Brazilian electricity market structure and risk management tools

The need to attract private capital was one of the main drivers for the deregulation of electricity markets in Brazil. The early 90s scarcity of public resources for infrastructure investments was responsible for the need of private funds. However, the deregulation process was not as straightforward as firstly conceived, and adjustments had to be made. This paper analyses the causes and consequences of the deregulation of Brazilian electricity markets, particularly in what concerns to the management of risks. It describes briefly the former market organization and details the current model, especially the changes made in market rules and the tools developed for risk management purposes. The paper concludes with some remarks on the marketspsila observed behavior and possible future trajectories.