Risk assessment of electricity distribution companies in the Brazilian energy market framework

Abstract

The aim of this study is to assess the financial risks that the distribution system operators (DSOs) incur in the energy commercialisation process in Brazil. The authors present a brief description of the Brazilian energy sector, the decision process and the risks involving purchasing decisions in order to understand the Brazilian framework from a DSO's point of view. In this study, the authors propose a methodology to calculate and evaluate the financial impact that the decisions may have in the budget of the DSO. This methodology includes the stochastic simulation of the decision on several scenarios of demand and energy prices. The authors apply it to two case studies that allow a better comprehension of the risks involved and their impact in terms of profits or losses. The results indicate that the risks can be as high as hundreds of millions of Brazilian Reais.