By Brazil Stock Guide – Brazil’s electricity regulator Aneel approved a new stage of a major capacity reserve auction on Tuesday, clearing contracts for existing thermal power plants fueled by fuel oil, diesel and biodiesel, with supply obligations scheduled between 2027 and 2030.
The decision came despite an injunction from a federal court in Ceará that ordered the suspension of the recognition of auction results and the signing of contracts. Aneel concluded the ruling did not prevent its board from proceeding with the vote.
The agency followed the opinion of its federal legal office, which argued that the same issue had previously been taken to a federal court in Brasília, where requests to halt the auction were denied. Based on that assessment, Aneel said it could continue the contract approval process.
In his vote, Aneel director Fernando Mosna said the regulator’s role at this stage is limited to checking the legality and regularity of the bidding procedure, not reassessing energy policy decisions made by the Mines and Energy Ministry.
“The Federal Prosecutor’s Office at Aneel concluded that there was no obstacle to continuing the deliberation,” Mosna said in his vote.
“I do not identify, in the case under analysis, any illegality, procedural defect, supervening fact or court decision capable of preventing the acts of approval and adjudication,” he said.
Mosna also cited the conclusion of Aneel’s Permanent Auction Committee, which found the process regular and said it had complied with the applicable bidding and regulatory requirements.
The contracts approved Tuesday do not cover the full auction, which contracted almost 19 gigawatts of capacity in March. The decision applies to a specific stage focused on existing oil and biodiesel-fired thermal plants. Aneel had already split the process into phases.
In May, the regulator approved contracts with supply starting in 2026. The new decision covers plants scheduled to begin delivery in 2027 and 2030. According to Aneel, the approval covers about 90% of the contracts.
Eleven projects remain pending. Nine are linked to Energia Pecém Participações, one to TermoG and another to Brasil-Celene. No stock tickers were identified for the companies cited in the source material. The pending cases involve disputes over documents and qualification requirements under the auction rules.
Aneel did not say when those projects will be reviewed or specify their share of the total contracted capacity.
The regulator said the auction produced estimated savings of 33.64 billion reais compared with the maximum prices that could have been contracted.
Aneel’s board also fully approved a second auction held two days after the main process. That auction was restricted to fuel oil, diesel and biodiesel-fired plants and contracted 501 megawatts of capacity for delivery between 2026 and 2030. According to Aneel, that process is now fully approved.
The decision may trigger further legal and political fallout because Aneel moved ahead despite the injunction obtained by Fiec, the Federation of Industries of the State of Ceará, and Sindienergia, the Ceará energy and energy services industry union.
The auction remains under review by Brazil’s Federal Audit Court, the Federal Public Prosecutor’s Office and the judiciary.
The LRCAP capacity reserve auction was designed to secure power availability for Brazil’s electricity system during periods of need. Unlike traditional power auctions, in which plants are paid for the electricity they actually generate, this model compensates generators for remaining available to produce power when dispatched by the national grid operator ONS.
The government says the mechanism has become necessary as wind and solar power expand in Brazil’s electricity matrix. Those sources depend on weather conditions and can fluctuate, requiring backup capacity to support grid reliability.
The auction has faced criticism since its launch. Consumer groups, power traders and renewable energy generators have questioned both the amount of capacity contracted and the prices set in the process.
One of the main controversies involved the government’s decision to raise price caps shortly before the auction. The Mines and Energy Ministry released the original values on Feb. 9, but revised them three days later after market reaction.
Aneel formalized the changes on Feb. 13, increasing limits for several auction products. For new gas-fired thermal plants, the ceiling rose to 2.9 million reais per megawatt per year from 1.6 million reais.
That change later drew scrutiny from the Federal Audit Court. The government argued the revision was necessary to reflect project costs and ensure sufficient competition in the auction.
Mines and Energy Minister Alexandre Silveira has defended the process publicly, saying the contracted capacity is essential to maintain the reliability of Brazil’s electricity system during the energy transition.
Critics say Brazil contracted more capacity than needed and at elevated prices. On the eve of the vote, the National Front of Energy Consumers asked Aneel to suspend the approval, arguing that prices contracted for 2026 were far above those seen in the first capacity auction, held in 2021.
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