ENERGY TRADING IN ORGANIZED MARKETS IN BRAZIL – MARKET DESIGN AND REGULATORY ISSUES

摘要

Similar to other markets, the creation of an organized environment for energy trading could potentially increase efficiency in the sector in Brazil. Through the provision of services related to custody, clearing, settlement and risk management, such trading platforms can add transparency and therefore improve the price formation process. Also, transparency of price formation leads to increases in efficiency and better decisions by investors interested in energy assets. Recently, Brazilian government launched a public consultantion process (MME CP 033/2017) to improve the regulation for entire energy sector in the country; however, little attention was devoted to the establishment of a truly organized market for energy trading in Brazil. According to current rules, the Energy Commercialization Chamber (CCEE), a civil association operating under the supervision of ANEEL (Brazilian Regulatory Commission), is responsible for compiling data related to energy production and consumption and by the registration and settlement of contracts among counterparties, but there are no clearing and risk management services, typical in organized over-the-counter markets. In spite of some initiatives from energy trading companies by themselves, in order to get around CCEE problems, there is a lack of minimum corporate governance principles, risk management procedures and prudential regulation – in fact, energy trading contracts in Brazil are financial products totally independent from financial regulators such as Central Bank (Bacen) and Securities & Exchange Commission (CVM). Thus, based on the principles of economic market design and taking advantage of international experience about financial energy products in organized markets, this paper proposes structural improvements to energy trading in Brazil, considering the technological changes related to distributed generation, mechanisms of demand response, and energy storage. This paper is organized as follows: after the introduction, which gives more details about the situation of energy trading and related regulation in Brazil, the second section describes the fundamentals of market design and its relationship with the development of organized commodity markets and risk management practices related. Based on these fundamentals, third section presents needed building blocks to improve Brazilian energy trading markets and a comparison with similar countries. The fourth section presents a counterfactual study considering some different possible strutuctures and their impacts. The final section discusses policy implications and recommendations.