One day after the Minister of Mines and Energy, Alexandre Silveira , announced a request to the National Electric Energy Agency ( Aneel ) to initiate the process of terminating the concession of the energy distributor Enel in São Paulo, due to inefficiency in the services provided, several doubts arose on Wednesday, December 17, about how this process will take place.

Among these are the criteria for evaluating the performance of Enel, the country's largest energy operator, the time required for a resolution, and even whether the chosen model – as opposed to intervention in the concessionaire, for example – is the most appropriate.

The initiative to initiate a contract termination process with Enel was the result of an agreement between Silveira, representing the federal government, with the governor of São Paulo, Tarcísio de Freitas (Republicanos), and the mayor of the capital, Ricardo Nunes (MDB), amidst an outcry from the population of São Paulo following the passage of an extratropical cyclone last week, which left approximately 2.2 million properties without power.

Enel has come under scrutiny for repeating the same problems for the third consecutive year: in addition to delays in restoring power, there is evidence that the company neglected the most recent series of extreme weather events.

Data from Aneel shows that Enel São Paulo spent 22.3% less than projected on personnel, materials, and services in the last 12 months. Enel's expense reduction – of 22.3% – is much greater than the average of 3.8% for all distributors in Brazil.

In another category, investment – by which Aneel calculates how much distributors invest and compares it with the depreciation of their own network – Enel ranks 48th (out of 51 companies), ahead only of distributors in Roraima, Amazonas and Light, which is in judicial reorganization.

Experts consulted by NeoFeed assure that the strategy chosen by the federal government was correct.

“The initiation of a termination process for Enel SP is the most appropriate measure, as it does not interrupt operations and allows for comprehensive oversight of governance, compliance , indicators, customer service, and complaints against the concessionaire, obligating the company to adapt,” states Rosemeire Costa, president of the National Council of Electricity Consumers (Conacen) – a non-profit association representing consumers in concession areas.

Costa cites the experience of a federal intervention by Aneel in the concession of Grupo Rede, in Mato Grosso do Sul, in 2012, as inadvisable. "The intervention 'stifles' management, hinders access to credit by the concessionaire, and paralyzes investments," he says, citing the delay in resolving the process – more than two years in the case of Grupo Rede – as another problem.

"Interventions make the market resistant, hinder financing, and generate systemic risk in multiple concessions, requiring subsequent transfer to solid operators," she adds.

2024 Process

The fact that Aneel announced it will use a process already opened against Enel in 2024 to accelerate the analysis is praised by the president of Conacem.

"The oversight by Aneel, which should be carried out in partnership with Arsesp (the São Paulo state regulatory agency for the sector ), is meticulous, with demonstrative, initial, periodic and extraordinary assessments, and on-site scrutiny of management systems," says Costa.

According to her, the inspection process collects evidence and complaints and issues a technical report. Subsequently, the agency's board recommends termination and forwards it to the granting authority, the Ministry of Mines and Energy, with the participation of the TCU (Federal Court of Accounts).

The duration of the termination process tends to be shorter than that of the intervention, between six months and one year, considering that part of the procedure was initiated in 2024. "The fines applied by Arsesp to Enel SP, of approximately R$ 170 million, support the admissibility of the termination," states Costa.

There is doubt as to whether extreme weather events – such as those that hit the city of São Paulo in 2023, 2024 and 2025 – which were not foreseen in the concession contract signed by AES Eletropaulo in 1998, and later taken over by Enel in 2018, can be considered grounds for excluding liability for a distributor.

“To put it simply: heavy rain and strong winds are generally not considered grounds for excluding liability,” says Guilherme Amorim, partner at the law firm Rubens Naves Santos Jr. Advogados. “Although companies try to claim 'force majeure' or 'act of God,' the courts and the National Agency of Electric Energy (Aneel) understand that these events are inherent risks of the energy distribution business.”

Marco Antônio Allegro, a lawyer specializing in Business Law and Asset Structuring, states that Aneel (Brazilian Electricity Regulatory Agency) has structured a formal model for evaluating the performance of distributors – which will be used in the Enel concession termination process – capable of supporting not only financial sanctions, but also the suspension, non-renewal, or termination of the concession itself.

At the heart of this system is Annex VII-A of Regulatory Resolution No. 948 of the regulatory agency, which establishes technical and objective criteria to assess whether a concessionaire maintains the necessary conditions to operate an essential public service.

“Unlike political or judicial debates, what is being evaluated here is not narrative, justification, or exceptional context, but measurable adherence to previously defined regulatory parameters,” says Allegro.

Aneel's model is based on a clear logic: the concession is a contract conditioned on continuous and balanced performance across multiple fronts. To this end, the agency structured the evaluation of distributors into five independent and cumulative dimensions, classified from A to E, each with its own indicators, calculation methodology, and minimum required score.

The dimensions include service continuity, quality of customer service, management efficiency, economic and financial sustainability of the concessionaire, and regulatory compliance.

According to Allegro, the critical point of the model is that there is no compensation mechanism between the dimensions. The concessionaire needs to have an average score in all areas. If it has a "red" score in just one of them, it implies regulatory unsuitability, even if the performance in the others is satisfactory.

“Dimension E, for example, which refers to regulatory compliance, doesn't assess whether the power came back on quickly or whether the call center provided good service; it measures something more structural: the degree to which the utility company adheres to the rules,” says the expert.

In other words, it's not isolated mistakes that matter, but the repetition of behaviors that indicate resistance or inability to comply.

"For Aneel, the tipping point doesn't occur when there's a serious operational failure, but when the regulatory history begins to reveal a persistent pattern of non-compliance," says Allegro. "It is precisely in this scenario that the most sensitive risk for Enel lies."