Reform in the electricity sector brings more rationality

The Provisional Measure (MP) sent by the government to the National Congress to reorganize the electricity sector has reignited important - and fair - debates about the direction of the Brazilian energy model. Although some reactions have been intense, it is essential to remember that the proposal did not come as a surprise. Many of the points it addresses have been discussed since 2018. In other words, it is not a rupture, but the maturation of an agenda that the sector has been demanding.

Among the main points, the end of subsidies - such as the "discount on the wire" - deserves attention. For years, industry players have questioned cross-subsidies, which created competitive distortions and encouraged misaligned investments. The withdrawal of these incentives has always been a legitimate demand. To now treat this measure as a setback is, at the very least, incoherent. The MP seeks to correct the course, making the sector more fair, transparent and sustainable.

The electricity sector has already undergone structural reforms, such as those inspired by the British model in the early 2000s, in response to the blackout. It was a context of low investment capacity and uncertainties, such as the risk of the "millennium bug". Two pillars then emerged: competition in energy generation and energy sales. Generation was opened; sales were restricted to large consumers. The free market grew, but remained limited by regulatory barriers.

The new provisional measure proposes what the sector has always wanted: the opening of the free market. Starting in 2026, all commercial and industrial consumers will be able to choose their suppliers. In 2027, this will also apply to residential consumers. This democratization strengthens competition, increases efficiency and expands options for consumers.

What deserves attention - and here, yes, there is room for technical criticism - is the definition given by the MP for the concept of self-production. By requiring the consumer to be the direct owner of the plant, it makes established financing models, such as project finance , unfeasible. This harms large consumers who depend on long-term contracts.

The provisional measure also corrects tariff distortions. Today, free market consumers benefit from reduced network tariffs, paid for by others. The new rule eliminates this asymmetry and strengthens the sustainability of the sector.

Despite having a clean and abundant matrix, the system is expensive and inefficient. The rationality of the MP is welcome. With adjustments, we have the chance to inaugurate a new cycle for the electricity sector.