The last injunction for hydrological risk falls and the legal dispute started more than ten years ago is closed | Brazil

Federal Judge João Carlos Mayer Soares, of the Federal Regional Court of the 1st Region (TRF-1), decided to suspend the validity of the injunction, thus unblocking the accounting of energy operations of the Chamber of Commerce of Electric Energy (CCEE) for a total amount of BRL 323.8 million.

The injunction prevented the settlement of hydrological risk debt, or GSF – a metric used to measure the relationship between insured energy from hydroelectric plants and the electricity actually produced.

The GSF reflects the difference between the energy a hydropower plant is contractually obligated to produce and what it can actually provide, due to factors such as water scarcity. The current rule is that, even if it produces less, the factory must supply the contracted quantity and bear the cost of purchasing energy from the short-term market (MCP).

The water crisis of the last decade has resulted in production below the physical guarantee of several hydroelectric plants, leading to liabilities for the plants. Hydroelectric plants had much less output than they needed to produce. As a result, the existing system to compensate for production surpluses and deficits from hydroelectric power plants, the energy reallocation mechanism (MRE), was unable to fully fulfill its objective.

“Thanks to the active suspensive effect, legal certainty, public interest and regulatory stability of the electricity sector are protected until the judgment on the merits of the appeals, which should be favorable to the preservation of the sectoral model for treating hydrological risk, as has happened in similar cases,” indicated the National Electric Energy Agency (Aneel), in a press release.

“For almost a decade, the GSF has been a constant concern and, now, we have ended this cycle and opened the doors to a more robust and promising business environment, which can safely serve the millions of consumers in the country who, soon, will have the power to choose their energy supplier,” said, also in a note, the chairman of the CCEE Board of Directors, Alexandre Ramos.

Due to the drought, companies affected by the GSF took legal action against the settlement of the MCP, whose operations are linked to the difference settlement price (PLD), used as a benchmark in the electricity sector.

These actions resulted in the repression of amounts of approximately 10 billion reais. The legal actions suspended payments to MCP, creating a financial imbalance that even affected agents who had nothing to do with the litigation.

In 2020, the government published a measure according to which hydroelectric plants that cede their shares could bear the debts of the GSF with the extension of the duration of the concession.

Liabilities fell from more than 10 billion reais to around 1.1 billion reais. In August this year, within the framework of Provisional Measure (MP) 1,300/2025, reforming the regulatory framework of the electricity sector, the government organized an auction aimed at resolving the debts of the GSF, by selling bonds corresponding to the hydroelectric debt.

The event raised 1.34 billion reais, of which 793 million reais was paid under the MCP. The difference, which at the time amounted to around 340 million reais, was protected by the injunction which has now been revoked.