Before detailing the activities developed by ONS in 2003, an overview will be given of the evolution of the physical generation and transmission segments of the NIS, a direct result of actions by ONS, as well as the follow-up of the evolution of the energy demand in the system.

a) Generation System

During 2003, the NIS incorporated 2,870.8 MW of new generation offer broken down into 2,275.6 MW from hydro plant production and the rest - 595.2 MW - from thermal plants representing a total of 37 new generation units. This increase added a 3.8% growth in the installed capacity in relation to the same period of the previous year. The new generation units represent a 6.5% increase in number in relation to the 566 units in operation at the end of 2002.

By the end of 2003, the NIS installed capacity reached 77,321 MW, roughly 66,321 MW from hydro plants and 11thousand MW from thermal generation units (including 2,007 MW from nuclear plants and 50% of the installed capacity of the Itaipu Complex - that belongs to Brazil - equivalent to 6,300 MW). The total number of existing generation units was 603 by the end of 2003. To obtain the total available production capacity these values must be added to the energy imported from Argentina - 2,178 MW and Itaipu – 4,100 MW contracted from ANDE/Paraguay.

b) Transmission System

General Aspects

The Brazilian Transmission System registered a growth rate in terms of its extension, of 7.1% in relation to 2002, adding 5,136 km of new T lines. With entry of 12 new substations, a 3.9% increase was recorded over the 306 installations in 2002, reached a grand total of 316 substations. An increment of 9,704 MVA corresponding to 5.8%, in the NIS transformation capacity, was also demonstrated in relation to the previous year.

Structure of the Available Capacity in the NIS (MW)

Data of 12/31/2003

⁽¹⁾ Includes only the Brazilian portion of the Itaipu Binational Complex. Total value of energy contracted by integrant NIS companies: 10,074 MW/year.

⁽²⁾ Refers to maximum import capacity from Argentina, Uruguay and ANDE - Paraguay.

The transmission system at voltages between 230 kV and 750 kV, represented in December of 2003, a total of 77,642 km consisting of 780 transmission circuits and 175,916 MVA of transformation capacity installed at the 316 substations in the System.

The following tables show the evolution of the transmission system and the transformation capacity of the Main Transmission Network in the period 2001 –2003:

Transmission Network

Transformation Capacity – Voltages greater than 230 kV ⁽¹⁾

⁽¹⁾ The installed transformation capacity contemplates only those transformers with a transmission and/or load attendance function. Exclusions include elevator transformers located at Generator Units and units used specifically with Synchronous and Static Compensators.

⁽²⁾ On 12/08/2003, FURNAS de-activated Transformer number T2B1 - 345/138 kV, 225 MVA, in the ADRIANOPOLIS Substation that operated with a temporary configuration.

Inter-regional Interconnections

The energy transfer capacity between regions was increased due to the entry into operation of reinforcements made in the interconnections that act as virtual power plants. Among the important events and aspects:

•Implantation of the 500 kV Tucurui/Marabá C3 transmission line and the Marabá/Açailândia/Imperatriz C1, Açailândia/Presidente Dutra C1 and Presidente Dutra/Teresina C2 transmission lines that increased the export capacity of the North region and the limits for receiving power from the Northeast region by about 300MWmed.

• In 2003, the Northeast region began to operate, directly integrated to the Southeast region, with the entry of the Serra da Mesa/Rio das Éguas/Bom Jesus da Lapa/Ibicoara/Sapeaçu - 500 kV transmission line, providing an increase in a power reception capacity of 600 MWmed.

•The beginning of the first steps of the expansion work on the North-South Interconnection, contemplating the 500kV transmission lines at Serra da Mesa - Samambaia C3 and Serra da Mesa - Gurupi - Miracema C2, besides the compensation series at Samambaia. This work permits the raising of transmission limits between the North and Southeast/Midwest regions by 800 MWmed.

•With the implantation of the double circuit 500 kV Ibiúna / Bateias transmission line, another link was created in the South – Southeast interconnection increasing the interchange capacity between these two regions. This line adds an increased reception capacity by the Southeast by 1,500 MWmed and about 1,000 MWmed by the South region.

Regional Supply Installations

Regarding the improvement of the inter-regional supply capacity, the following entries of new installations is highlighted:

• In the Rio Grande do Sul area: transmission lines - 230 kV Caxias 2 / Caxias, Gravataí / Porto Alegre 6, a new substation at Taquara 230/138 kV and a 230 kV Taquara / Caxias transmission line;

• In the Curitiba area: a new substation at Campo Comprido and new 230 kV Cidade Industrial / Gralha Azul and Cidade Industrial / Campo Comprido transmission lines;

• At Fortaleza: circuit conversion to 500 KV at Milagres / Quixadá / Fortaleza and a 230 kV Cauípe / Fortaleza C2 transmission line;

• In the central area of Minas Gerais, a new substation at Vespasiano that sectioned the 500 kV Neves-Mesquita transmission line;

• In the Rio de Janeiro/Espírito Santo area: transformation increases at the Adrianópolis 500/345 kV and Vitória 345/138 kV substations;

• In the São Paulo area: a new station at Avaré and the transformation increases at the Tijuco Preto 750/500 kV, Bandeirantes 345/230 KV and Interlagos 345/230 kV substations;

Installations to viabilize the integration of power plants:

A new transmission line - 230 kV Jauru-Cairo - in Mato Grosso, integrating the NIS with the Jauru and Guaporé hydro plants as well as other smaller hydroelectric plants in the state.

The total electric energy consumption of the NIS, including losses in the transmission and distribution systems, (excluding energy imports), was recorded at 41,780 Mwmed - about 5.3% higher than in 2002.

The highest verified demand in the system in 2003 - representing the maximum integralized power on an hourly basis during the peak load period was recorded at 53,515 MWh/h, occurring at 19:00 hours on May 22, 2003 – a value 5.7% greater than registered in the previous year.

The values, dates and times for the maximum demand by region and the corresponding growth rates over the 2002 results are shown as follows:

By the end of 2003, the number of Generation, Distribution and Transmission Agents totaled 128, a growth of 6.67% over the total for 2002. The largest increase was seen in the Transmission segment that grew from 20 to 28 associate agents at ONS, mainly due to new investments in the sector. In the Generation category, two new agents were brought in raising the total to 78 members. One new Free Consumer also joined the operation - Fibraplac – who is connected to the Main Transmission Network at Rio Grande do Sul.

Among the alterations made in the regulatory legislation in 2003, the following events and highlights were recorded:

a) ANEEL authorization for temporary use - until reviewed at a public audience - of the Grid Procedures Module 14 - “Ancillary Services” and Module 8 - “Daily Electro-energetic Programming” as well as the second revised version of Module 10 – “Manual of Operation Procedures” in compliance with Resolution 675/03.

b) First use by ONS of the Grid Procedures Module 19 – “Identification and Treatment of Non-conformities”, according to a directive from ANEEL.

c) Issuance of the National Waters Agency – ANA Resolution 434/03, authorizing the temporary reduction of the minimum water flow limit at Sobradinho, from 1,300 m3/sec. to 1,100 m3/second. The aim was to permit a greater thermal energy dispatch in the Northeast region and maximize power transference from the Southeast and North regions, in order to recover the reservoir water levels in view of the unfavorable rainfall conditions verified in this region.

d) With the objective of establishing regulatory guidelines for the procedures indicated in GCE Resolution 109, to give greater safety to the energetic operation, The CNPE – the National Council for Energy Policies issued Resolution 10/03, regulamented by ANEEL Resolution 686/03, establishing among other things, procedures related to the use of Risk Aversion Curves - CAR. In the imminence of the curves being reached, ONS must dispatch complementary thermal generation in order to prevent the water storage levels from reducing below the limits defined by the Risk Aversion Curves. In this situation, when emergency plants are dispatched, these plants will not be considered when determining the MAE energy prices. However, if in fact the Curve is reached, dispatch from these plants will be considered in the MAE energy prices.

e) As a consequence of the hydrologic conditions, in the South, resulting in very reduced water levels at the reservoirs in the region, especially on the Iguaçu River, ONS conducted studies in collaboration with energy companies operating in the area in order to establish new Risk Aversion Curves. These new values were submitted to ANEEL and subsequently approved after the Public Hearing held to present the altered values.

f) Issuance of the CNPE Resolution 03/03 that defined the directives for conducting auctions of surplus energy from generation concessionaires and authorized agents; issuance of ANEEL Resolution 353/03 establishing the general conditions for the exclusive sale of residual electric energy resulting from the release from the Initial Contracts or Equivalent Contracts Agreements. Responsibility falls on ONS and the distribution agents to issue a Technical Report to MAE presenting the remaining capacities associated with the connection points used for different proponent purchasers as well as the amount of electric energy in question.

g) Special highlight must be given to the issuance by the Federal Government, in December 2003, of the Provisional Measures 144 and 145 that establish a new institutional milestone in the Brazilian Electric Sector which will be regulamented in 2004.

The operation of the National Interconnected System - NIS, throughout 2003, ran well within the limits established in the Grid Procedures.

The activities conducted by ONS, together with sector authorities and with the support of sector Agents, aided in minimizing operational costs and at the same time, maximize the safety of the electric supply. Furthermore the joint efforts made helped the Operator observe the constraint limits imposed by the multiple uses of water resources and the actual operational limitations of the installations of the system. ONS obtained a high degree of success by simultaneously complying with all these objectives through its coordination and control activities of the NIS while trying to maintain the goal of consistent systemic optimization.

The safety conditions of the electric energy supply were evaluated based on probabilistic analyses that estimated the risk of occurrence of energy deficits. These studies were complemented by deterministic studies based on biannual risk aversion curves – CAR.

The regional water storage level positions, in relation to the curves, were monitored and published continuously. They aided the National Operator to establish interregional energy interchanges and the thermal generation dispatch in order to minimize costs and maintain acceptable reliability standards, in view of the recorded hydrological conditions and the energy consumption behavior of each region.

In the Southeast/Midwest region, the hydrologic conditions presented a normal profile (92.4% long-term average). This allow ed for the maintenance, throughout 2003, of the regional water storage values at levels far above those determined by the Risk Aversion Curves. During most of the year, this region exported energy to the Northeast and South, thus contributing to the equalization of the power supply conditions between the different regions of the country.

The South region experienced unfavorable inflows between September and November with a significant reduction of water levels at the reservoirs along the Iguaçu River. This fact lead ONS to maximize the energy supply from the Southeast to this region in order to help maintain the water storage levels above the limits set by the Risk Aversion Curves for the region.

Load demand was supplied within the normal conditions in the period. There were occurrences of spillages at Tucuruí during the wet period following the controlled depletion of the reservoir during the dry season guaranteeing the necessary power supply to the regional market and the transfer of energy to the Northeast, without violating the Risk Aversion Curve storage levels established for this region.

To facilitate entry of the second stage operation of the Tucuruí plant, the water level at the reservoir was lowered over the second half of 2002. In January of 2003, in order to recover the water level, ONS ordered importation, by the North region, of 120 MWmed from the Southeast region.

In 2003, the Northeast registered an average inflow of 71.4% of the long-term historic average. However, between May and September, inflows fell significantly to only 66%. This situation demanded special attention from ONS in the management of the energetic resources. The strategy adopted was to maximize the interchange received from neighboring regions which helped keep the water levels in the Northeast above the Risk Aversion Curves limits. In terms of annual values, this strategy resulted in water storage in the region in the order of 15,100 MWmed, roughly equal to 30% of the storage capacity of the entire region.

Between September and December of 2003, the inflows in the region were unfavorable demonstrating values of only 55% of the historic average. This resulted in the reduction of the safety margin related to the water storage levels compared to the respective Risk Aversion Curve. As such, in the first two weeks of December, the natural gas powered thermal units were dispatched at maximum generation. The emergency thermal plants, at a much higher operational cost, were also put on-line during the last few days of the year – on December 27th. This integrated operation policy, bringing together various System resources, contributed to the overcoming of adverse hydrological conditions at the lowest possible cost while protecting the water storage level in the region that was at only 14% of the maximum capacity by year’s end – equal to the limit set by the Risk Aversion Curve for the region.

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NIS - 2003: Participation-by-source of verified energy generation and imports - shown in %:

Looking at the NIS electric supply conditions, in 2003 the System operated well within the criteria established in the Grid Procedures when examining continuity, reliability and supply quality. There were no major disturbances recorded in the period thanks to the circuit loading and dispatch polices used during the year by ONS. An adequate level of compatibility was achieved between supply safety and energetic optimization and the almost perfect functioning of the safety and protection schemes whose job was to minimize the eventual propagation of equipment shutdowns and the risk of outages in the System.

Mention must be made of the improvements that were made in the operative safety of the NIS in spite of the fact that the complexity of the System increased due to the integration of various large sized installations and the expansion of the interconnections among the regions. The NIS received 37 new generation units and 12 substations as well as more than 5,000 km of transmission lines, close to 2,000 Mvar of capacitor series and 5,000Mvar of reactors, equipment that required the running of operational tests and commissioning simulations – all of which demanded the closest scrutiny by ONS beginning with the preliminary access request and pre-operational studies. This work depended on very close interaction between the National Operator and sector agents, owners and operators of the new installations; work that included intense monitoring during the initial equipment start-up operations, when a high probability of problem incidents normally occurs.

In 2003, operative safety improvements made in the NIS can be verified by looking at the number of disturbances that, significantly, did not provoke load cuts of any kind – more than 80%. Even when operating under conditions close to the transmission system limits, the system supported multiple contingencies very well while complying with the safety and quality requirements. The verified performance recorded for frequency of the system was higher than the previous year. While in 2002, there were 10 events in which the frequency reached a value less than 58.5Hz; in 2003 this value was repeated in only four disturbances, involving exclusively the North/Northeast subsystem.

The detailing of institutional activities conducted by the National Operator and the results obtained by these actions is presented in item 5.4 of the report under the title – Electro-energetic Management.

The total electric energy consumption in the NIS, including losses in the transmission and distribution systems was recorded at 41,780 MWmed, approximately 5.3% higher than recorded in 2002.

The first of the following Tables presents the NIS energy load corresponding to all of the energy consumed including technical losses, in GWhours, for the period 2001 – 2003.

The verified load peak, (see the second table below), representing the maximum integralized power on an hourly basis at the load peak period , expressed in MWh/h, is presented for the period 2001 – 2003.

Load Demand in MWh/h

The Action Plan, subject to approval by ANEEL, is a fundamental part of the ONS planning system, elaborated every year based on a three-year horizon in consonance with previous cycles.

The Action Plan covering 2003/2005 contemplates the environmental conditioning factors of the Brazilian Electric System – BES; the strategic challenges faced by ONS in this period; the permanent commitments of the National Operator and the activities focusing on achieving the strategic challenges including directives and associated projects.

The strategic challenges listed below have been based on the need to fulfill the permanent commitments of the Operator and take into consideration the environmental conditioning factors of the energy sector referred to above:

a) Maintain the NIS at a level of optimized performance;

b) Guarantee the electric safety of the NIS;

c) Assure the efficient management of the Grid Procedures and operational relations with all sector Agents;

d) Elaborate proposals and participate in the process of change in the BES;

e) Guarantee and adequate evolution of the methodologies and technical management processes of the NIS;

f) Assure the evolution of the institutional relations within the BES and the society so as to widen knowledge of the role of ONS;

g) Consolidate the bases and instrumentalize the corporate management of ONS.

The total amount of the Action Plan Budget for 2003 was approved by the Administrative Board and by ANEEL through Resolution 310, published in the Diário Oficial on July 01/2003, originally estimated at R$ 31,094.2 thousand.

Through Resolution 518 dated 10/03/2003, ANEEL approved a revision of the Budget for 2003 raising the amount to R$ 32,447.5 thousand. Of this revised value, a total of R$ 31,641.5 thousand was effectively spent, equivalent to 97.5% of the Revised Budget.

The ONS Action Plan for the period 2003/2005, contemplates not only the strategic challenges imposed by the environment of the energy sector, but also the permanent commitments of the Operator, based on 15 projects briefly shown below, including the results achieved in 2003.

PROJECT 1

Development of the Strategic
Management Model

The development of this model aims at preparing ONS to face the challenges associated with the increased complexity of the NIS operation in regard to the institutional and organizational improvements. In this project the concept-reference was developed consisting of ONS characteristics and organizational values, inherent responsibilities, institutional prerogatives and the requirements for healthy external relations. The process of detailing the “Organizational Systems” was initiated in this first phase targeting general improvement of management activities at ONS.

PROJECT 2

Development of an Agent Relations System

The objective of this Project is to create an integrated model for Information Management and Agent Relations and to develop and implant a general Information System to improve the quality of service provided by the Operator. Among the results of the project, mention must be made of the implementation of the new SIGA Information System in 2003.

The modeling of the system and its functional specifications as well as the definition of the implantation strategy were among the major landmarks reached in 2003 . The implantation of the GED – Electronic Documentation Management System is still in progress.

PROJECT 3

Development of Models and Processes
for Integrating New Agents to the NIS

This Project aims at bettering the relationship between ONS and sector Agents that will be connecting to the NIS. The objective is to develop and establish, for each new Agent, to facilitate his functions in the sector, an outline of the individual responsibilities during the Access Request Process and the final integration of the agent installations to the System, describing the procedures and highlighting Agent participation in the process of the operation of the system after his entry to the operation. This project designs actions that will guarantee integration of the new installation, in the safest possible manner, in compliance with requirements outlined in the Grid Procedures.

Procedures for coordinating the process and the step-by-step process accompanying the integration of new installations were systematically established to aid all sector Agents.

PROJECT 4

Implantation of an Operational
Auditing Routine

This project contemplates the activities needed to implant an operational audit procedure at ONS. The main purpose of this routine is to verify the total compliance of all operational processes as established in the Grid Procedures.

A manual entitled “Manual for Operational Audit Procedures” was elaborated. These procedures were used to audit the Biannual Telecommunications Plan, the Disturbance Analyses routines, the Monthly Operation Program and the Quarterly Planning of the Electric Operation.

PROJECT 5

Grid Procedures Management

This project was designed to detail the technical processes and to elaborate manuals containing the identification of responsibilities of all sector Agents, in relation to the ONS activities as outlined in the Grid Procedures. These procedures are understood to be a set of rules and technical processes, necessary and indispensable, so that the National Operator may fully exercise all institutional attributions. By the end of 2003, all 23 Modules of the Grid Procedures were approved by ANEEL for provisional use.

PROJECT 6

Improvement of the Models and Processes of
Corporate Management

This Project targets the upgrading and general improvement of all corporate management practices principally in regard to the functions of the Corporate Management System and the Economic-Financial Management System. It focuses on improving the managerial processes in the Competences Management System of the ONS technical and management personnel.

In 2003 the final stages of the People Soft, version 7, Corporate Management System were concluded as well as the elaboration of the basic structure for the Integrated Economic-Financial Planning System.

PROJECT 7

Improvement of the Operational and Corporate Infrastructure
for Information Technology and Telecommunications

This Project was designed to provide ONS with the necessary conditions so that the Information and telecommunications operational and corporate systems can guarantee a high level of productivity and efficiency in all respective processes.

Highlights in 2003 include: integration of the Technical Database with the Real Time Database, the evaluation of the existing computational systems and the upgrading and expansion of the telephone systems at ONS.

PROJECT 8

Improvement of the Operation Planning and Programming Models,
Methodologies and Processes

The work focuses on bettering the methodologies and improving the efficiency of the models and processes associated with the operation programming and planning.

In 2003, work was finished on the development of the SIPPOE Project – the system integration model – which is now undergoing implantation. Furthermore, in 2003, the concept of risk aversion curves was incorporated in the mid-term optimization model – NEWAVE.

The SADEPE system is still undergoing development and will e used for gathering outside information needed by ONS for the elaboration of the energetic operation planning. Highlights include the beginning of the development of a new short-term programming model called DESSEM. Finally, in 2003, purchase was made of the license to use and absorb the SDDP -an optimization model, with a detailed representation of the plants, to be used in energy operation planning.

PROJECT 9

Improvement of the NIS
Operational Safety Conditions

The objective of this Project is to increase the operative safety of the National Interconnected System – NIS when facing multiple contingency events and single contingencies when provoked by multiple shutdowns.

The Project comprehends the National System of Safety Control which was expanded in 2003 to include Safety Zone 1- ECS de Assis. Additionally, Project highlights include the implantation of basic tests as part of the Post-fault Analysis System and the beginning of the preventative maintenance programs for the ECS already set up; continuity of the studies for the implantation of long-term oscilographic systems; improvement of the models used to evaluate voltage stability and dynamics; a computational system for voltage coordinated control and finally, optimization of computational tools used to study system recompostion.

PROJECT 10

Improvement of the Models
and Processes of Load Forecasting

The main target is to streamline the relations between ONS and the Agents involved in forecasting load. The purpose was to comply with all guidelines laid down in Module 5 of the Grid Procedures, and includes the introduction to computational environments that facilitate the reception and treatments of data as well as the technological and computational advances needed for load forecasting for electric and energy studies. Highlights include the implementation of the ANNSTLF -Artificial Neural Network Short Term Load Forecaster, used to make hourly forecasts for 1 to 35 day periods.

PROJECT 11

Development and Implantation of
Hydro-meteorological Management Models and Processes

This project includes work on three main objectives focusing on input, processes and products that support the development of actions related to hydro-meteorology within the scope of ONS interests – namely:

• Expand access and incorporate more hydro-meteorology data so as to build a historical data file and improve the process used to update this information at ONS. Important work done includes the Revision Project for Natural Water Flow Series in the main hydrologic basins of the NIS. This revision now includes data for the period of 1931 to 2001. The work was carefully followed by ANEEL, ANA, CCPE/MME and generation Agents and marked the incorporation of information on the consumption of water for multiple uses in the streamflow series of the different basins in the system. It marked the improvement in the evaluation of hydraulic resources not only for planning the NIS operation but also for expansion planning and extra-sectorial studies, associated with hydraulic resources management.

• Organize the processes utilized in the hydro-meteorological area, highlighting the issuance of recommendations for the improvement of hydrometric and reservoir level monitoring at the basins in the NIS when considering the multiple use of water resources.

• Innovate products and processes at ONS in the hydro-meteorological area, incorporating new technologies and scientific advancements.

PROJECT 12

Operational Integration of
New Installations

This Project was designed to insure that integration of new installations in the NIS is done in the safest possible manner and that all pertinent information related to the start-up of operations be made available to all interested Agents. Included in this information package are directives for elaborating the first operations instructions, guidelines for pre-operational studies and a set of procedures for holding commissioning simulations, all designed to guarantee the safety and reliability of the NIS.

In 2003, 40 pre-operational studies were developed for integrating new transmission and generation installations. This was an increase of 91% in relation to the 21 studies held the previous year. Highlights: 6 thermal plants: 5 hydro plants; nearly 5,000 km of new 500kV transmission lines; 12 large substations involving 2,000 Mvar of compensation capacity in series in 500 kV lines and more than 5,000 Mvar of inductive compensation in parallel.

Revisions were also made in the Emergency Control Schemes in the areas under influence of the new installations, specifically, studies related to steady state performance, dynamic performance and electro-magnetic transients.

PROJECT 13

Development of Systems for
Disturbance Analyses and Intervention Management

The Project deals with development of infrastructure used in the disturbance analyses and intervention management – SGI procedures.

The objective of the disturbance analysis process is the implantation of an automatic system for receiving recordings of disturbances originating in Agent short-term oscilographic networks. A pilot computational system for accessing data in the FURNAS oscilographic network is being implanted at this time.

The process of intervention management aims at the development of a computerized system that will allow ONS to administer and control the intervention processes and permit Access by ANEEL and sector agents to all pertinent information in the project systems.

The SGI Intervention Management Project was concluded in the first half of 2003 and is now in the final testing stages before implantation. Tests conducted together with Agents have identified the need for some improvements which will be made in 2004.

PROJECT 14

Improvement of the Transmission
Administration Processes

This Project aims at improving the processes related to the definition of the expansion of the inter-regional interconnections, to guarantee the electric energy reliability and quality standards, management of the transmission contracts and settlement of monthly charges for the use of the transmission system.

Some of the important results already achieved: conclusion of the computerized system used for the management of transmission contracts; edition of the geo-electric map updated to 2006; the improvement of the methodology used for reliability analyses in the Expansions and Reinforcements Plan; improvements of the parameters for the long duration loading of transmission lines and transformers and the ongoing development of systems for management of the quality of energy.

PROJECT 15

Improvement of the Resources
for Real Time Operation

This Project was designed to provide ONS with conditions to be able respond with increased speed and safety, to the demands of real time operation. Works contemplates the perfecting of supervision and control tools, improving the analyses processes of real time events and generally improve the infrastructure at the Operation Centers.

New procedures were implanted to provide data for the settlement of transmission contracts and furnish information to the wholesale market – MAE - Supervision and control systems at Operation Centers were improved by modernizing hardware at these Centers. Other upgrades were made to improve the telecommunications resources used among the Centers. Two important data bases were integrated – the Technical Database and the Real Time Database. The Operations Training Simulator was also set up in 2003. A new software program – a pilot version of the Network Power Flow Analysis Program – was implemented as well as the Ground Fire and Atmospheric Electric Discharge Detection System. Finally, the ONS Operation Centers all passed ISO 9001-2000 certification after the modernizing of their infrastructure.

This section covers the main activities included in the daily ONS work routine and the most relevant results achieved in 2003. In some cases, specific on-demand work requested by other sector entities will be mentioned even though this work is not seen as part of the normal daily activities.

5.1.1 Relations with Government, Regulatory Agencies and Sector Entities

In 2003, the process of information exchange between the National Operator and Government, Regulatory Agencies and other sector entities was conducted within the established rules for such activities resulting in major advances in the formation of institutionalized procedures. As such, not only the routine products at ONS, as specified in the Grid Procedures, as well as the products resulting from outside requests, were all issued in their designated time frames and served as the basis for many decisions made in the various segments of the electric sector.

Relations with the Government, specifically the Ministry of Mines and Energy, were highlighted by the following events: the presentation of subsidies, by ONS, to the government to support the monitoring functions of the electro-energetic supply conditions program. Among these important subsidies was information concerning the urgent need to overcome adverse conditions in the South due to greatly reduced water levels at reservoirs in the period extending from September to December and the elaboration of Risk Aversion Curves for the region. In the Northeast region, the period of September to December was the driest in the historical database and demanded the adoption of special operative management measures by ONS. To help contain the situation, additional thermal dispatch was ordered. Special interchange energy management programs were implemented, complemented by a reduction of the lower limits for acceptable water outflows in the region, authorized by the ANA. All these efforts were coordinated in harmony with the various sector and governmental entities in order to overcome the difficulties witnessed in the system until the hydrologic situation returned to more favorable conditions.

Regarding the relations maintained with ANEEL in 2003, mention must be made of the technical work done by ONS at the instruction by this agency in order to support its regulatory functions related to the administering of public auctions and authorizations for reinforcements and expansion o f the transmission system. The objective of such work was to create structural solutions to guarantee the operative electric safety of the NIS.

When looking at the question of the management of systemic difficulties, to maintain the high standards of energy supply, the Regulator did act promptly designing regulatory measures for all the special actions adopted to overcome the problem. In this vein, an important evolution was made in the implantation of mechanisms such as the Risk Aversion Curves in the sectorial methodology, which on one side, integrated the criteria in the energetic optimization models, and on the other - aided the refinement of the premises and rules for the usage of the Curves as an external instrument to the models.

Relations with the National Water Agency – ANA were highlighted by the work articulated with ANEEL that is being conducted for the revision the natural inflows increasing the reliability of the hydrologic database based on accurate measurement of the water stored at the reservoirs. Besides this work, with the growing demand related to the multiuse of water, ONS was intensely active supporting the Agency in seeking solutions to questions related to the use of water at the reservoirs such as at Caconde on the Pardo River and the reservoirs in the Paraíba do Sul River basin, in order to assure an adequate water supply to the metropolitan area of Rio de Janeiro. Regarding these activities, there is a strong interaction between the ANA and the Basin Committees. Interaction with the ANA was also intense during some periods in 2003, with the equationing of the supply risks in the Northeast region. The Agency flexibilized the outflow limits at the reservoirs at Três Marias and Sobradinho, located in the São Francisco river basin.

Regarding relations with MAE, routine contacts throughout 2003 included the furnishing of data, information and versions of computational programs designed for operation optimization. One of the highlights worth mentioning was the implantation of the billing measurement network which is accessed by both ONS and MAE.

Relations maintained with Agents and sector Entities were definitely improved with the investments made to create formats of reports that are more readable, without loss of technical quality or content Access to data via the Internet web site created by ONS and direct mailing lists. These resources reduced the number of requested meetings and individual presentations while also enhancing the quality of the meetings eventually held.

In 2003, mainly targeting new Agents, ONS issued a compact publication entitled "Agents Manual” offering a transparent vision of the steps to be taken by Agents and by ONS when integrating new installations in the NIS.

Parallel to this work, investments were made for developing internal processes at ONS used to conduct institutional relations with sector Agents aiming at harmonizing actions taken by both parties. Besides the institutional relations maintained with Agents, the operative relation is considered equally important, especially for conducting short-term and real time processes. In this respect, mention should be made of the operational instrumentation created at the National Operator to allow data and information to flow at a great speed while still allowing for the verification of the quality of content. Other efforts were made to improve management of relations designed to approximate Agents to ONS through events such as meetings, events and visits in order to solidify the interface, functional and operative, between ONS and sector Agents.

5.1.2 International Relations

Although the National Operator is exclusively focused on the Brazilian Electric Sector , relations with other entities overseas do exist and among the important events recorded in 2003, we cite:

• As an associate member of the Electric Power Research Institute (EPRI) - the National Operator was able to access special computer applications, mainly used for operation planning and real time operation.

• As an affiliate of The Group of International Comparison of Transmission System Operation Practices – an international organization that congregates 20 independent electric system operators - ONS supported the “2003 TSO Workshop" held in Rio de Janeiro. ONS participated in five taskforces – one for each phase of operation. Participation included planning to post-operation, always looking to identify benchmark models, seeking international references for improving technical and corporate functioning – ONS is the one and only independent system operator in Brazil.

• Continuity was given to the work underway on the Argentina-Brazil Agreement concerning systems operation - ONS and CAMMESA held meetings of a techno-managerial nature with the participation of the technical Directors of both entities. The results were positive: enhancement the operative processes already in use, mainly in the energy exchange programming area used by Argentina, through the conversers located at Garabi I and II; reducing transmission constraints associated with energy importation and exportation between the two countries; new studies for short and mid-term operation planning and improved flow of information between ONS and CAMMESA.

• In its final year, the partnership with US Energy Association (USEA), financed by the USAID, ONS received a Technical Mission from CAISO (California Independent System Operator). Presentations of great interest were organized for the technical body at ONS. A trip to the US was also made by ONS representatives earlier in the year, to California for visits with CAISO and PG&E. Special areas of interest were discussed such as; Information Technology, Agent Relations, Use of Information Systems, Computer Programs - used by CAISO for conducting electric studies, Load Forecasting, Maintenance Management and IT Strategies for System Safety. Negotiations are underway to extend funding throughout 2004 for this partnership.

5.1.3 Relations with Society and the Press

In 2003, ONS marked its presence at various technical seminaries, public events and work meetings held with authorities and entities from the organized society in which the details of the electro-energetic supply conditions were elaborated among other management aspects related to the NIS

The ONS web site was an important source of information and received many enquiries not only from sector Agents but from the press, research organizations and the public at large. More than 800 visitors a day were recorded, higher than the 700 per day registered in 2002.

The National Operator maintained almost permanent contact with the Press regarding the operative conditions of the NIS in 2003, not only through the divulging of information at the web site but in attendance of specific enquires made by other means. In 2003, ONS was cited nominally in more than 673 articles published in national newspapers. Roughly 86.9% of the comments made were positive. In terms of volume, these articles were enough to fill 148 newspaper pages.

The National Operator image, as a provider of reliable, updated technical information, in matters related to the National Interconnected Electric System, was confirmed as being very positive in a survey conducted by the ABDIB (Associação Brasileira da Indústria de Base), in July of 2003. The survey was made among executives from the electric sector and generally concluded that the Operator is the most highly reliable entity in the sector.

5.2.1 Improvement of the Management Model

Because of the specific nature of its institutional functions and the many roles played, ONS decided to improve its Management Model to better its performance related to both institutional and organizational activities.

In 2003, the executive direction, managers and technical teams at ONS undertook many projects involving significant investments made in designing new management polices at the Operator. The first step was to identify and to begin discussion on corporate institutional prerogatives, their nature and characteristics and company principles and organizational values and ethics. This lead to the understanding that it was necessary to conceive and implant new organizational instruments that were given the name – Organizational Systems - all aimed at improving intercorporate integration and the capacity to coordinate internal and external actions at ONS.

The development of the Organizational Systems included special targets such as: the Human Resource Area, Grid Procedures, Technological Development, Knowledge Management, Relations and Communication, Products and Processes and Corporate Financial and Economic Planning. In 2003, more than 180 professionals were actively involved in these projects. For each one of these systems, strategies were developed to viabilize the implantation of new procedures and resources for implantation in 2004. Special emphasis was given to the establishing of performance indicators for the actual organization in order to gauge progress (see details further on).

5.2.2 Dimensioning the Workforce

By the end of 2003, ONS concluded the studies for the redimensioning of its employee body that remained stable since 1999, in spite of the ever-growing workload resulting from the expansion of the Agent population and the physical assets of the NIS. These factors were not taken into consideration when the size of the workforce was first studied. Conclusions clearly showed a need to increase the staff by 17%. In the first step of the redimensioning, the Executive Directory authorized a first increment of 12 % in 2004 and a subsequent complement over the short term. The addition of new human resources was approved by the ONS Administrative Board and later approved by ANEEL in 2004.

5.2.3 Human Resource Development

Capital resources of R$ 1.4 million were applied in personnel training and development programs – a value equivalent to 2% of the payroll. In 2003, 398 employees participated in training programs representing 77% of the workforce.

The programs were offered in response to knowledge gaps identified by the Operator, and from requests made by the actual professionals at the organization. Some courses were given under agreements maintained with federal universities such as Itajubá, Santa Catarina and Rio de Janeiro.

To complement the professional formation programs, joint training events were held with other electric sector entities held in other state capitals around the country. These programs covered topics such as the operative safety of electric systems, sector economy, system protection schemes, and power quality – themes all considered vital by the Operator in view of their strong systemic character and the daily technical activities always focused on all these issues. This initiative, not originally foreseen in the functions of the Operator, fulfilled a gap left in the electric sector since it’s restructuring when sector companies began to progressively reduce their technical teams.

The renewal of technical personnel is seen as a necessity in view of the fact that the average age of the present workforce is 41 years – 16% of employees are more than 51 years old – a continuous renewal program at the Operator is just good strategy. In this context, in 2003 a “Junior Employees Development Program” was instituted at ONS. The objective is to prepare the younger professionals to become specialists in their respective work areas, be it technical or administrative.

In 2003, the Operator also concentrated on 29 Trainees – 20 university graduates and 9 with technical school formation – all in the 25 year age range. The Trainee Program includes a job rotation scheme among various work units at ONS – their individual performance is evaluated with an eye on their possible contracting by the Operator or the electric sector workforce. Additionally, 22 university students were offered 1-year apprenticeships in order to source potential new talents for ONS and help prepare these young people for the general job market-place.

Last year, special training courses and programs were created and offered to managers, supervisors and selected employees who eventually substitute these positions.

Considering the importance of system operator qualification, in 2003 ONS concluded the adaptations made to the Operator Training Simulator purchased from the Electric Power Research Institute (EPRI). The modifications were made by CEPEL and the equipment should be placed in operation by the first quarter of 2004.

5.2.4 Improvements of the Information and Telecommunications Infrastructure

Within the activities developed in the Information and Telecommunications areas, the following events are highlighted:

• Continuity of the structuring, integration and launching of the primary and operational Technical Database at the ONS Operation Centers.

• Implantation of strategic complementary back-up information system for use by the corporative and operative areas of the Operator.

• Consolidation of the telecommunications infrastructure, incrementing the quality and reliability of corporate and operative communication flows through the upgrading of recording systems at the Operation Centers and the expansion and updating of the central telephone desks.

• Analyses of contingency occurrences resulting from major outages, minimizing the risks to the operation of corporate systems at the company. This initiative was made to flexibilize the IT and telecommunications resources when faced with large disturbance scenarios that could interrupt the use of some installations.

• Consolidation of the present version of the Peoplesoft corporate management software program and the migration to a newer version of this same program will be concluded in 2004.

• Improvements made to the telecommunications resources, upgrading voice and data flow networks used at the Operator. In the first phase, the Operative Network (ROP) was consolidated followed by the Operation Support System (RAOP) that permits interconnection between the Operation Centers at ONS and those owned by third parties. The second phase – improvements will be made to both aforementioned systems, expanding interconnections to include substations, plants and information concentration points between Agents and the Operation Centers.

• Technological updating of communication protocols used to interconnect the Operation centers to the network installations. ONS, together with the Agents and CEPEL, realized an important Project in this context that resulted in the implantation of the transport protocol - TCP/IP. This work helped overcome a series of limitations that interfered with information exchanges between the Centers. In the near future a new protocol will be implanted – the Inter-Center Communication Protocol (ICCP) – developed for the National Operator and third party operation centers. The implementation of this protocol will raise the standard of protocol efficiency to the IEC international norm and provide more flexibility in the construction of tables used for cross-referencing data transferred between centers.

5.2.5 Performance Indicators  

In 2003, the definition and implantation of the corporate performance indicators was concluded. These indicators cover the following areas: General Corporate Services Administration, Financial Management, Human Resources, Information Technology and Telecommunications.

In regard to the indicators developed for measuring the performance of the Main Transmission Network, in compliance with the Grid Procedures, ONS initiated the collection of data and calculation of some of the indicators needed to create a realistic vision of the behavior of the Main Transmission Network.

ONS defined and formulated indicators that will measure the performance of the operative processes and the quality of its products. Among the indicators that were defined are those used to evaluate the results of ONS work as perceived by society. These indicators are receiving priority treatment to speed up their finalization.

The set of 41 indicators under development may be grouped into the following macro-functions:

5.2.6 Technological Development

Because of the responsibilities and vision of ONS of the systemic operation, in 2003, the National Operator made organized efforts prospecting for developing new technology projects.

Supported by the Ministry of Science and Technology - (MCT/FINEP), ONS launched five technology development projects in collaboration with the Federal University of Santa Catarina (UFSC), the University of São Paulo (USP), the University of Campinas (UNICAMP) and the Federal University of Rio de Janeiro (UFRJ). The total value of the projects, all of which are part of the ONS Action Plan, ranged in the order of R$ 7 million. The projects were conducted to introduce innovations to enhance the systemic environment of the Main Transmission Network and improve the Operation Planning and Programming models in place.

In 2003, ONS maintained association with EPRI and associated with LACTEC.

On another front, ONS made a proposal which was accepted by the other operator-associates of the Group of International Comparison of Transmission System Operation Practices" (TSO) to include on the group’s organizational agenda, as permanent themes, “Technology – Acquisition, Evaluation of Results and Technological Prospecting “, issues to be regularly discussed at all TSO encounters and meetings.

The integration of New Agent Installations in the NIS involves responsibilities belonging to ANEEL, ONS and the Agent, owner of the new installation in question, and finally, other Agents integrated and/or connected to the Main Transmission Network whose operation may in someway be affected by the presence of the new installation.

During 2003, new installations were connected to the generation and transmission segments belonging to new Generation, Transmission and Free Consumer Agent categories.

With an eye on correct integration procedures for new NIS operation installations, ONS conducted a series of studies and analyses together with Agents, in order to guarantee the safety, quality and reliability of the energy supply of the Interconnected System and Agent installations. All studies and related activities and analyses were conducted within the strict observance of guidelines laid down or authorized by the Grid Procedures.

In all, 59 test programs were run for the coordination and programming of new equipment, generator units, transmission lines, special schemes, CAG Automatic Generation Control programs and installation re-arrangements.

In compliance with the specific directives issued by ANEEL concerning the integration of new work in the System, ONS developed additional activities as follows:

• The Operator established, as per Official Communication SRT164/02, a system for issuance of Access Approval Term for transmission installations based on the verifying of compliance of all pre-defined conditions including the conceding of the concessions, contractual conditions, recommendations made on pre-operational and commissioning studies protection studies and the requirements laid out for systems of supervision and telecommunication according to Grid Procedures. In this context, 105 Access Approval Terms were issued in 2003 authorizing the integration of new transmission installations in the Main Transmission Network. The following highlights are among the 5,000 km of new T lines that went on-line in 2003:

• Interconnection of the Southeast / Northeast - 500kV T line between Serra da Mesa and Sapeaçu and integration with the existing system in the Southeast Governador - Mangabeira region; 3rd interconnection circuit of the North / Northeast region, 500 kV T line - Tucuruí / Açailândia / P. Dutra; 2nd Southeast / South interconnection, 500 kV T line - Ibiúna - Bateias double circuit; conversion to 500 kV of two 230 kV circuits in the P. Afonso / Fortaleza axis; first steps of the implantation of the 2nd circuit in the Southeast / North interconnection - LT 500 kV T line with energization of the Serra da Mesa / Miracema T line section.

Regarding generation units, approval processes were also issued by ANEEL, regulamented by Resolution 433, dated 08/26/2003, and ONS through declarations authorizing the beginning of tests and commercial start-up of the production units. A total of 23 Grid Procedures compliance declarations were released for 16 thermal plants and 7 hydroelectric plants. An additional 24 compliance declarations were also issued by ONS for small hydroelectric plants that were connected to the system from outside the Main Transmission Network.

The National Operator, in the management of electro-energetic resources, always follows Grid Procedures, and the prevailing techno-economical conditions of the system, maintaining the lowest possible cost profile while preserving the safety of the operation, not only under normal operative conditions but also in the face of contingency events. Highlighted in the activities linked to this area are included: the commissioning of new installations - generation and transmission - before their integration with the NIS that require maneuvers and interventions in the transmission network and re-managing of generation in order to guarantee the continuity of the power supply at these times.

The instrument used by ONS to evaluate and monitor the safety conditions of the energy supply is the Biannual Risk Aversion Curve – CAR, as defined and based on the work program for generation and transmission indicated by ANEEL, the forecasted market and the hypotheses to be verified, of the critical hydrologic conditions in the two-year being analyzed. This Curve indicates and establishes, for each region, the minimum levels of required equivalent water storage at the reservoirs in the system, throughout each month, over a two-year horizon, so that the water resources will assure attendance of the needs of the electric energy market.

In 2003, the favorable hydrologic conditions in the Southeast /Midwest regions helped to complement the amounts of exported energy – from the North to the Northeast - maximizing the energy exchange to this region. Through this measure, it was possible to supply nearly 20% of the load for the Northeast region by minimizing the use of the region’s water resources and proportioning a water storage gain of 30% capacity at the reservoirs located in this region.

In the case of the Northeast region, with the worsening of the hydrologic conditions over the last few months of 2003, specific measures were taken by ONS together with SEN/MME, ANEEL and MAE, that resulted in the ratification by ANEEL, for the use of preventative thermal dispatch under circumstances that would imminently violate the CAR value established for the region based on the horizon outlined in the Monthly Operation Program, starting in the month of December or 2003.

At the same time, interactions among ONS, MME, MMA, ANEEL, ANA and CHESF, resulting in the issuance of Resolution ANA-434 dated 12/09/2003, reducing the minimum outflow from 1,300 m3/s to 1,100 m3/s at Sobradinho, with the objective of allowing for greater energy reception from other regions and/or greater thermal dispatch in the actual Northeast region. New agreements were also initiated involving ONS, MME, ANEEL and Petrobras, related to increasing the availability of natural gas to the thermal plants in the region.

In the South region, significantly reduced inflows to the region’s main reservoirs, mainly in the second half of 2003, influenced the work at ONS to determine increased energy transfer amounts to this region and implementing special Emergency Control Schemes - ECE, at the substations - Ibiúna and Bateias- in order better explore the transmission network and at the same time, preserve the safety profile of the NIS.

This scenario was particularly severe at the plants located in the Uruguay and Iguaçu river basins, forcing the storage level to only 15% EARmax, which resulted in the shutdown of the Machadinho hydroelectric plant.

The situation obliged ONS to create a special electro-energetic operation strategy for the South region, built around a water storage priority at the plants located in the Iguaçu river basin, to preserve electric safety and avoid load supply deficits in this region in the period of October and November of 2003.

Efficient management of the transmission network allows for the attendance of the load demand at the main consumer centers while maintaining the goals for energetic optimization and recovery of the water storage levels through the energy transfer among the various regions. At the same time, transmission management aids in the administering of programmed interventions needed for maintenance purposes as well as those needed at the time of integrating new installations in the System to safeguard the operational safety of the NIS.

In 2003, more than 13,400 requests for shutdowns and interventions were received and analyzed by ONS – nearly 20% more than the number processed in 2002.

Other activities were highlighted – the actions taken to handle contingency situations that provoked forced shutdowns of equipment and subsequent coordination of maneuvers / interventions in the transmission network and re-management of the generation programs in order to guarantee the continuity of the energy supply even under these extreme conditions. An example of such a situation was the collapse of 19 double circuit towers in the 440kV Jupiá – Bauru transmission line at the end of 2003. This event did not interrupt the load supply thanks to the safety scheme arrangements that were in place and the modifications that had been previously introduced at the substations in the area.

The management of the transmission network allowed for the necessary sectioning of the Main Transmission Network required at the time for the entry into operation of large trunks without provoking any supply interruptions.

Finally, ONS transmission management included the elaboration of technical reports on the transmission network attendance capacity in the face of new load requirements arising from the surplus energy auctions held by MAE that allowed the supplying of more than 912 MWmed throughout the NIS – a Project developed at the Operator at the special request of the Ministry of Mines and Energy.

In 2003, ONS participated in joint actions together with the ANA, ANEEL, Agent-owners of system installations and other entities involved with the management of hydrologic resources at the river basins where production plants are located in the NIS, in order to preserve and optimize the use of this precious asset.

Highlights during the year’s activities include the special management scheme developed for the Paraíba do Sul river basin, where two important issues demanded attention. The first was how to avoid the aggravation of the unfavorable water conditions that were being registered. ONS elaborated studies together with other government organs and entities responsible for the basins. These groups furnished valuable information to create regulatory guidelines - by ANA - and new hydrologic operative constraints. The second matter was related to the ecological and environmental problems that resulted from the discharge of pollutants into the Pomba River, an affluent of the Paraíba do Sul river system - the situation was overcome by using water reserves stored at upstream reservoirs to flush out the affected area.

Special mention must be made of an important study entitled the Natural Water Flow Series Revision that was developed along the year and included the eight main river basins in Brazil. The focus was on energy generation in the Grande, Paranaíba, Tietê, Paranapanema, Iguaçu, Paraná, São Francisco and Tocantins river basins. The basins contemplated in the study represent more than 2.2 million square km and contribute 91% of the natural energy inflow in the NIS. The series of annual inflows were evaluated and incorporated with studies of the multiuse of the water resources by seasonal period, subsystems and type of activity practiced in the various regions. The Project was supervised by a Special Commission formed by technical personnel representing ONS, ANEEL, ANA and the CCPE/MME with the participation of the Generation Agents involved in their respective basin areas.

In 2003, the real time operation of the NIS was conducted under conditions considered normal without registering any major disturbances. Actions implemented by ONS and by sector Agents, to reinforce the operational electric safety of the System were based on experience acquired in previous years where large disturbances did occur – this background helped to minimize the consequences of the disturbances that were in fact recorded during the year 2003.

This positive performance was achieved based on the creating of norms and procedures and the processes introduced in the daily Operation and Post Operation Programming that decisively supported the actions and decisions made at the ONS Operation Centers.

Regarding the elaboration of norms and procedures, more than 1,330 Operation Instructions were issued including Operational Routines, Technical References, 431 Operative Messages and 397 Operational Diagrams – an average increase of 22.6 per cent in comparison with the previous year’s verified volume.

Results of the coordination and operation analyses, together with sector Agents, of the Operation Programming in 2003 shows the following numbers: 37,042 interventions in the components of the Operation Network, with and without shutdowns. Of this total - 30,376 were programmed representing an increment of 2.9% in relation to 2002. The remaining 6,666 interventions were characterized by emergency conditions which represented an increase of 29.6% over the previous year.

In the post operation stage, the numbers were also expressive of the intense work done by ONS over the year: 126 Preliminary Operation Reports - RPO, six Operation Analysis Reports - RAO and 38 Disturbance Analyses Reports - RAP, all showing decreases of the orders – 13.7%, 14.3% and 7.9% respectively, in relation to 2002. Mention should be made of the organization and operalization of the data used for settling financial accounts at MAE and for the verifying of information used in the transmission contracts. There was significant evolution in the elaboration of the Technical Data Base at ONS, an instrument used in various processes at the Operator. In 2003, more than 130 thousand recordings were entered making this reference resource even more efficient for all users.

Among the activities engaged in, to help upgrade the ONS Operation Centers, highlights include the modernization of the hardware and software resources in the control rooms aiming at increasing the ability to observe, monitor and control events in the NIS. This was done by incorporating powerful simulation programs in real time through latest generation computer applications. Improvements were also made to the physical assets at these Centers to ease the work by the system operations technicians.

With this same objective in mind, the OTS – the Operation Training Simulator – underwent the final installation stages at the CNOS Operation Center. This equipment is manned with a SAGE software program designed to support real time training activities for teaching operators to deal with the extreme situations provoked by major disturbances as they happen. This learning tool will be implanted at the other Operation Centers at ONS.

5.7.1 Supervision and Control Systems
at Operation Centers

• Issuance of the Temporary Acceptance Certificates for the Northeast, North and South – COSR-NE, COSR-N and COSR-S, Regional Operation Centers, developed with technology purchased from ALSTOM. These centers have all the tools needed for conducting network analyses, operator training simulations and recording and processing of historical information. Resources are also available for the Automatic Generation Control which will allow ONS to fully assume control of the North Region through the COSR-N Control Center.

• Modernization of the hardware at the Southeast Operation Center with the substitution of the application servers. This will make available, sufficient computer resources for the integration of new Agents at this Center.

• Modernization of hardware at the National System Operation Center, substituting the application servers for the Itanium equipment. The adaptation of the applications is forecasted for conclusion in the first quarter of 2004.

• Integration of the generation system Real Time Data Base at the CNOS with the ONS Technical Data Base, reducing the efforts expended to collect data and the incidence of convergence of information in only one data base source.

• Intense usage of real time tools proportioned by the new Control and Supervision System – SSC, by the real time operator teams, such as Network Analysis that allow for the evaluations of shutdown requests and the safety conditions of the System.

• Utilization, by all ONS Centers, of resources for accompanying ground fires and electric atmospheric discharges. This system will be improved gradually by systematic work underway for obtaining geographic coordinates of all transmission towers and by the improving of detection algorithms and alarm systems.

5.7.2 National System of Control
and Observation - SINOCON

Ongoing work of the SINOCON in 2003, in strict collaboration with sector Agents, included the following activities:

• Definition of the installations included in the Emergency Phase of the Project - this resulted in the formation of a group of 153 plants and substations. Of these, 117 will have their control and supervision equipment substituted or implanted for the first time and 36 installations will have their existing equipment upgraded. To promote competitiveness among the proponent suppliers, a public tender was edited for the supply of goods and services needed at the 117 installations, divided into 4 supply lots.

• Purchase process management answered 292 questions forwarded by all potential suppliers. Commercial and technical proposals were received for the four different purchase lots. The bidding procedures for the first three lots should be concluded in March of 2004.

• Contracting effected for the supply of goods and services of the first 13 of 36 installations.

5.7.3 Operation Centers Certification

The ONS Operation Centers were re-certified according the NBR ISO 9001 Version - 2000 Norm, after having been submitted to external auditing done by Bureau Veritas Quality International (BVQI). The Centers that had previously qualified for only Real Time Operation, under the ISO 9000:1994 Norm, are now fully certified for all processes that make up the Quality Management System certification as per the revised version of the ISO Norm.

To guarantee the NIS operative electric safety, ONS has been dedicating all efforts with great zeal to the prevention of situations of potential risk to the interruption of the energy supply, adopting measures that impede the occurrence and/or propagation of sudden shutdowns of equipment during disturbances and speed up the reestablishing of the interrupted loads in the System. These efforts are focused on increasing the NIS capacity to support the presence of multiple contingencies.

In this context, in 2003 the process to consolidate the Recommendations for Management of the ONS Analyses Reports of the electric occurrences and disturbances was made, implanting a follow-up system with an interface for all Agents via the Internet. This initiative is guaranteeing control of the implementation of the measures recommended to avoid reincidence of the problems identified in the analyses reports and consequently, the minimizing of the consequences of disturbances in the NIS.

In 2003, thirty eight RAP – Disturbance Analysis Reports were elaborated, together with involved sector Agents.

Among activities designed to increase NIS operative safety, a total of 45 schemes were incorporated and 27 existing schemes were revised, due to the expansion of the G and T systems.

As a result of actions already implemented or underway in 2003, the following large disturbances were recorded. These events did not provoke discontinuity of the energy supply to the System:

• • August/2003 – total loss of the SE Itaberá 750 kV resulting from the automatic shutdown of six connecting transmission lines;

• • September/2003 – simultaneous loss of four 750 kV transmission lines associated to the SE Itaberá;

• • December/2003 - total loss of the SE Bauru resulting from the automatic shutdown of 10 440 kV transmission lines and two 440/138 kV transformers.

Another important aspect has to do with the NIS integration involving large installations that entered into operation without causing any negative impact in the System thanks to the work and studies conducted beforehand to defend the electric safety of the NIS and the installations of the new connecting Agents.

In November of 2003, the 1º Cycle of Debates (CINTER) was held at ONS. The theme “Interconnected System Safety” was treated by specialists at ONS who presented results from studies and then debated new proposals for measures to be taken to impede disturbances or when impossible to avoid, reduce their impact on final consumers.

Looking at the applications used in programming and in real time operation, to assure electric safety in the NIS, the following highlights were registered in 2003:

a) AGORA System

A pilot system is being implanted of the AGORA (Advanced Grid Observation Reliable Algorithms) System. This will be used to evaluate system functions. The main characteristic of this system is to use a direct method of analytic problem solving to examine power flow rather than a system dependent on successive approximations. This allows reaching consistent solutions in a greatly reduced processing period, and increasing the possibility of including new functions in the analysis such as recomposition and the search for corrective measures in real time, either under normal operation conditions or in contingencies. All acceptance testing in real time was run and concluded with success. The system is now ready and available for use.

b) Electro-mechanical Stability Programs
The year 2003, witnessed the beginning of the development and implantation of a program to evaluate the voltage and dynamic stability of the NIS in real time. This program was named ORGANON, developed by BC-Hydro-Canada, by a Brazilian professional who at this time is employed by ONS.

This program, through a friendly man-machine interface, allows the safety margins of the NIS to be defined at any given moment of the operation. This is seen as a program vital to the reliability of the electric operation since it is an instrument that focuses on the area of greatest fragility in the Brazilian System – that is the dynamic behavior – due to the system’s characteristics of very long extra high tension transmission lines interconnecting large hydro plants, long distances between each of these plants and from load centers. The program proportions many gains for the operational study activities, operation programming and programming in real time due to its processing speed and ability to analyze cases “automatically”.

At ONS, the Transmission Administration conducted various activities including the new access management processes, expansion of the transmission system and administration of new and existing transmission contacts which includes the settlement of charges for the use of the Transmission System.

Technical studies were made on behalf of ANEEL, highlighting the establishing of system performance indicators. The implanting of the energy supply quality management system continued throughout the year as well.

ONS played a relevant role in the development of the transmission business model, used as a paradigm for treating the generation segment in the new institutional model being designed and adopted by the Ministry of Mines and Energy.

5.9.1 Expansion and Reinforcements  

In June of 2003, the Expansion and Reinforcement plan – PAR was issued for the Main Transmission Network, for the period covering 2004/2006. Presentations and discussions were held to divulge the Plan at Regional Seminaries involving sector entities and Agents.

The projects proposed in the Plan represent investments in the order of R$ 8.2 billion (about US$ 2.6 billion), and the incorporation of 11,063 km of transmission lines of which 73% of the projects have already been authorized by ANEEL or awarded at public auctions. With regard to the expansion of the transformation capacity, recommendations were made to implant an additional 21,431 MVA of which more than 54% has already been conceded in well defined concessions.

In the public tendering for new transmission installations in the Main Transmission Network, conducted once again by ANEEL, ONS was responsible for providing important technical support in the elaboration of the actual tender documentation by developing seven technical annexes related to the analysis of ten basic projects for new installations, including the verification and compliance of all technical content and processes with the established Grid Procedures.

In response to a request from the Ministry of Mines and Energy, ONS elaborated in collaboration with certain Agents, a detailed report of the operative conditions of the so-called “ Other Transmission Installations – DITs”, that are not part of the Main Transmission Network, indicating the critical points identified in relation their ability to supply energy to the market . This work served as the basis for discussions with ANEEL that eventually lead to the modification of existing legislation governing the expansion of these kinds of installations – this project is still underway at this time.

In response to requests from ANEEL, ONS held ten studies to evaluate the impact of work delays on the performance of the NIS.

Among the important studies realized were the projects run together with the CCPE to evaluate alternatives for energy supply to the radial systems of the Main Transmission System. The Tables below present the increments proposed in the Expansion PAR Plan for 2003/2005 regarding transmission lines and transformation capacity.

New Transmission Lines for the Main Transmission Network - (Km)
Forecast for Implantation

New Transformation Capacity in the Main Transmission Network - (MVA)
Forecast for Implantation

5.9.2 Access to the Main Transmission Network

Looking at Main Transmission Network access processes underway in 2003, 32 new Access Reports were issued as well as 37 Process Revisions – 17 from Generation Agents, 52 from Free Consumers Agents and 2 others covering international interconnection requests.

The volume of reports issued was 37% higher than in 2002. The Reports established the conditions for access connection to the Main Transmission System, within the set of compliance details as outlined in the Grid Procedures.

In 2003, revision was made of the Grid Procedures Module 3 entitled “Access to the Transmission System” as a result of the use first made of the Procedures by Agents and new requests from various other Agents.

Furthermore, acknowledgment must be made of the efforts made to integrate the Eolic Energy Plants with the support of the Ministry of Mines and Energy that helped establish the conditions allowing the integration of these plants with the generation networks, members of the PROINFA.

The graph below presents the growth in the number of Access Request Reports issued between 1999 and 2003.

5.9.3 Contract Administration and
Settlement of Transmission Charges

In 2003, 393 contracts were celebrated by the Transmission Administration bringing the current total up to nearly 1,000 contracts signed since the origin of this concept. This volume represented an increase of 75% when compared to the number of contracts signed in 2002.

Additionally, highlight must be given to the implantation of the computerized transmission contract management system and the development of the new Ancillary Services Contract Model in compliance with Grid Procedures Module 14 and the Official Communication 675/03-SRG/ANEEL.

Settlements of charges for the use of the transmission system totaled 102, 444 transactions resulting in the issuance of Credit and Debit Statements, relative to the authorized revenues for the period in the amount of R$4.07 billion (about US$ 1.3 billion), involving a total of 135 User Agents. It should be noted that in relation to 2002, an increase of 37% was registered in the number of Credit/Debit Statements issued in the period, a 40% increase in the revenues allowed in the transmission segment of the Main Transmission Network and a zero payment default rate in 2003.

The graphs that follow show the evolution of the increasing number of signed contracts, the Credit and Debit Statements issued and the number of Agents involved in these transactions:

5.9.4 Definition of Minimum Requirements for
Installations in the Main Transmission Network and Quality Indicators

In 2003, various studies were conducted. Among the most important, mention must be made of the following: the development of the criteria used for the checking of over-limit occurrences at circuit breakers and associated equipment due to the increase in the relation X/R in the NIS, the analysis of the reduction of short circuit currents at the substations through the application of limit devices to make viable the closing of the 345kV ring in the São Paulo area, analysis of the viability of using mono-pole re-connection in transmission lines of the Main Transmission Network and elaboration of a proposal to introduce new requirements in the auction invitations issued by ANEEL.

The work was done by a special group consisting of members from ONS, ABDIB and ABRATE. Highlights include: work related to the establishment of performance indicators for transmission lines in the Main Transmission Network and a study of the statistical distribution of the indicators as subsidies for ANEEL, used in creating regulatory measures for the Variable Portion of the Transmission Contracts.

Important strides were also made evaluating the quality indicators used in the Main Transmission Network, especially those used to observe continuity at control points on the frontiers of the T Network, directly related to the providing of energy transport services. The performance of this follow-up process, first started in 2000, has been greatly improved. Today the system consists of 702 control points under permanent observation. The interruption Duration at Control points - DIPC was reduced from 2.8 to 2.2 hours per year, between 2000 and 2003. The Frequency of Interruption at Control Points was equally improved over the same period, reducing from 1.6 interruptions per year to 1.4.