Less than two months after it was held, the Capacity Reserve Auction in the Form of Power ( LRCAP ), marked by a low premium (5.5%) and a high impact on electricity bills, continues to generate controversy.
This time, a report from the Mines and Energy Committee of the Chamber of Deputies, signed by Congressman Danilo Forte (PP-CE), proposes the suspension of the LRCAP by the Federal Court of Accounts (TCU) due to numerous irregularities in the bidding process, opening a new crisis in the already troubled electricity sector.
Organized by Aneel – the regulatory agency for the electricity sector – the objective was to contract thermal power plants using natural gas, coal, fuel oil, and biodiesel, in addition to hydroelectric plants, to be activated during peak hours, between 6 PM and 7 PM, when solar generation drops, public lighting is activated, and the use of household appliances skyrockets, demanding firm and immediate power from the system, mainly from thermal plants.
The auction generated more than 100 contracts in 20 states, totaling R$ 515.7 billion, with the contracting of 18,977 MW of power. The winners will be entitled to a fixed annual revenue of R$ 38.9 billion, in exchange for the availability of power to the system.
Given the sums involved, the LRCAP auction was eagerly awaited by companies in the electricity sector – many of which were suffering losses due to curtailment , the cuts in renewable generation by the ONS (National System Operator), because of the oversupply of energy during the day.
This is because the contracts will have a duration of ten years for existing plants and 15 years for new projects and expansions. The selection of the winners was based on a criterion that combines price and operational performance.
The auction's structure had already drawn criticism from industry experts at the time it was held. Abrace Energia – an association of large industrial energy consumers – for example, warned that the volume contracted in the auction was beyond what was necessary at the time, evidenced by the very low level of competition, and would cause significant tariff impacts, estimated at R$ 40 billion per year, impacting the average electricity tariff for Brazilians by approximately 10%.
The report presented this week by Congressman Forte, however, goes further. He criticizes, for example, the alteration of the ceiling price by the Ministry of Mines and Energy 72 hours before the auction. The ministry's measure doubled the ceiling price for plants already in operation that competed in the bidding and also increased the value for new plants by 81%, without any regulatory impact analysis.
In the text, the rapporteur recommends the approval of a draft legislative decree (PDL) in Congress – which does not require presidential sanction – providing for the immediate suspension of the bidding process by the TCU (Federal Court of Accounts), the revision of the bidding price ceilings, and suggests the opening of an administrative process by Cade (Administrative Council for Economic Defense) to investigate "possible cartel formation".
Finally, the report states that representatives from the National System Operator (ONS), the Brazilian Association of Energy Storage Solutions (ABSAE), and other sector entities affirmed during a public hearing before the committee that storage systems could offer a faster response, with lower costs and less environmental impact than contracted thermal power plants.
Caution
Experts consulted by NeoFeed acknowledge flaws in the organization of the auction, but are cautious about canceling the bidding process, warning that restarting the process now could jeopardize the security of the electrical system. Off the record, sources cite Congressman Fortes' alignment with the wind energy sector as a motivating factor for the creation of a draft law suspending the bidding process.
In fact, the process that led to the 2026 LRCAP had already been marked by two years of waiting, with legal challenges, a postponement, questions about the rules, and harsh criticism from the TCU (Brazilian Federal Court of Accounts) in a session held two days before the auction, in which it decided to maintain the bidding process due to the limited time available to investigate the irregularities.
Luiz Eduardo Barata , president of the National Front of Energy Consumers (FNCE) – a coalition formed by 23 entities representing all classes of consumers (residential, low-income, industrial, commercial, and isolated systems) – considers the excess of contracts foreseen in the LRCAP to be misguided, as it will lead to an additional cost of approximately half a trillion reais over the next few years.
"In FNCE's view, the results should be reassessed, but the auction should not be canceled," it warns, highlighting the importance of the contracts that will specifically meet the needs of the electricity system in 2026 and 2027.
"Contracts for longer terms should be reevaluated, as well as the contracting of non-existent power plants, that is, those that are still only on paper," it continues. FNCE also classifies the contracting of coal-fired projects as unjustified.
João Carlos Mello, CEO of Thymos Energia , a consulting firm operating in the sector, lists a series of factors that ultimately led to the problems seen in the auction. He cites the fact that the bidding process was held after years of delay, with an accumulated need for contracting, in an environment of high demand and the need for significant investments for companies to re-equip or build new thermal power plants.
“There was an error in the Capex reference used in the ceiling prices, based on statements from investors, who then demand guarantees, and not on the actual value of the projects,” he states. “Furthermore, in parallel, there was a global overheating of the thermal energy market due to the demand for AI data centers in the US.”
According to him, this may have been a factor in the last-minute price ceiling adjustments. Mello, however, criticizes the governance with multiple bodies (MME, Aneel, ONS, etc.), which hesitate to take positions and acknowledge delays, such as the five-year delay in carrying out the LRCAP: "It is necessary to publicly admit the delays and correct course with transparency, for example, by justifying price and cost revisions."
Alternative
Fábio Lima, executive director of ABSAE , acknowledges that the proposed law to cancel the auction is a very drastic measure. “Ideally, an auction with technological neutrality would be held, where the sources compete; as an alternative, an auction could first be held for batteries, complementing it with cheaper sources such as hydroelectric power, and, if necessary, short-term contracts for diesel or gas,” he states.
Based on studies by EPE, Lima states that the central problem is peak demand between 1 and 3 hours – the so-called “120 critical annual hours”. BESS (a battery-powered energy storage system) is cited by Lima as a cost-effective solution for peak demand.
“BESS can address the core of the power deficit with lower fixed revenue and zero variable costs,” he says, stating that it is cheaper than new gas-fired power plants (R$ 2.7 million/MW-year versus approximately R$ 1.5 million/MW-year for BESS), competitive with hydroelectric and diesel plants, and more economical than existing thermal plants.
Regarding potential legal developments suggested by the Chamber's committee, an expert consulted by NeoFeed sees a possibility that the request will be accepted by the TCU (Federal Court of Accounts).
“There is a chance, yes, but I wouldn’t frame the issue as a simple choice between ‘suspending’ or ‘validating’ the auction,” says Diego Fernandes , partner at the law firm Roenick Fernandes Advogados. “The TCU, so far, hasn’t immediately suspended the bidding process, but it also hasn’t closed the discussion,” he adds, referring to the decision to maintain the bidding process on the eve of the auction.
According to him, the most likely course of action, in light of the decision already made by the TCU (Brazilian Federal Court of Accounts), does not seem to be a total and immediate halt to the bidding process, but rather a conditional intervention, focused primarily on the transparency of the documents, the consistency of the model, the investigation of corporate ties, and the effective capacity of the winners to deliver the contracted power.
“Recalculating the price ceilings would be a more ambitious and legally more difficult intervention; however, if the investigation reveals a lack of motivation, a relevant contradiction, or a disconnect between the MME's final decision and the available technical elements, the case ceases to be a mere regulatory divergence and begins to involve a possible flaw in administrative motivation,” says Fernandes.
