Excerpt from the Background section:
The Brazilian Power Sector, Latin America's largest, unique among energy suppliers to the world's leading economies, is almost completely dependent on one resource for its energy supply: water. Of its 65, 134 MW of installed generating capacity, in 1998 more than 90% was hydro. A substantial amount of that hydro capacity is located on only a few rivers. The sites for the generating facilities, by virtue of the nature of the resource, are generally far removed from major load centers, leaving the country highly dependent on long transmission lines to move electricity from the producer to the consumers. This dependence greatly complicated Brazil’s coordination and optimization in the use off its resources. Seasonal and regional differences in precipitation and water levels, coupled with the fact that most dams are multi-purpose facilities, providing irrigation and navigation as well as energy production, gave rise to a very sophisticated national model for coordination and dispatch. The model worked quite well in operating the generation and transmission sectors in a reasonably efficient manner.
Historically, the ownership of the power sector has changed from private to state and then back to private ownership. Indeed, the nationalization of the industry was only completed in the late 1970's, and even then it was not 100% nationalized. State ownership, however, did not necessarily mean ownership by the national government. Although the Brazilian Constitution vests responsibility for the electricity sector with the national government, in fact, much of the distribution sector was owned by state governments. In some states, including major ones such as Sao Paulo, Minas Gerais, Parana, Rio Grande do Sul, and Rio de Janeiro, the state government-owned utilities were at least partially vertically integrated. By the early to mid 1990’s when restructuring came on the agenda, the industry structure was clear. With the exceptions of nationally owned distribution companies in Rio de Janeiro, Espirito Santo, Brasilia and a few scattered, privately owned companies, the distribution companies were, as noted, owned by state governments. The part of the industry owned by the national government was generally housed under the umbrella of the government holding company, Eletrobras. These entities included four large generating and transmission companies: Chesf, FURNAS, Eletronorte, and Eletrosul (later Gerasul); the industry research arm, CEPEL; and the energy efficiency program, Procel. The huge Itaipu hydro plant was operated by an independent governmental authority, created pursuant to a treaty with Paraguay, with whom the facility is shared. The entire electric sector was, nominally, at least, subject to the “regulatory” authority of the National Department of Water and Energy (DNAEE). DNAEE’s staff was almost entirely composed of employees of regulated entities on loan to the regulator for stated periods of time, and was anything but independent. While it had a role in approving tariffs and was often consulted on industry related matters, it lacked an independent governing board, any independent and final authority of its own, and functioned generally as only a small piece of the overall bureaucratic structure of the industry. Overseeing DNAEE and responsible for policy within the sector was the Ministry of Mines and Energy.