By Brazil Stock Guide – Brazil’s National Electric Energy Agency, known as Aneel, unanimously rejected Enel São Paulo’s appeal on Tuesday (Aug. 11), allowing a proceeding that could terminate the power distributor’s concession to move forward. The case was opened after repeated outages and service failures in the country’s largest metropolitan area.
The ruling applies to Enel SP’s challenge against the opening of the regulatory proceeding. Aneel has yet to consider the merits of the potential concession forfeiture, which is being handled separately.
Enel SP is the São Paulo distribution unit of Italy’s Enel SpA, whose shares trade on Euronext Milan under the symbol ENEL, or ENEL IM under Bloomberg’s ticker convention.
Regulatory Escalation
Aneel Director Fernando Mosna, who presented the appeal decision, said the proceeding was not an isolated measure. He described it as the outcome of years of regulatory action prompted by recurring shortcomings.
“On the contrary, it represents the culmination of a regulatory escalation built over the years, in response to repeated failures that were monitored and sanctioned, without the concessionaire presenting an effective response capable of restoring adequate service,” Mosna said.
The agency’s director general, Sandoval Feitosa, said he had seen “signs” of improvement in Enel SP’s concession area. He said the review must also take into account the company’s historical service indicators, unpaid fines and legal challenges.
Feitosa said there had been “several delaying actions” in court and rejected claims that Aneel’s handling of the case was disproportionate.
“There is no witch hunt in the agency’s work, there is no disproportionality in the work of the agency’s technical staff, and there is no disproportionality in the rapporteur’s opinion,” Feitosa said. “Quite the opposite, we are talking here about a dialogue-based process.”
Enel Cites Improvements
Enel SP said in a statement that its performance has improved under both normal operating conditions and extreme weather events.
“Over the past two years, Enel São Paulo has significantly reduced long-duration interruptions and substantially improved emergency-service indicators — including the Average Emergency Response Time, monitored by Aneel since the administrative proceeding was opened in 2024,” the company said.
Aneel Director Agnes da Costa, who is overseeing the concession-forfeiture case, gave Enel SP 10 days over the weekend to submit its final arguments.
The agency’s technical staff recommended in early July that the proceeding remain open after reviewing the company’s request for reconsideration. Aneel has sought to provide broad rights of defense to limit potential future challenges to the regulatory process.
Billion-Real Cost
Terminating the concession could require compensation of more than 10 billion reais. Under current law, the utility would be entitled to payment for investments that have yet to be amortized.
Any contract termination would not take effect immediately. The government could establish a transition period by decree to preserve the continuity of electricity distribution.
The final outcome will depend on Aneel’s review of whether the utility’s record provides sufficient grounds to recommend ending the concession.
Government Weighs Alternatives
Brazilian Mines and Energy Minister Alexandre Silveira said in an interview with CNN Money on Monday (Aug. 10) that Enel São Paulo “has lost the conditions, including in terms of its image,” to continue providing electricity-distribution services.
Silveira nevertheless described a concession-forfeiture decision as “dangerous” and said there were “other paths” to resolve the dispute.
One option explicitly mentioned was a transfer of Enel SP’s corporate control, an alternative already being monitored by the market. The concession proceeding will remain active while Aneel awaits the company’s final arguments and prepares its review of the merits.
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