Medium Term Horizon

The planning process of energy operation in the context of the Annual Planning Cycle Operation results in two basic products: the Energy Operation Plan (PEN), which horizon covers the period from May of this year (end of rain season) to December of the fifth year at the helm, this study being issued by ONS in July 2013, by the reports RE / 0065/2013 - Energy Operation Plan 2013/2017 - PEN 2013 - Executive Summary and RE / 0066/2013 - Plan of Operation energy 2013/2017 - PEN 2013 - Volume I - Terms of Service. The second product corresponds to the calculation - each month of the current year – of the Future Cost Functions, using the medium-term optimization model - Newave. This product allows the coupling of the operating strategies of medium-term to short-term model Decomp establishing policies for energetic operation of each week of the current month, the Monthly Operation Program PMO.

Exceptionally, in September 2013, studies of PEN in 2013 were revised in view of the changes resulting from the approval of the use of the Model NEWAVE version 18, which replaced the mechanism of risk aversion (CAR) for CVaR methodology, as well as updates relevant to the second review of data from the 2013 Planning Cycle Energy Operation. Thus, it was produced in September 2013 the Energy Operation Plan 2013 Revision 1 2013/2017 PEN - - Executive Summary, which in qualitative terms did not bring significant changes in the conclusions and recommendations with respect to reports issued in July 2013.

With the incorporation of the mechanism NEWAVE CVaR model the most critical inflows scenarios shall be most relevant for estimating the Cost Function Future. For this, the paradigm of minimizing the expected value of the total cost of operation becomes the minimization of a balance between the expected total cost of operation value and the expected value of the operating cost of the most critical scenarios, where the value corresponds to the percentage of these scenarios. Both the value and the value of the weighted CVaR (called λ) are input data of model NEWAVE and were established by the Standing Committee for Analysis of Computational Methods and Programs for the Electric Sector - CPAMP as = 50% and λ = 25 %.

In addition to incorporating this mechanism, the analysis of system performance were based on the expected load in the 2nd quarterly review and the expand of supply of scheduled generation, with reference to the work schedules set by the MME / CMSE / DMSE PMO for September / 2013 in order to capture the results of any significant changes occurred in the supply schedule.

The analysis of the conditions of service to the load based on the probabilistic risk assessment of energy deficit indicates the adequacy of supply criteria established by the National Energy Policy Council (CNPE), to the extent that the deficit risks are less than 5% for all subsystems on the horizon 2014-2017. It is noteworthy that the North and Northeast subsystems present risks of any depth near zero, which could indicate the existence of non-exportable surplus energy in these subsystems.

This result is due mainly to the increased supply of new energy aggregate by auctions and transmission lines. The installed capacity of  BIPS is set to rise from 114 951 MW, existing on 31/12/2012 to 145,667 MW on 31/12/2017. Hydroelectricity will continue as the main source of power generation, although its percentage will be reduced over the next five years, from 77.9% of the BIPS (89,521 MW) to 73.8% of the BIPS (107 491 MW).

Noteworthy is the significant increase in the installed capacity of wind power plants, which will increase from 1.5% of Matrix Power (1,762 MW) to 5.8%, equivalent to 8477 MW installed at the end of 2017, without considering the upcoming auctions of new energy that may still occur in 2014.

The evolution of this matrix, with the maintenance of the current trend of expanding hydropower with low or no multiannual regularization causes the flexible or low flexible thermoelectrics, with moderate operating costs and lower uncertainty in the supply of fuel - natural gas, liquefied natural gas and coal - will take an essential role in the selection of projects to be offered in the next new energy auctions. Likewise, small plants and complementary alternative sources in the dry season, such as wind and biomass, albeit with intermittent offer profiles also come to play complementary roles in the operational safety of the BIPS.

Noteworthy is the analysis of the maximum demand of care, where the static balance indicates that the net capacity available under the horizon of the 2013 PEN is always higher than projected demand. However, the trend is that the order of thermal generation over the declared inflexibilities by the thermal generation agents is necessary, depending on the severity of the losses by depletion of reservoirs (function of hydrological regimes) and/or internal constraints in the transmission network. Added to these events progressively increased participation in the supply of hydraulic expansion grounded in plants with low and/or no regularization, which reduces hydraulic availability at the time of maximum demand.

Sensitivity analyzes indicate that greater availability of hydroelectric generation may result from the application of operational security policies, which elevate levels of the reservoirs, reducing losses by depletion. Besides this feature, the hydro generation can also be increased by the implementation of new generating units accrued in some existing hydropower wells (about 5 GW, second inventory ABRAGE), once the analysis of technical/economic feasibility is concluded.

The main recommendations of PEN in 2013 are listed below:

• Maintenance of strict monitoring by the MME/CMSE and ANEEL, of the schedule of supply expansion, with emphasis on the following premises: Belo Monte hydropower (11,233 MW), Jirau (3,750 MW), San Antonio (3,150 MW), Teles Pires (1,820 MW), Santo Antônio do Jari (373 MW), Baixo Iguaçu (350 MW), Colíder (300 MW) power plants Baixada Fluminense (530 MW) and Maranhão III (499 MW), whereas the results of PEN are intrinsically related to the assumptions of load and especially the supply expansion predicted;
• The results of the energy assessments indicate the need to develop feasibility studies to expand the capacity of the North-South and South-Southeast / Midwest interconnection and export capacity in the Northeast;
• MME and ANEEL should evaluate the creation of regulatory mechanisms that encourage the installation of hydraulic power in BIPS, either through the engine of the existing wells in operating plants or by repowering existing plants, or by the possibility of contracts of power and/or capacity charges;
• It must be assessed by the MME the feasibility of special auctions of energy by source and region, particularly for South and Southeast / Midwest subsystems, aiming at the aggregation of thermal generation, especially in the southern region of the country.

Short Term Horizon

The summer of 2013 was characterized by a condition of neutrality of the Sea Surface Temperature - SST in the equatorial Pacific and a delay in the onset of the rain season. The table below summarizes the conditions of inflows in the BIPS subsystems throughout the year.

Subsystems	Afluent Power (% on historical average)
	jan / abr 2013	mai / nov 2013	dez 2013
Southeast/ Middle-east	96%	112%	96%
South	127%	129%	89%
Northeast	50%	56%	85%
North	85%	90%	97%

The table below shows the evolution of levels of storage per subsystem, throughout the year, highlighting the end of the wet period of the Southeast / Midwest, Northeast and North regions in April, and the end of the dry season in these regions in November. Existing hydrological conditions did not allow the Southeast / Midwest, South and Northeast subsystems to recover their maximum storage capacities in the wet season.

Subsystems	Stored power (% of maximum EAR)
	jan 2013	abr 2013	nov 2013	dez 2013
Southeast / Middle-east	37,5	41,6	62,5	43,2
South	43,8	60,3	73,0	57,7
Northeast	32,9	48,8	22,2	33,8
North	51,1	96,1	33,3	46,2

Considering this scenario, the Monitoring Committee of the Electricity Sector - CMSE kept the full order of the thermal power stations (nuclear, coal, gas and liquid fuel) until the month of April. Starting in May, the CMSE promoted partial reduction of the order of thermal liquid fuel higher cost plants totaling 400 MW. During the dry season, inflows of recession in the North and Northeast subsystems were observed.

In the latter, the third worst dry period of all history available (1931-2012) occurred. Improving hidroenergetic conditions in the Southeast / Midwest and South, between May and November brought the CMSE to promote the total shutdown of the thermal power plants on liquid fuel from the month of July on, representing a further reduction of about 3,850 MW.

The thermal generation dispatch considering the totality of the thermal nuclear fuel, coal and gas (GT1a group) plants remained in the period July-August 2013 From September, with the implementation of the CVaR methodology on the NEWAVE and DECOMP models in replacement to Short Term Operating Procedures - POCP, the thermal generation dispatch of BIPS became effected as outcomes of these models, from the realization of Monthly Programs Energy Operation - PMO and its revisions.