At Enel, a shock of incompetence.

The passage of an extratropical cyclone through São Paulo on Wednesday, December 10th, with wind gusts close to 100 km/h, lasted about 12 hours and knocked down trees onto the power grid, leaving approximately 2.2 million of the 7.5 million properties covered by the Enel São Paulo concessionaire in the metropolitan region without power.

After the initial scare, which generated 1,800 calls to the Fire Department, the residents of São Paulo returned to living a nightmare that has been repeating itself with irritating frequency over the last two years: Enel's delay in restoring the power supply.

On the afternoon of Friday the 12th, as clouds began to form, with rain forecast for the weekend that would certainly lead to further fallen trees and power outages, approximately 600,000 properties in the largest city in South America remained without power after 48 hours, resulting in losses of R$ 1.5 billion for commercial establishments alone, according to the São Paulo Federation of Commerce.

In 2018, when it took over the electricity concession for the São Paulo metropolitan region by acquiring 73.38% of AES Eletropaulo's shares for R$ 5.55 billion in an auction held on the B3 stock exchange, the Italian multinational Enel promised a management overhaul. Seven years later, it has managed to subvert the order and institute a genuine shock of incompetence.

Strictly speaking, Enel's management in São Paulo can be divided into two parts. The first, between 2018 and 2023, was marked by reduced investments, with significant cuts to the workforce of the former operator, resulting in a failure to meet the minimum quality targets set by Aneel (the sector's regulatory agency) in 2021 and 2022.

The tragedy is that, starting in 2023, the company paid the price for the negligence of previous years by suffering from successive extreme weather events passing through São Paulo in the last two years – intense storms and this week's cyclone, which knocked down trees and power poles – which only reinforced its bad reputation, fueled by the accumulation of fines that already total more than R$ 404 million.

The predictions of "quick restoration of power," which incidentally always took longer than promised, have gained a veneer of sincerity in the last two years: in cases of outages following more extreme weather events, given the evidence, Enel simply stopped giving a timeframe for the restoration of electricity.

This was the case in the consecutive blackouts in 2023, 2024 and now – with the announcements justifying it by saying that “complex problems” prevented the restoration of power.

Data presented by Aneel shows that the average response time for Enel's emergency calls in São Paulo increased from 9.13 hours in 2019 to 12.21 hours in 2024, an increase of approximately three hours. Last year, a large number of properties took five to seven days to have their power restored after a storm.

The problem is that there is evidence that the company neglected the recent series of extreme weather events. According to information obtained by CNN from the regulatory agency, Enel São Paulo spent 22.3% less than planned on personnel, materials, and services in the last 12 months.

According to Aneel, there has been a reduction of R$ 877 million in personnel and materials since 2024. Enel's expense reduction – of 22.3% – is much greater than the average of 3.8% for all distributors in Brazil.

In another aspect, investment – by which Aneel calculates how much distributors invest and compares it with the depreciation of their own network – the result is even more paltry. Among 51 companies, Enel ranks 48th, ahead of distributors in Roraima, Amazonas, and Light, which is in judicial reorganization.

Weeds among the wheat

The distributor has long been under scrutiny from Aneel (the Brazilian Electricity Regulatory Agency), the city hall of the capital, and the São Paulo state government. The repeated fines have been ineffective – Enel has resorted to the courts to escape sanctions, paying so far just over R$ 29 million, less than 10% of what is owed.

Despite a history of failing to meet targets, Enel sought the early renewal of its concession contract – which raised concerns among several public agencies. In October, the Federal Court suspended the administrative process for the early extension of the concession, responding to a request from the City of São Paulo.

Last week, days before the storm in São Paulo drew attention to the distributor's management, the Federal Court of Accounts (TCU) concluded that Enel had not proven that it had definitively corrected the flaws that led to a series of major blackouts and recommended that Aneel evaluate the possibility of administrative intervention in the concessionaire and a declaration of forfeiture of the concession.

Nivalde de Castro, a professor at the Federal University of Rio de Janeiro and general coordinator of the Electric Sector Studies Group (Gesel) at UFRJ, however, states that it is necessary to separate the wheat from the chaff in the case of Enel.

According to him, since 2023, São Paulo has faced three major extreme weather events – “perfect storms,” with wind gusts above the historical average and interaction between urban heat islands and cold fronts from the south. These events cause abrupt changes in weather conditions, affecting airports, traffic, internet networks, and, above all, the electrical grid.

“The current infrastructure was not designed to withstand such extremes, resulting in widespread and prolonged blackouts, such as when 25% of Enel's customers were left without power,” says Castro, noting that even with impeccable management, the utility would hardly have been able to avoid the damage seen this week.

“Investments in distribution are capital-intensive and cannot be activated with short notice,” he warns. “Alerts given hours or months in advance are not enough, as preparation requires structural and regulated works.”

Castro admits that Enel's track record up to 2023 was negative in terms of operation and maintenance, with cost reductions, asset sales, and outsourcing. Even when imposing fines, the regulatory body also has limitations.

This is because, according to the concession contract and Aneel's regulations, investments need to be authorized and classified as "prudent" to determine the tariff and remuneration base. "Since extreme events were not foreseen 30 years ago, when AES Eletropaulo won the concession, the distributor had no regulatory motivation to prepare the city against unprecedented cyclones and storms," he adds.

According to him, starting in 2023/24, Enel committed to an above-average investment plan for two years, extending to 2025-2026, although operational effectiveness is not immediate due to the complexity of the São Paulo network.

Recent guidelines from the Ministry of Mines and Energy suggest accepting prudent investments for exceptional cases in the energy transition. Castro says that Aneel (the Brazilian Electricity Regulatory Agency) should regulate these exceptional cases, such as Enel's, opening space for differentiated solutions, such as underground networks in critical clusters, with specific tariffs for high-density regions of high economic importance.

"The city cannot be solved overnight; progress must be made in stages, prioritizing areas with the greatest socioeconomic impact and a history of failures, according to data and regulatory oversight," he points out.

Political interventions suggesting the suspension of the concession, according to him, are ineffective and counterproductive, citing the failure of the São Paulo City Hall to prune trees that threaten the power grid.

“The response must be regulatory and technical: if there is an intervention from Aneel [Brazilian Electricity Regulatory Agency], what are we going to do in the next external climate event in São Paulo?” he asks. “The approach is to learn in order to improve and establish terms of commitment conditioning any eventual renewal.”

Contacted for comment, Enel did not respond by the time this report was published.