Can Brazil learn from California? Challenges of power deregulation in a predominantly hydroelectric system

The objective of this paper is to diagnose what went wrong with the Brazilian power industry reform, contrasting Brazil´s approach with California´s, and discussing alternatives to improve the situation. In particular, the authors address some of the criticisms that have been made to Brazilian sector reform: half the critics say the solution is more market; the other half, that Brazil should go back to state-owned enterprises. In addressing the more-market side, the authors discuss some problems such as: bid-based dispatch in a cascade of hydroelectric power plants; the concept of a wholesale water market (an extended spot market where water transactions are recognized); and the pricing of transmission services.