as do counterclaims, using the same procedural basis as the case that generated the judgment (...) Liquidation via the ordinary procedure calls for a full defense on the part of the defendant, wherein it is possible to perform various means of evidence admitted by law, that is, as stated by Araken de Assis, 'everything that is admitted in the ordinary procedure of the trial phase assumes immediate pertinence (intervention of third parties, evidence, counterclaims, etc.)' (...) If it is necessary to produce evidence, it shall be produced, and an evidentiary and trial hearing shall be scheduled, if appropriate. All evidence, in theory, is admissible, pursuant to article 369 of the CPC.”^[8]

In the motion to resolve divergence in REsp No. 1.705.018/DF, the majority of the 2nd Section of the Superior Court of Appeals emphasized the need to process actions for liquidation by the ordinary procedure, precisely in order to avoid situations in which the alleged beneficiary claims damages, although he does not present any evidence to this effect. The trial phase is essential to ensure the effectiveness of the generic judgment and direct it to those who actually have the right, as the excerpt from the opinion of Justice Luis Felipe Solomon makes clear:

“The possibility is frightening that people might directly filed for individual execution of a collective judgment although they do not prove their condition as being entitled to the judgment debt being enforced, nor even prove the case with suitable documents to support the breakdown of calculation presented in order to assess the amount due."

There is no doubt that a judgment in a public civil action constitutes a judicial enforcement instrument. However, although such judgment cannot be modified in the liquidation proceedings (article 509, paragraph 4, of the CPC), there is still the need for establishment of the adversarial process, under penalty of suppression of rights and basic guarantees of civil procedure.

The adjudicatory body cannot disregard the collective judgment and simply relegate the new trial phase to the time of filing of the action for liquidation judgment, when, in fact, new facts must be analyzed.

^[1] MARQUES, Claudia Lima; BENJAMIN, Antonio Herman V.; and MIRAGEM, Bruno. Comments on the Consumer Protection Code. 4th ed. São Paulo: Revista dos Tribunais, 2013 p. 1552

^[2] TUCCI, José Rogério Cruz e. Limites subjetivos da eficácia da sentença e da coisa julgada civil [“Subjective limits of the effectiveness of judgments and civil res judicata”]. São Paulo: Revista dos Tribunais, 2006, p. 313/314.

^[3] Consumer Protection Code: Article 95. If the claim is granted, the judgment will be generic, establishing the liability of the defendant for the damages caused.

^[4] Consumer Protection Code: Article 97. The liquidation and execution of judgment may be procured by the victim and his successors, as well as by the legal entities referred to in article 82.

^[5]"Among the cases of generic judgment provided for in our legal system is the one that judges collective actions for the defense of homogeneous individual rights (Law 8,078/1990, article 95). In this case, as seen, judicial review is limited to the homogeneous nucleus of the subjective rights presented in the claim. There is no determination of the amount of the payment due or identification of the potential plaintiffs of the substantive law relationship, which leaves the concrete legal rule undefined to a high degree. A generic judgment, for this very reason, is not amenable to judicial execution. To reach this point, it will have to be supplemented by another one, which will result in identification of the missing elements of the individualized legal rule. This supplementation activity takes place in an autonomous procedural phase, generally called liquidation of judgment. With regard to the generic judgment in collective actions, liquidation thereof is also called an enforcement action. It is an action intended eminently for judicial review, aimed at defining the amount of the payment to be enforced, or its object or the holder of the right, thus forming, integrated into the prior judgment, the instrument that enables the judgment creditor to seek judicial execution." (Zavascki, Teori Albino. Processo coletivo: tutela de direitos coletivos e tutela coletiva de direitos [“Collective procedure: protection of collective rights and collective protection of rights”], 7th ed., revised, current, and expanded, São Paulo: Editora Revista dos Tribunais, 2017. P. 186)

^[6] "Here, each judgment creditor, in the liquidation process, must prove, in a full adversarial process and with exhaustive review, the existence of his personal injury and the etiological link with the damage globally caused (that is, the an [sic]), besides quantifying it (that is, the quantum)." (GRINOVER, Ada Pellegrini; WATANABE, Kazuo; NERY JUNIOR, Nelson. Código Brasileiro de Defesa do Consumidor comentado pelos autores do anteprojeto [“Brazilian Consumer Protection Code commented on by the authors of the draft bill”]. Vol. II. Rio de Janeiro: Editora Forense, 2011, p. 154)”

^[7]See also: "The individual execution of a collective judgment cannot be considered a mere phase of the previous proceeding, since a new legal procedural relationship is established, as occurs with the execution of foreign, arbitral, or criminal judgments. Thus, it is necessary to summon the judgment debtor, pursuant to article 475-N, applicable to the case by extension" (STJ, REsp. No. 1.091.044/PR, opinion drafted by Justice Nancy Andrighi, 3rd Panel, decided on November 17, 2011).

^[8] PIZZOL, Patricia Miranda. Collective Relief: collective cases and techniques for standardization of decisions. São Paulo: Thomson Reuters Brasil, 2019, pp. 454-457. See also: "During the collective proceeding, the evidentiary aspects of specific and individual situations of the savers are not examined, since the documents that prove ownership of the credit are only submitted in the execution phase (fulfillment) of the judgment. For this reason, in the individual executions of judgment issued in collective actions, there is a clear need to procure liquidation of the amount paid and individualization of the damages, with a demonstration of ownership of the judgment creditor's right. This is because the judgment granting collective relief has a generic nature, the fulfillment of which, in relation to each of the individual holders, presupposes the suitability of the judgment creditor's condition to the legal situation established therein." (Demócrito Reinaldo Filho, Cuidados em execuções individuais de sentenças coletivas sobre expurgos [“Care in individual executions of collective judgments on write downs”]. Consultor Jurídico, February 8, 2015).

Category: Labor and employment

With the advance of the vaccination campaign against the new coronavirus after more than a year after the beginning of the covid-19 pandemic, finally the time has come to discuss and evaluate the concrete possibility of returing to in-person activities at the companies.

According to the latest survey by the National Sample Survey of Households (PNAD), about 7.9 million people have been working remotely since the beginning of the pandemic.

According to the labor legislation, part of these people may be in a telework or home office arrangement. Regardless of the arrangement adopted, the determination on when to return to work is a right of the employer as the party responsible for the economic activity. However, it is important for the employer to keep in mind the legal limits of its power and be aware of the recommendations so that the return to work occurs in a positive and safe manner.

Firstly, it is necessary to look at the arrangement to which the worker is subject in order to identify the minimum time limit for requesting a return:

• Home office: there is no minimum period required by law, nor is it necessary to formalize it in writing. The rules set out in the internal policy of the company that instituted the arrangement must be observed.

• Telework: a minimum transition period of 15 days must be guaranteed, with corresponding registration in a contractual amendment.^[1]

After identifying the model, it is important to check the locally instituted standards for return plans and consider the general recommendations from the federal government regarding precautions {care} with the return.

In commercial establishments and service providers and non-essential activities located in the State of São Paulo, according to State Decree 65,897, of July 30, 2021, it is hereby established that, in the return to on-site activities, the limitation of space of occupation up to 80% of the respective capacity must be observed, as well as the limitation of attendance to the public between 6 a.m. and midnight.

The decree imposed restrictions on occupation at companies providing services and non-essential activities, limiting the number of employees who may work in-person on office premises. The rule differs from prior decrees, in which capacity restrictions applied only to locations where there was service to the public. Companies and offices that intend to return to in-person work should therefore pay attention to the new rules. The decree also makes direct mention of the prohibition on crowding, observation of sanitary protocols, and mandatory use of face masks.

The other covid-19 containment measures remain in force (Ordinance No. 1,565/20 of the Ministry of Health, Joint Ordinance No. 20/20 of the Ministry of Economy and Special Bureau of Welfare and Labor, as well as state and municipal laws), especially the health protocols.

In the State of São Paulo, it is mandatory to wear a face mask, keep a distance of at least 1.5 m between employees, and follow sanitary protocols of hygiene and cleaning, air conditioning maintenance, and disinfection of workstations.

It is extremely important that the company have an internal protocol for managing cases of suspected contamination, allowing the worker the social isolation necessary to avoid spreading the virus among employees.

Compliance with the standards and recommendations of public authorities is essential, since, under Brazilian law, the employer is responsible for ensuring a safe and risk-free work environment for all its employees, under penalty of civil and criminal liability for any damages it may cause.

Besides the general precautions, companies must observe that the pregnant women cannot be obliged to return to in-person work, because as provided for in Law No. 14,151/21, the pregnant workers must remain away from in-person work activities, without prejudice to their her remuneration.^[2]

With respect to employees who fit into a risk group, it is possible to request a return to work in person, taking the precaution of redoubling care. It is recommended that these employees be kept on a remote working basis.

The restriction measures are expected to be fully relaxed by August 17, 2021, by which time the São Paulo state government aims to have all adults over the age of 18 vaccinated.

Even with the progress of vaccination, it is extremely important that all health measures recommended by the competent authorities continue to be followed and that everyone, employees and employers, take responsibility, taking the precautions necessary for it to be possible to overcome the pandemic and resume the economic strength of the country.

^[1] Article Article 75-C of the Consolidated Labor Laws.  The provision of services in the form of telework must be expressly stated in the individual employment contract, which will specify the activities that will be performed by the employee.

Paragraph 1. The change between in-person work and teleworking may be made provided that there is mutual agreement between the parties, registered in a contractual amendment.

Paragraph 2. The change from telework to in-person work may be made by determination of the employer, guaranteeing a minimum transition period of fifteen days, with a corresponding record in a contractual amendment.

^[2] Article Paragraph 1. During the public health emergency of national importance resulting from the new coronavirus, pregnant employees shall remain away from on-site work activities, without prejudice to their remuneration.

Sole paragraph. The employee who is absent pursuant to the head paragraph of this article will be available to perform activities at home, through telework, remote work, or another form of distance work.

Category: Infrastructure and energy

In mid-2016, the federal government created the Gas to Grow program, which preceded the New Gas Market program, launched in 2019. Both were designed to promote a dynamic and competitive liquid gas market that would stand up to the then deeply verticalized market dominated by a monopoly player.

The characteristics of the creation and development of the gas market in Brazil over the years have led to the existence of significant barriers in all links of the gas value chain, the overcoming of which demands, even today, continuous and coordinated efforts by the various players involved on various action fronts.

Thus, the stimulus to the new natural gas market had as its pillars, above all: promotion of competition; harmonization of state and federal regulations; integration of the gas sector with the electrical and industrial sectors; and removal of tax barriers.

In this context, the long-awaited approval of the new legal framework for natural gas in Brazil, with the publication of Law 14,134/21 (Gas Law) and, later, Decree 10,712/21 (Gas Decree), whose campaign dominated the industry scene especially in recent years, revived in the sector the enormous expectation of developing an effective natural gas market in Brazil, with dynamism, attractive potential for new players, and increased liquidity with the expansion of supply and demand.

The Gas Law and Decree brought about material advances expected by the sector, among which the following stand out:

• implementation of the inward and outward transport system;
• application of the authorization arrangement for the transport and storage of natural gas;
• expansion of the list of essential infrastructure and third party access; and
• deverticalization, with independence and autonomy in the activities of transport and distribution (although structured differently for each of these segments).

The challenges, however, were not all overcome with the publication of the new legal framework. New entrants have experienced many complexities in practice, which require them to analyze carefully whether they are to reap the benefits potentially offered by measures opening the gas market.

Among the various adversities faced by players and governments in the process of creating a liquid gas market, one of the most relevant derives from the fact that the Federal Constitution grants the states the competence to operate local piped gas services.

The states have exclusive authority to regulate and provide piped gas services, within their boundaries, to participants in the free market (free consumers, self-producers, and self-importers, referred to jointly as "free agents") and the captive market (residential and industrial consumers, among others who do not meet the requirements for joining the free market). Services may be provided directly by the state or via distribution utilities (CDLs).

The bipartition between the federal and state spheres produces an extremely material practical effect, especially for free agents and potential marketers: the multiplicity of state regulatory regimes, which brings about the most distinct of implications and developments, which agents interested in entering the free gas market must observe. In addition to the different state regulations, these agents must comply with the regulations established by the federal government, which is responsible for regulating natural gas loading and marketing activities, among others.^[1]

Currently, states are at different stages of maturity with respect to free market regulations: Amazonas, Sergipe, Bahia, Espírito Santo, Minas Gerais, Rio de Janeiro, São Paulo, Santa Catarina, and Rio Grande do Sul have recent regulations for the free market, published between 2019 and 2021; Maranhão, Mato Grosso, Mato Grosso do Sul, Pará, Paraná, and Pernambuco have less recent regulations; and Acre, Alagoas, Amapá, Ceará, Goiás, Paraíba, Piauí, Roraima, Rondônia, Rio Grande do Norte, and Tocantins have no regulations. Thus, of Brazil's 26 states, only eight have recent regulations that tend to more adequately reflect the current stage of the domestic gas market.

Main issues considered in the migration to the free market

In addition to the complexities related to compliance with the various state and federal regulations, which inevitably imposes high costs for the agent wishing to migrate to the free market, special attention must be paid to the challenges generated by the simultaneous existence and, to a certain extent, the need for compatibility of the main contracts characteristic of this market: Gas Supply Agreement (GSA); Gas Transportation Agreement (GTA), which can be incoming and/or outgoing; and Distribution System Use Agreement (CUSD).

An agent wishing to enter the gas market may opt for different contractual arrangements, such that it is not party to all three contracts mentioned, but only to two of them. A free consumer may, for example, not be responsible for contracting the transport, when this is the responsibility of its supplier. In this scenario, the free consumer would only contract CDL's gas supply (GSA) and gas distribution service (CUSD). However, exposure to several contracts, with different contracting parties in different links of the chain that are intrinsically related, substantially raises the aggregate risks of migration to the free market, requiring agents to make an integrated and careful assessment.

The main sensitivities arising from the coexistence and coordination of the aforementioned contracts and regulations include:

• Prior notice for migration to the free market and withdrawal of the notice: the issuing of the prior notice by the agent to the CDL binds it to that specific term for effective migration and consequent interruption of gas supply by the CDL. The moment the prior notice is sent out must be carefully evaluated by the agents, especially focusing on the term of their supply agreement with the CDL, since any delays in the schedule planned for negotiating and executing the GSA and GTA that cause a mismatch in the start of the term of the agreements may represent a high risk of gas shortage for the agent and exposure to penalties within the scope of one or more agreements. In this scenario, the possibility of waiving prior notice is an important instrument for agents seeking more security and predictability for the migration.

• Simultaneous contracting in the free and captive market: in some states, there is still considerable uncertainty regarding certain issues involving the possibility of contracting gas in the free and captive market simultaneously, which would constitute a partially free consumer. Although simultaneous contracting is allowed in many state regulations, the lack of clarity regarding the volume to be contracted in each of the markets represents a risk for the agent. Simultaneous contracting is also a much appreciated mechanism at a time of transition, as it can mitigate the risks of interruption in gas supply cited in the prior item.

• Penalty and accumulation of penalties across contracts: the probability that the agent will suffer simultaneous penalties due to the same event in all three contracts or in at least more than one of them is considerably high, especially in a network industry. Operational issues tangential to these contracts should be particularly assessed in order to have an accurate picture of the risk pointed out. The analysis of the stacking of penalties requires special attention from the agent when weighing the costs relative to migration to the free market.

• Sale of surplus quantity: in some states, the free agent must qualify as a trader before the state and the National Petroleum, Natural Gas, and Biofuels Agency (ANP) so that it can exercise efficient management of its portfolio, selling the surplus quantity of gas. Such regulatory impositions mean more bureaucracy and costs for the agent that intends to migrate.

• Tariffs applicable to the free market: the uncertainty as to the tariffs applicable to free agents is a relevant point of attention. Regulations that give little predictability to the tariffs (one of the main elements considered in migration) tend to discourage agents from migrating.

• Construction of dedicated pipelines: the construction of dedicated pipelines is a very sensitive topic for certain agents whose projects substantially depend on the construction of certain infrastructure involving very high investments. The lack of clarity regarding the regulatory treatment in the negotiation and execution of large investments represents an additional challenge to be faced by the agent interested in the investment.

• Contracting transportation - public calls for contracting of long-term firm products: the agent should establish a migration schedule to safely and efficiently accommodate public calls for contracting of transportation. There is also the possibility of evaluating non-firm and short-term products that can, in various scenarios, help agents whose needs are met by these modalities or who want to use them in a moment of transition, pending the contracting of firm capacity through a public call.

Long road to maturity

Despite the recognized advances introduced by the Gas Law and Decree, there is still a long way to go before the Brazilian market reaches the liquidity, dynamism, and competitiveness so desired. One aspect of this path is related to the agents' own knowledge curve regarding their new roles and responsibilities in the new market configuration.

The difficulties pointed out, however, do not prevent joint development of creative solutions to meet the challenges that present themselves. Each project needs to be carefully studied so that risks are mitigated in the most efficient way. Joining the efforts of market players remains one of the most effective ways to develop solutions capable of equating or minimizing existing risks.

^[1] For example, if an agent that has manufacturing plants located in all states of the Southeast Region wants to become a free consumer of gas in these states, it must observe the following regulations: Arsesp Resolution No. 1061/20, for the State of São Paulo; Agenersa Resolution No. 4142/20, for the State of Rio de Janeiro; Headquarters Resolution No. 17/13, for the State of Minas Gerais; ARSP Resolution No. 46/21 and State Law No. 11,173/20, for the State of Espírito Santo; in addition to ANP regulations for gas loading and marketing and sale.

Category: Infrastructure and energy

Laura Souza and Thiago Cantareli

MP 1,055/21 created the Chamber of Exceptional Rules for Hydropower Management (CREG), which will last until December 30 of this year, to establish emergency measures for optimizing the use of hydroelectric resources, in view of the water shortage. The objective is to prevent scenarios of water shortage or insufficient power generation.

Brazil has suffered from a shortage of rain since 2020, according to the Ministry of Mines and Energy (MME). From September to March of this year, the National Interconnected System (SIN) registered the worst index of water inflow into its reservoirs since 1931. This picture is aggravated by the prospect of little rainfall in the coming months, which coincides with a typically dry season.

Due to the multiple uses of water, such as human consumption, recreation, transportation, generation of energy, and agriculture, in addition to its environmental role, the scenario of water scarcity demands attention and measures for the optimization of this resource to increase the security of its availability, even in pessimistic water scenarios.

To respond to this situation, CREG was given the competence to:

• define mandatory, exceptional, and temporary guidelines to establish limits on the use, storage, and flow of hydroelectric plants and eventual mitigation measures;
• determine the deadlines for adoption of these guidelines by the federal public administration, the National Electric System Operator (ONS), the Electric Energy Trading Chamber (CCEE), and generation concessionaires; and
• request and establish deadlines for forwarding information and technical supporting documents to the Federal Public Administration, ONS, CCEE, and the generating concessionaires.

Another competence of the CREG is to decide on the ratification of the deliberations of the Monitoring Committee of the Electric Sector (CMSE) related to the measures for the security of the electric energy supply. With the approval by the CREG, compliance with the CMSE's resolutions will be mandatory for the direct and indirect federal public administration, ONS, CCEE, concessionaires, and authorized parties of the electric power sector, as well as concessionaires, permissionaires, or authorized parties of the oil, natural gas, and biofuels sector. These decisions may include contracting reserve capacity through simplified competitive procedures.

The operating costs incurred by electricity generators and resulting from the measures under MP 1,055 will be reimbursed by charges to cover the costs of the system’s services. To this end, they must be recognized by the National Electricity Agency (Aneel) and must not be covered by the terms of the concession contracts.

The rules of operation of the chamber were approved by the CREG on July 8, 2021, through Resolution No. 1, in the form of its exhibit. The CREG is composed of the ministers of Mines and Energy (chairman); of Economy; of Infrastructure; of Agriculture, Livestock, and Supply; of Environment; and of Regional Development. The chairman of the body may make decisions on matters within the competence of the CREG, which shall be subject to referendum by the plenary at the earliest opportunity. In addition, the chairman may invite experts, authorities, and representatives of other bodies and entities, public or private, to advise the CREG.

The ordinary meetings of the plenary will occur monthly, usually at the MME. Special meetings may be convened by the chairman on his own initiative or that of the members of the chamber. The CREG shall decide by means of decisions or informative acts, which shall be published or forwarded to the addressees within three business days of the meeting, if no shorter period is decided. The decisions will be disclosed through minutes, published on the MME website within two business days of approval. All acts issued shall receive wide publicity from the CREG Executive Board.

It is expected that the CREG will be able to promote the measures necessary to ensure a sufficient volume of water in the reservoirs and adequate energy generation, even in a scenario of unfavorable rainfall.

Category: Infrastructure and energy

Ana Karina Souza, Laura Souza, Lair Loureiro and Rafaela Falavina

On 08/18/2021, Bill No. 5,829/19 was approved by the House of Representatives, which aims to establish the regulatory framework for distributed minigeneration and microgeneration and the Electric Energy Compensation System (SCEE) in Brazil. The approved bill is a result of a joint effort of agents of the power sector, members of the house of representatives and regulatory entities with the scope of increasing legal certainty of the distributed generation sector in Brazil, and has been submitted to the analysis and deliberation of the Senate.

According to the approved bill, energy consumers, individuals or legal entities and their respective consumer units may join the SCEE:

• with distributed microgeneration or minigeneration with local or remote generation;
• members of multiple consumer units;
• with shared generation or shared generation members; and
• characterized as remote self-consumption.

The units participating in the SCEE will be subject to the tariff rules established by the National Electric Energy Agency (ANEEL) for the consumer units with microgeneration or minigeneration distributed after December 31, 2045, when existing on the date of publication of the law or if they file an access request to the distribution system within 12 months of the publication of the law. Projects requesting access between the 13th and 18th month of validity of the law will be inserted in the transition rules until 2031, while projects requesting access from the 19th month of validity of the law will be inserted in the transition rules until 2029.

After the transitional periods indicated by law, the participating consumer unit participating in the SCEE will be charged by the tariff modality stipulated by ANEEL for its respective consumption class. The charge will focus on the active consumed power from the distribution network and on the use or demand of all tariff components not associated with the cost of energy, and all the benefits to the electrical system provided by distributed microgeneration and  minigeneration plants should be reduced from the charged amounts.

After 12 months from the date of publication of the law, the Energy Development Account (CDE) will temporarily bear the costs of the tariff components not associated with the cost of energy incident and not remunerated by the generating consumer units on the electricity compensated by the consumer units participating in the SCEE.

The National Council for Energy Policy (CNPE) will have six months from the publication of the law to define the guidelines for the calculation of the costs and benefits of distributed microgeneration and minigeneration. ANEEL, in its turn, will use the guidelines established by the CNPE to calculate the benefits of distributed generation for the National Interconnected System (SIN). This calculation will be completed by regulation to be enacted by ANEEL within 18 months of the date of publication of the law and will consider all the benefits of distributed microgeneration and minigeneration for the electrical system, comprising the components of generation, electrical losses, transmission and distribution.

After the transition periods, the units participating in the SCEE will be subject to the tariff rules established by ANEEL for the consumer units with distributed microgeneration or minigeneration.

ANEEL must establish a standard form for the access request for distributed microgeneration and minigeneration, which must be filed with the competent electric power distribution concessionaire,  and the concessionaire will not be able to request additional documents to those indicated in such standardized form. In other words, ANEEL will unify the connection criteria for distributed generation projects, ending the currently decentralized analysis made by each electric power distribution concessionaires, individually.

The bill also establishes that those interested in implementing distributed minigeneration projects must submit a performance guarantee in amounts ranging from 2.5% of the investment value (for generating units with installed power greater than 500 kW and less than 1,000 kW) to 5% of the investment value (for generation units with installed power greater than or equal to 1,000 kW), being exempted from this obligation distributed microgeneration or minigeneration units  explored under consortium, cooperative and multiple consumer units structures.

In addition, distributed minigeneration projects will be considered electricity generation infrastructure projects, being able to benefit from the Special Incentive Regime for Infrastructure Development (Reidi). They will also be included in the list of projects that are able to constitute an Infrastructure Investment Fund (FIP-IE) and Investment Fund in Participation in Intensive Economic Production in Research, Development and Innovation (FIP-PD&I), and are therefore considered priority projects that provide relevant environmental and social benefits to Brazil.

Specifically in relation to distribution companies, their excess amounts of electricity, depending on the market variation resulting from the option of consumers for the distributed microgeneration and minigeneration regime, will be considered as an involuntary contractual exposure, thus reducing the risk of overload in the distribution system caused by energy overlap caused by consumers.

The bill also establishes the Social Renewable Energy Program, intended for investments in the installation of photovoltaic systems and other renewable sources, in the shared local or remote modality, for the benefit of consumers of the Low Income Residential Subclass, whose financial resources will come from the Energy Efficiency Program, from complementary resources,  or from the portion of other revenues from the activities carried out by electricity distribution companies converted to tariff affordability.

Even though still depending on resolution of the Senate, the approval of the bill by the House of Representatives represents an important milestone in the consolidation and modernization of the regulatory structure of distributed generation activities in Brazil, including in relation to legal certainty matters. These factors, as long as they are effectively implemented in the final text of the bill to be converted into federal law, can operate as an important investment vector in the sector and expand the participation of the solar source in the Brazilian energy matrix.